How to Benefit from LEED Certification and Decoy Pricing
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How to Benefit from LEED Certification and Decoy Pricing

Today I want to show you how to successfully promote LEED Certification and WELL/Biophilic design services using the Decoy Effect. 

Let’s start with a word of caution…

LEED Certification and design services:

As mentioned in my recent post “How to win better Clients with Choice Architecture”, fee proposal writers have the power to influence the design services that people buy… that influence comes with great responsibility!

Please exercise that responsibility carefully. 

The aim of this article is to promote LEED Certification and Well/Biophilic design services that provide a better outcome for the building owner and the end-user. 

Please be mindful of your professional codes of conduct when implementing the ‘Decoy Effect’ pricing strategy.

What is the Decoy Effect?

The Decoy Effect (also called the asymmetric dominance effect) refers to the way in which human beings tend to be ‘influenced’ by the presence of an inferior (less dominant) option, when choosing between a range of similar products and/or services.

The less dominant (decoy option) acts like a silent force ‘nudging’ consumers towards an option they may not have otherwise chosen.  

Note: ‘Nudging‘ is a term that was first defined by Nobel Prize winner (2017) Richard Thaler and Cass Sunstein – pioneers of Nudge Theory.

How does the Decoy Effect work?

Example # 1: The Decoy Effect and Newspaper Subscriptions

In his book, “Predictably Irrational”, the world-famous behavioral finance expert and New York Times best-selling author, Dan Ariely described how The Economist applied the Decoy Effect with great results (albeit by mistake).

Predictably Irrational and LEED Certification

Anyone who was thinking about subscribing to the Economist was presented with three subscription options:

Option 1 – Digital Subscription Only for $59

Option 2 – Print Subscription Only for $125

Option 3 – Digital and Print Subscription for $125

At first glance it seems strange that option 2 and 3 would be offered at the same price point… so Ariely decided to find out why by testing the pricing strategy on a group of MIT students.

According to the study, when the above three subscription options were offered, 16 percent of participants opted for the most affordable option – Option 1 (Digital Only), nobody opted for Option 2 (Print Only), and an incredible 84 percent opted for the most expensive option – Option 3 (Digital and Print).

LEED Certification and the Decoy Effect
Image by Blue Turtle Consulting

So, if nobody is subscribing to Option 2 (Print Only) why continue to offer it as an option? Let’s find out.

Ariely repeated the study but this time he removed the unpopular Option 2 (Print Only) leaving just the most affordable and most expensive options – Options 1 and Option 3.

Option 1 – Digital Subscription Only for $59

Option 3 – Digital and Print Subscription for $125

On this occasion he found that the subscription preferences of this group of participants had completely reversed. 

In the absence of Option 2 (Print Only), the number of participants who chose the most affordable option – Option 1 (Digital Only) increased from 16 percent to 68 percent, while the number of participants who chose the most expensive option – Option 3 (Digital and Print) decreased from 84 percent to 32 percent.

LEED Certification and the Decoy Effect
Image by Blue Turtle Consulting

Why the change in preference?

It would appear that Option 2 (Print Only), provided the perfect decoy subscription option – its mere presence encouraged more participants to see the benefits afforded by Option 3 (Digital and Print) thus helping to increase revenue by over 40%.

This is how the Decoy Effect works – the less dominant option serves as a necessary benchmark to help promote the benefits of the more dominant option.

But what happens if you don’t offer Option 2 and Option 3 at the same price point, but instead offer Option 3 at a slightly higher price point? Let’s look at another study to find out…

(Note: To help you with your fee proposal and negotiation strategy we’ve created a FREE Fee Proposal Mini-Series. Click the image below to learn more):

Example # 2: The Decoy Effect and Popcorn Sales

National Geographic also decided to test the power of the Decoy Effect (asymmetrical dominance) by conducting a similar experiment, only this time the research included movie-goers and popcorn choices.

In the first round of the experiment participants were offered just two popcorn options:

Option 1: Small Popcorn for $3

Option 2: Large Popcorn for $7

When presented with these two options most participants chose to purchase the small version.

LEED Certification and the Decoy Effect
Image by Blue Turtle Consulting

Why choose the small popcorn option?

When asked why, most participants said that either the large version was too expensive, or that the small version was a better size for their appetite.

Researchers then decided to repeat the experiment but this time with the addition of a third option… a slightly inferior, medium sized (decoy option) for $6.50!

Option 1: Small Popcorn for $3

Option 2: Medium Popcorn for $6.50

Option 3: Large for Popcorn for $7

When presented with these three popcorn options the researchers found that the results had completely reversed: now a much higher percentage of participants chose to purchase the large instead of the small version of popcorn.

LEED Certification and the Decoy Effect
Image by Blue Turtle Consulting

Why choose the large popcorn option?

When asked why, most participants explained that it only cost an extra 50 cents for the large. In effect they saw value in ‘more’ popcorn for only $0.50.

