Context Effects on Consumer Choice

Rational choice theory suggests that consumer choices and preferences should be independent of
the context. As a simple example, it is assumed that consumers will evaluate a $5 discount the
same way regardless of context. However, this is not the case. Consumers tend to perceive the
value of the $5 discount as higher when it is on a product originally priced at $10 and lower on a
product originally priced at $100. The reason goes back to Chapter 8 and relative preferences.
Consumers appear to evaluate the $5 savings in the context of or relative to the original price of
the product.
In a similar way, consumers are affected by the competitive context in which they make choices,
or what we referred to in Chapter 13 as the purchase situation. There are numerous context
effects on consumer choice. Here we will discuss two, the center-stage and decoy effects. These
effects may occur when a consumer faces a choice from three alternatives.³⁸
Center-stage effect: Where a product is physically located has an influence on preference for that
product. If choosing among three options, we tend to prefer, and choose, the one that is
physically positioned in the middle. This center-stage effect has been shown to occur in many
and varied situations including seating (71 percent choose to sit in the middle of three chairs), as
well as with the purchase of chewing gum (50 percent choose the middle of three packs). One
reason this may occur is that we tend to choose what we visually attend to, and it appears that we
tend to look first/most at items in the center. Gas stations have applied the center-stage effect to
increase sales of premium (the most expensive) gas by placing this option in the middle of the
two lower-priced options on the gas pump. Note how with the gasoline choice situation, the
center-stage effect is independent of attribute levels (e.g., quality, price) or the weights
consumers might attach to them but is, rather, a function of a completely other attribute (physical
location of the pump), which is irrelevant to the characteristics of gasoline, which therefore
violates rational choice theory.
Decoy effect: The decoy effect involves placing a third and clearly inferior brand into the choice
set to influence choice outcomes. We begin with Decoy Effect: Choice Context 1 (left graph), in
which there are two apartments (A and B) evaluated on two attributes (distance from campus in
miles and quality on a 1–100 scale where 100 is best). As the graph on the left shows, option A is
further from campus (a negative) but of higher quality (a positive), while option B is nearer to
campus (a positive) but of lower quality (a negative). In addition, because some consumers care
about quality more than distance and some are just the opposite, assume that the choice
percentages between A and B are split equally (50 percent choose A and 50 percent choose B).
Now consider Decoy Effect: Choice Context 2 (right graph). Here an apartment option is added
(Apartment C) that is clearly inferior to Apartment A (that is, Apartment A is said to dominate C).
An important point here is that Apartments A and B have not changed at all. Only the context of
choice has changed because a third option was added that is obviously inferior to Apartment A
and not obviously better than Apartment B. Rational choice theory would say that an irrelevant
choice option should not change a consumer's original choice. In this case, Apartment C should
be irrelevant. Those who chose A previously should never choose C because C is clearly inferior
(same distance as A but of lower quality). Those who chose B previously should still prefer B
because it is better than C on their more preferred attribute, namely distance. However, this is not
what happens. Instead, the addition of the decoy (Apartment C) appears to make it easier for
consumers to see how B is better than C, but it does not make it obvious that B is A better than A.
As a consequence, adding the "irrelevant" option of Apartment C triggers Apartment A’s choice
or market share to increase by pulling market share from Apartment B. In a sense, the decoy
"attracts" consumers to Apartment A, and it does so even if no one chooses the decoy, as shown
in the figure.
Marketers can utilize these and other “contextual” factors to influence consumer choices and can
do so in such a way to move consumers "toward" the options they most want consumers to select
and "away" from options they might otherwise select. You might wonder how it is possible that
choice context can matter so much. One explanation, according to consumer choice expert Dan
Ariely, is that “we [as consumers] actually don’t know our preferences that well, and because we
don’t know our preferences that well, we’re susceptible to all the influences from external
forces.”
Critical Thinking Questions
1. Why do the center-stage and decoy effects contradict rational choice theory?
ANS
1. The center-stage and decoy effects contradict rational choice theory because
theydemonstrate that consumer preferences are influenced by context and not solely based on
theattributes or characteristics of the options themselves. Rational choice theory assumes
thatconsumers make choices based on the inherent value or utility of the options and that
thesechoices are independent of the context in which they are presented. However, the center-
stage effect shows that the physical location of a product or option can influence preference,
while the decoy effect demonstrates that the presence of an inferior alternative can change
therelative attractiveness of other options. These effects suggest that consumer
choices areinfluenced by factors beyond the rational evaluation of attributes, leading to
deviations fromthe predictions of rational choice theory.
2. Besides typically looking first at the center of the screen, can you think of other reasons
why consumers prefer middle options on websites?
ANS
Besides typically looking first at the center of the screen, there are other reasons
whyconsumers prefer middle options on websites. Some possible reasons include:
- Perceived fairness: Consumers may perceive the middle option as a fair compromise
betweenextremes, leading to a preference for the middle option.
- Anchoring bias: The middle option can serve as an anchor or reference point for
comparison,making it more likely for consumers to choose options closer to the middle rather
than theextremes.
- Perceived popularity: Consumers may assume that the middle option is the most popular
orwidely chosen, leading them to prefer it based on the social influence of popularity.
These factors, along with the tendency to visually focus on the center, can contribute to
thepreference for middle options on websites.
3. Do you see any ethical issues related to strategies designed to position brands against
decoy alternatives? Explain.
ANS
Ethical issues related to strategies designed to position brands against decoy alternativescould
arise in certain situations. Some considerations include:
- Transparency and honesty: Marketers should ensure that the decoy alternative is
clearlypresented and accurately represented. Presenting a decoy in a misleading or deceptive
mannercould be considered unethical.
- Manipulation of consumer choices: The use of decoy alternatives can be seen as an attempt
toinfluence consumer choices by exploiting cognitive biases. Marketers should be mindful of
thepotential for manipulation and ensure that consumers have access to accurate information
tomake informed decisions.
- Fair competition: The use of decoy alternatives to position brands should not involve unfair
oranti-competitive practices. Marketers should adhere to legal and ethical standards to
maintainfair competition in the marketplace.

Ultimately, the ethical implications of using strategies involving decoy alternatives depend onthe
specific context, the manner in which they are implemented, and the impact on
consumerdecision-making. Marketers should strive to uphold ethical standards and consider the
long-term consequences of their actions on consumer trust and welfare.