Humans are emotion-driven creatures. We feel as if we’re making rational decisions when in fact, there are so many factors that subconsciously influence our emotions and steer us in the direction of our judgment. For business owners, this sounds like bad news because the unpredictability of a prospect or customer’s buying behavior makes it difficult for them to be in control.
The fact is that the human psyche is a lot more complicated than simply analyzing data in search of customer trends. There are dozens of so-called “cognitive biases” that influence every single decision a business owner and a customer makes.
Below are 5 cognitive biases you need to know and how you can effectively adapt them to your marketing efforts.
1. Anchoring Bias
When an individual is presented with a piece of information first, followed by another piece of information, they tend to rely more on the first one to the point that they “anchor” the decision they make to that first bit of information they’re provided with.
Take for example the anchoring study conducted by Strack and Mussweiler (1999). Two groups of students were asked whether Mahatma Gandhi died before or after the age of 9, or before or after the age of 140. Of course, these so-called “anchors” are completely absurd because Gandhi was obviously older than 9, and the oldest person who ever lived was 122. However, these anchors still influenced the students’ answers, with the first group guessing an average age of 50 versus the second, with an average age of 67. Neither was close to 87 – Gandhi’s real age when he was assassinated.
The best way to apply anchoring bias in marketing is when you unveil pricing. For instance, if a customer is presented with a high price on a product, followed by a much cheaper price, they’ll assume the second price is more favorable.
One classic example is how Williams-Sonoma managed to double their sales on their original $279 breadmaker by cleverly adding a more expensive deluxe breadmaker to their product line, for $429. By introducing a better but more expensive model, the company was able to provide an anchor which customers were able to make a comparison on. Obviously, they went for the $279 model, which was a more affordable alternative.
2. Loss Aversion
For many of us, it’s more frustrating to lose $10 than finding the same amount hidden in our purse. The Loss Aversion effect is quite simply how we fear loss more than gaining something of the same value.
For business owners, the basic Loss Aversion strategy is to give customers free coupons. For example, by giving a $10-off coupon, shoppers feel as if they “own” that money-saving opportunity.
Loss Aversion also works when providing free trials. When a free trial expires, some customers will feel as if they’ve lost out on something they have spent the last month using. And because it’s hard to give up at this point, they’ll end up paying to continue their subscription. Thanks to Loss Aversion, you’re more likely to convert free-trial users into paying customers, as compared to converting customers who have never used your product before.
3. Social Proof
It’s a given fact that more people tend to like and trust something if it’s already popular with others, especially if they share similarities with those “others”.
No matter how small this Social Proof is, say, a short and basic-looking testimonial without a name or photo, this cognitive bias still works, especially in marketing. You can apply this to your marketing strategy either by:
- presenting personal stories and experiences of several customers and then serving them as testaments to show how your business has helped or benefited them (qualitative); or
- highlighting the number of people who trust and do business with you (quantitative)
You can maximize the Social Proof effect by using both. Plus points if you present them with an extensive testimonial or a case study that will show them just how many paying customers you have. IHateWritingEssays.com author, David Anderson, for example, is able to manipulate client decisions by showcasing personal experiences (positive or negative) of customers who have previously paid for a writing service.
4. Hyperbolic Discounting
Hyperbolic Discounting describes how customers would prefer to get a smaller reward or token now instead of a larger one later. For example, customers would rather receive a $10 voucher now than get a monthly $15 coupon.
When applying this type of cognitive bias, marketers should point out the immediate benefits of their service or product. How will it change their potential customers’ lives for the better? If shoppers can get a picture of these changes in the future, they’re more likely to purchase it.
Another way to apply this to your business is when offering speedy shipping options, even if these tend to cost more. You can also offer limited-time perks to activate a present bias. For example, customers can take advantage of a free, next-day delivery if they purchase from you before midnight.
5. Authority Bias
Based on the 1961 Stanley Milgram experiment, the Authority Bias effect is when people put their trust on
In marketing, this means that customers will tend to be more influenced if the information about a product or service is coming from an authority or an expert. This can be a powerful tool for convincing prospects and instantly converting them into paying customers.
A classic example of Authority Bias used in marketing is one that we often see in toothpaste campaigns and commercials: Dentists with their lab coats on, trying to convince us that this particular product is the right choice for your dental health. Authority Bias is a commonly used method among salespeople. In fact, it’s ever-present in TV commercials. Remember those celebrities that are used to promote a certain product? That’s Authority Bias in the works!
As you can see, if you take these cognitive biases into account, you’ll have a much easier time boosting conversions, attracting more customers, and maximizing customer value.
But remember: A great marketing campaign doesn’t just convert people by accident. They serve as a guide for people through the decision-making process. Cognitive biases aren’t about tricking people into buying what you’re selling. It’s more about understanding how people think and using that knowledge to showcase your brand in the most effective way possible.