Making choices is tough, especially in a competitive retail environment. A new study sheds some light on the processes consumers use to make choices among multiple options.

To illustrate the phenomenon they investigated, authors Young-Won Ha and Sehoon Park (both Sogang University, Korea), and Hee-Kyung Ahn (University of Toronto) put forth the following scenario: A consumer must decide between two identically priced vacation packages to France. Package A ("the competitor") offers stays at four-star hotels that are inconveniently located. Package B ("the target") includes stays at two-star hotels near famous museums and palaces. As the consumer weighs the difference between service and convenience, she finds a package C ("the decoy"), which offers stays at one-star hotels that are as conveniently located as Package B.

Prior consumer research has clearly demonstrated that the presence of a decoy increases the attractiveness of the target option. More people will choose Package B (the target) when the decoy is available.

In this study, the authors examined the effect of changing one feature in the choice set. For example, if Package A's destination were now Italy instead of France, how would consumers respond? This introduction of Italy into the choices is called a "unique categorical feature."

"When a unique categorical feature (e.g., Italy for a tour site) was introduced in the competitor option, the power of the decoy to enhance the attractiveness of the target (vs. the competitor) was significantly reduced," write the authors. In three separate studies, the authors documented the influence of categorical attributes on the impact of decoys to enhance the attractiveness of the target options. They used vacation tour packages, laptop computers, and camera phones.

The conclusions of the study can help retailers fend off challenges from competitors that offer less-expensive competing brands. Opening their own stores (Haagen-Dazs, Nike) is one way to control competitive factors. "There are many other creative ways to set consumers' choice agendas based on categorical attributes," the authors conclude.