5 Cognitive Biases E-Commerce Marketers Need to Know About
In an age of information overload, mental shortcuts known as heuristics act as rules of thumb, allowing buyers to make decisions quickly and efficiently.
As much as we like to believe in our ability to make rational decisions, the reality is, we are far from perfectly rational when faced with a decision. In fact, given the vast amount of decisions a person is required to make a day, we do not have the available time, information, and mental capacity required to arrive at truly rational conclusions.
As we are limited by the available time and information at our disposal, it is unsurprising to see our brain resort to other alternatives, namely heuristics, allowing us to simplify the decision-making processes that are part of our everyday life.
In simple terms, heuristics are a set of guiding mechanisms, allowing individuals to make decisions quickly and effortlessly. While such processes can greatly speed up the decision-making process, they inadvertently give rise to cognitive biases.
The term ‘cognitive bias’ coined by psychologists Tversky and Kahnemann in the 1970s, refers to systematic ways in which individuals assess situations that deviate from rational and logical thinking. In fact, there are numerous types of cognitive biases, affecting how individuals make decisions across a wide range of situations.
With that said, let’s look at some of the most common cognitive biases and how to use them in your marketing strategy.
Why You Confuse ‘Easy’ with ‘True’
Which is a more likely cause of death, shark attacks or being hit by falling airplane parts? Chances are you will rate death from shark attacks as more probable, and that's largely due to a phenomenon known as the availability heuristic.
The availability heuristic is a type of bias where individuals evaluate situations based on information that is most readily accessible. But how does that apply to your marketing campaign?
A way to apply the availability bias is to advertise to users that are already familiar with your brand. In fact, only 2% of users will convert on their first visit to your site, which if you think about it, are a lot of lost conversions. Fortunately, using the availability can help win most of them back.
One of the most effective ways to win back customers is to use retargeting. Whether using Facebook or Google ads, showing ads to buyers that already visited your site will make them more aware of your brand, acting as a foot in the door and bringing you a step closer to reaching a higher conversion rate. In fact, buyers who see retargeting ads are 70% more likely to convert to customers.
Another amazing tool that will lend a significant boost to your availability marketing campaign is to use an exit-intent overlay. Making an offer such as a coupon or giveaway will help consumers overcome the barriers they have with your brand and equally make them more likely to convert.
The Effects of ‘Gain’ versus ‘Loss’ Framing
Which of the two would you favour, a product that is 90% effective or one that fails 10% of the time? While the information presented is the same, the manner in which it is presented can significantly influence how customers respond to it, better known as the framing effect.
To be more specific, people want certainty when presented with a gain frame and are more risk-seeking when presented with a loss frame. That being said, there are two main ways you can employ framing in your marketing copy - positive and negative framing.
Positive or 'gain’ framing of product features highlights the benefits a customer will gain by engaging with a product.
Negative or ‘loss’ framing instills an image in the customer’s mind that by not purchasing a particular product, they are foregoing a potential gain. Aside from instilling fear, negative framing also allows you to offer customers a solution, fixing the problem they are experiencing.
With that in mind, combining a negative and positive frame in a single message can work too. For instance, by using a negative frame to create a problem and a positive frame to offer a fitting solution.
Since both types of framing can improve consumers' attitudes toward your product, is it better for marketers to emphasise the positive or negative? There is no straight answer. After all, it depends on the message you are trying to convey via your marketing.
The bottom line is, both positive and negative framing are useful tools to add to your marketing toolbox. A way to figure out the framing that suits your strategy best, is to simply see which framing performs better via A/B testing.
How Initial Values Fool You
When trying to estimate the value of an option, you need a foothold where you can stand on. Luckily, the anchoring bias allows you to do just that.
According to the anchoring phenomenon, people tend to rely too heavily on the first piece of information that they hear. To be precise, anchoring involves evaluating a decision based on a certain reference point or ‘anchor’, resulting in the subsequent decision to be biased towards the initial value.
So how can marketers translate the anchoring bias to their advertising? Using anchoring can significantly influence how customers perceive your product. In fact, there are multiple ways anchoring can help you achieve this.
