In an ideal world, defaults and price anchors would not have any bearing on consumer choices. As consumers, our decisions would be a result of us meticulously weighing up the costs and benefits along with being informed by our existing preferences and because of this, we would always make optimal decisions.
But contrary to what we would like to believe, most of our decisions as humans are driven by emotion and instinct rather than by rationality. So in order to influence consumers, we need to first understand why people make decisions from a psychological, emotional and behavioural point of view. Behavioural economics helps us to do this by unpacking the various factors that impact consumer decision making and reveals ways that you can use to steer irrational consumers towards a predictable outcome.
1. The gentle nudge
The most effective nudges are subtle and not that noticeable. They don’t include threatening or forceful CTAs (Calls To Action) like “sign up now or you’ll regret it later!” but rather use gentle suggestions that the reader can relate to on a sub-conscience level. A nudge can suggest scarcity or exclusivity, for example, “only 3 left!” or “for a limited time only!” which taps into the types of emotions that are connected with FOMO (Fear Of Missing Out). When consumers feel like they are missing out, they act quickly and out of urgency.
Scarcity works wonders for fueling consumer’s desire to buy. A study done on consumer behaviour by the Journal of Marketing Research stated that when participants were faced with scarcity “the overall perception of scarcity versus the overall perception of abundance increased “choice share” of the most-preferred item from a product class.” Meaning that the participants showed a greater interest when presented with items they were told were scarce versus ones they were told were freely available.
Highlighting urgency through the use of a subtle CTA is a great motivator. You can do this by presenting a promo code or a limited time offer to create a sense of scarcity and effectively drive consumers to take urgent action.
2. Decision paralysis
Having the option to choose is an essential part of life and consumers like being presented with options because it makes them happy, but too many choices can lead to something called decision paralysis.
Have you ever stood in the aisle of a grocery store unable to choose between 15 different flavours of potato chips? This inability to choose is known as decision paralysis, also known as choice paralysis or analysis paralysis. Decision paralysis happens when we are forced to choose from too many options that are too difficult to compare. It can be described as having such a tough time choosing between the myriad of options that we end up do nothing at all.
But if the choices are reduced, for example, 15 different flavours reduced to just 6. The decision for consumers becomes a lot easier. Proving that more isn’t always better and that offering fewer choices can lead to improved engagement and sales.
The key takeaway, don’t drown consumers with products or content, rather have a limited and targeted offering.
3. Social proof
Social proof explores the theory of how people are influenced by one another and the popular courses of action that they take. The most basic motivating force behind social proof is known as the “bandwagon effect”, which is a social psychology concept that states that people are more likely to engage in an action if other people are doing it. The effect proves that when you appeal to a consumer’s need to fit in, it often yields great results.
You can leverage social proof by sharing testimonials, ratings or feedback and customer’s good reviews.
4. The decoy effect
Price is the most delicate element of the marketing mix, and a lot of thought goes into setting prices to nudge consumers towards spending more. There is one particular pricing strategy that gets consumers to switch from one option to another more expensive one and it’s known as the “decoy effect.”
Let’s say for example that you are in the market for a blender. You see two options, the cheap one priced at R1296,14 that offers 900 watts of power and a 5 piece accessory kit and the more expensive one that costs R2169,95 and offers 1,200 watts and 12 accessories. Which one do you choose? It’s not immediately obvious that the more expensive option is better value for money because it’s more powerful and has more than twice as many accessories but is also more expensive.
Now consider the two options while keeping a third option in mind. The third blender costs R1 819,55 and offers 1,000 watts of power. It also comes with a total of 9 accessories. Knowing this new information enables you to make what feels like a more considered comparison, right? So for R524,03 more than the cheapest option, you get 4 more accessories and an extra 100 watts of power. Bargain! You have just experienced the decoy effect.
5. The Ostrich Effect
In behavioural economics, “The Ostrich Effect” describes a consumer who avoids and ignores negative experiences because they feel overwhelmed by a process or task. This overwhelming task could be a purchase, survey or some kind of action that they need to take on a website. “The Ostrich Effect” is a result of the conflict between what our rational mind knows to be important and what our emotional mind anticipates will be painful.
To make things easier for ostrich consumers, you can use guard rails on your website to help reassure and guide them along the user journey. For example, make it easy to navigate your website while making purchasing steps very clear, use goal gradients along the way to encourage them to keep going and let them know that they are on the right path. These guard rails will help to ease the consumer’s anxiety and make the path to purchase fast and pain-free.