Once again, it would appear that Option 2 (Medium Sized Popcorn) provided the perfect decoy option. Its mere presence encourage more movie goers to see the benefits afforded by the larger popcorn size…. a size that they originally deemed too expensive, or too large, for their appetite.  

Conclusion:

By providing a range of product or service options, and by making one option slightly inferior, we can significantly influence the purchasing decisions that people make.

Ethical Considerations:

Now you may be asking yourself… is this ethical?

Should we be influencing the choices that other people make, especially when they relate to artery-clogging foods and products that do little to promote the health, safety and welfare of the individual, or the public?

I think we can all agree that using this strategy to influence the sale of products and services that have a negative impact on society, may not be the best use of this information.

Design Professionals and Ethics:

However, before we jump on that band wagon, I think it’s important to remind ourselves that many of us already rely on some version of this strategy in our own business transactions.

For example, during fee negotiations, how many of us reduce our design fee in an effort to influence the Client’s purchasing decision?

Just like the ‘Decoy Effect’, by reducing our design fee during a negotiation, we’re effectively trying to ‘nudge’ the Client’s purchasing choice in our favor.

As individual Design Professionals it’s not our intention to cause harm with this approach, quite the contrary.

However we must remind ourselves that however innocent our intentions, collectively, lowering our design fees to win work has a devastating impact on the industry and the services Design Professionals provide.

The Architects Journal refers to the practice of reducing design fees to win work as  “The Race to the Bottom” (“The Era Of the Super Low Fee Is Back” Richard Waite, 12/6/18). 

According to the RIBA president Jack Pringle “…large or small, firms can only bid below cost for so long… then they will either go out of business or give such a poor service that they lose their Clients and their reputation.”

Using the Decoy Effective for Good:

But what if I told you we could use the Decoy Effect for good?

For example, versions of the Decoy Effect have been used to help people make healthier food choices, get regular medical check-ups, reduce energy usage and participate in organ donor schemes (Nudge: Improving Decisions about Heath, Wealth and Happiness).

Nudge and LEED Certification

Decoy Effect and LEED Certification:

What if we could use this strategy to encourage more Clients to make better design choices… choices that reduce the impact the built environment has on the planet and improve the health, safety and welfare of the building owners and occupants.

By applying the Decoy Effect we can promote the issues that LEED Certification and WELL/Biophilic design set out to achieve; energy savings, water usage, CO2 emissions, air quality, and the use of renewable materials… and we can promote them in a way that’s more effective than our traditional approach to fee proposals.

Would that not be better for everyone?

Here at Blue Turtle Consulting, we’ve been helping Design Professionals apply the Decoy Effect for over a decade. 

Our position is simple, let’s use this knowledge to educate clients on the services we can provide while encouraging them to select a higher ‘quality’ design service.

In summary, let’s design our fee proposals to promote health, safety, and welfare, just like we design our buildings to promote health, safety, and welfare.

“Let’s design our fee proposals to promote health, safety and welfare, just like we design our buildings to promote health, safety and welfare.”

How to apply the Decoy Effect to encourage LEED Certification:

Applying the Decoy Effect requires creating service options and presenting them in an easy-to-read format. We use a table format and we call it the Fee Matrix. 

It’s easy to see the benefits of this approach – the Fee Matrix provides a very clear and compelling argument for choosing a higher level, or higher quality, design service (e.g. LEED Certification or WELL/Biophilic Design). 

When implemented correctly we can achieve three goals:

  • Educate the Client on the different design services available.
  • Provide freedom of choice.
  • Encourage Clients to choose the most sustainable design service available.

Isn’t that (in part) what our Professional Codes of Ethics are all about?

AIA Code of Ethics and Professional Conduct:

CANON VI Obligations to the Environment

Members should recognize and acknowledge the professional responsibilities they have to promote sustainable design and development in the natural and built environments and to implement energy and resource conscious design.

The RIBA Code of Professional Conduct:

13. The environment

13.3 Members should promote sustainable design and development principles in their professional activities.

The Royal Australian Institute of Architects Limited Code of Professional Conduct:

  • promote environmental awareness and the appreciation of architecture and urban design;
  • respect, conserve, and enhance, the natural and cultural environment;
  • encourage and maintain responsible ecologically sustainable and energy efficient design and development, and
  • strive to contribute to the development of architectural knowledge, culture, and education.

Would You Like Help Creating your Fee Matrix?

We’ve been helping Architects, Interior Designers and Landscape Architects for over a decade.

We’ve tried all the different ways to present design fees and we’ve learned what works, and what’s not so effective. 

To learn more about how we can help you check out the FREE Fee Proposal Mini-Series. 

During the series we’ll show you where most Design Professionals go wrong, and what you can do to fix it. 

To learn more click on the following link: https://blueturtlemc.com/fee-proposal-mistakes/