1. Think about your product range: One of the most common techniques is to create different variations of the same product such as by offering a cheap, mid-range and expensive option. By doing this, you will make your most expensive option act as the anchor, encouraging people to buy the mid-range product.
2. Play with price perception: Another technique is to expose customers to a higher price and display it together with a discounted price. This will induce your customers to compare the discounted price up against the ‘anchor’, nudging them to view the discounted price as more attractive than it is.
3. Increase prices gradually: Anchoring can also help your company introduce gradual changes in price without the hazard of driving away your customers. Because each new price will act as the anchor for the following price increase, customers will tend to judge the price difference as relatively small and will be more likely to agree with it.
On another note, try not to set your anchor price too high, as that will merely reduce the tendency to measure other prices up against the anchor. In other words, try to accommodate the anchor price to the realm of what you are selling.
The Power Of ‘Wanting It Now’
How do you choose between immediate, tangible pleasures such as eating delicious food or drinking alcohol and the long-term benefits of a healthy lifestyle? In fact, a lot of the decisions we make are guided by a principle known as hyperbolic discounting, requiring a tradeoff between instant gratification and a long-term reward or goal.
To cut it short, hyperbolic discounting is the tendency to prioritise smaller immediate rewards rather than larger, delayed rewards. With that in mind, it’s vital that you focus on the immediate reward you can offer your prospects.
1. Loyalty programs: A way to harness hyperbolic discounting is by offering small, short-term rewards to customers that regularly engage with your brand. As an example, a point-based loyalty program allows customers to rack up points for every item they purchase. Offering customers the immediate reward of points is likely to encourage them to further engage and invest in your brand.
2. Delayed Payments: Deferring the pain of paying for a product is also perceived as reward. The “Buy Now, Pay Later” technique, grants prospects the satisfaction of buying a product the second they want it, while allowing them to pay for it over a longer period of time. The immediate reward of buying the product is likely to outweigh the burden of having to pay at some point down the line.
3. Limited time offers: Another way to incentivise customers to act now is to provide them with limited time offers. Not only do such offers play into the hyperbolic discounting bias, they also generate a sense of urgency. This way, you entice customers by offering them instant gratification but also urge them to act quickly for fear of missing out on an opportunity.
The gist of the matter is, desire for immediate satisfaction is strong. Not only do you need to give your prospects what they want, you need to give it to them now.
FOMO (Fear Of Missing Out)
The fear of missing out, better known as ‘FOMO’, is something we have all at some point of our lives fallen victim to. In essence, FOMO is the fear experienced by the prospect of missing out on a social occasion.
Marketers can tap into customers’ FOMO, appealing to customers’ desire to make the most out of every opportunity. But what does FOMO marketing entail?
A powerful FOMO marketing tool is to add social proof to your landing or sales page. In fact, there’s a reason why so many companies use customer testimonials to communicate the success in their products. Testimonials tap into FOMO because they reassure that other people have invested in a product, prompting customers to do the same.
Another social proof technique is to mention how many customers are looking at a product. That will make potential customers want to follow suit, nudging them to buy your product.
Social proof is not the only tool at your disposal. Another effective way you to trigger FOMO is to induce scarcity. A way you can achieve this is to display the stock availability for items that have low stock. This will create an urgent situation pushing customers to act fast and buy your product before it can slip through their fingers.
No matter the techniques that you choose, weaving FOMO into your marketing is a sure-fire way to increase engagement with your brand.
Cognitive biases play an important role in how we act upon information in the world around us. But how does that help marketers? Understanding how cognitive biases play into the decision-making is key to engaging your audience.
While each of these cognitive biases can be applied to your marketing strategy, it is not imperative for you to use all of them. Rather, consider your overall marketing goals and determine what biases will benefit your strategy the most.
Remember, biases alone are not a one-size fits all solution. If your product is faulty, tapping into different psychological principles will not miraculously persuade consumers to buy it.
However, if used in a consistent and skilful way, biases can form the basis for a successful marketing strategy, boosting conversions and causing your sales to skyrocket.