MarketingDUAL-USE

Compromise Effect

What it is

Arranging a set of options so that the one the seller wants to sell sits in the middle — flanked by a cheaper version that looks stripped and a pricier one that looks excessive — because people avoid extremes and choose the option that is easiest to justify.

How it works

Simonson showed in 1989 that adding a more extreme option to a choice set increases the share of the option that has become the middle. The mechanism is extremeness aversion, formalized with Tversky in 1992: each option is judged not on its own but by its position among its neighbours, and the middle position minimizes the largest disadvantage on any dimension, which makes it the easiest choice to defend to oneself or to others. “Not the cheapest, not the most expensive” is a reason, and people choose based on reasons. Sellers exploit this by building the top tier to make the middle look sensible, and the bottom tier to make it look adequate — the good-better-best menu, the three-tier subscription with the middle plan highlighted, the wine list on which the second-cheapest bottle is the best seller. The effect has held up better in replications than its cousin the attraction (decoy) effect, whose robustness with naturalistic stimuli Frederick, Lee and Baskin questioned in 2014. The honest version is a real range in which the middle suits most buyers; the manipulative version is a range engineered so that the middle suits the seller.

Real-world examples

  • •Three-tier software and streaming plans in which the middle tier carries a “most popular” or “recommended” badge and the top tier exists mainly to make it look moderate.
  • •The restaurant wine list, on which the second-cheapest bottle is the reliable best seller because ordering the cheapest looks mean and ordering the dearest looks reckless.
  • •Retail “good-better-best” assortments — three grades of tyre, mattress, or appliance — in which the “better” product carries the margin and the other two are positioned to frame it.
  • •Simonson and Tversky's 1992 experiments: adding a high-priced camera to a two-camera set raised the share choosing the formerly more expensive model, now the middle option.

Ethical guidelines

Where the line is

Offering a genuine range in which the middle option suits most buyers is good product design; it becomes manipulation when a top tier exists only to make the middle look moderate, a bottom tier is crippled only to make it look adequate, or a “most popular” badge is applied to the option with the best margin rather than the one people actually choose.

  • ●Build the range from customer needs: each tier should be a product someone should buy, not a frame for the tier beside it.
  • ●A “recommended” or “most popular” label must reflect actual purchase data or a stated needs-based criterion, not the margin.
  • ●Show what each tier adds in plain terms and per-unit cost, so that a buyer can see when the middle is padded with features few use.
  • ●Do not remove or hide a cheaper option that would suit the buyer; the low anchor must be a real product, not a deterrent.

How to defend against it

  • ►Decide before you look: list what you need from the product, then read the tiers from the cheapest upward and stop at the first that meets the list.
  • ►Ask what the middle tier adds that you will use, and cost each added feature; if the extras are things you cannot name a use for, the cheaper tier is your product.
  • ►Treat “most popular” and “recommended” as unverified marketing unless the seller states its basis.
  • ►Notice the flanks: if the top tier is absurd and the bottom tier is crippled, the set was built to sell the middle, and the fair comparison is against a competitor's product, not the neighbours.
  • ►For services and wine lists, ask the seller directly for the best value rather than the middle price; a good one will tell you.

From the Defense Playbook

Decide Before You Look (Pre-commitment)minutes

Fix your criteria, budget, walk-away point, or answer in writing before you see the offer, the anchor, or the pressure, so that the decision is made by the cool version of you.

The Unit-Price Checkseconds

Compare products by price per unit (per 100 grams, per litre, per sheet, per dose) instead of by pack price, pack size, or the size of the discount sticker, which is the one number that package design and promotions cannot disguise.

"There's a Third Option"seconds

When you are handed exactly two choices, stop and generate at least one more before choosing, including doing nothing, doing both, doing part, doing it later, or pursuing the underlying goal in a different way.

Every playbook entry states how strong its evidence is and when not to use it. Browse the full playbook.

References

  1. Simonson, I. (1989). Choice Based on Reasons: The Case of Attraction and Compromise Effects. Journal of Consumer Research, 16(2), 158-174
    The original demonstration that adding an extreme option raises the share of the now-middle option, explained by reason-based choice.
  2. Simonson, I., & Tversky, A. (1992). Choice in Context: Tradeoff Contrast and Extremeness Aversion. Journal of Marketing Research, 29(3), 281-295
    The extremeness-aversion account and the camera experiments in which a high-priced option shifted choice toward the middle.
  3. Frederick, S., Lee, L., & Baskin, E. (2014). The Limits of Attraction. Journal of Marketing Research, 51(4), 487-507
    The replication concerns about the attraction (decoy) effect with naturalistic stimuli, against which the compromise effect has held up better.
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