Here are 5 behavioral economics lessons marketers need to know the Art of Marketing by S-Media.
Under the surface of our seemingly well-ordered, rational society, emotion and instinct are calling the shots a lot more often than we think.
For marketers, this knowledge is power, because understanding why people make choices is the first step toward influencing them.
So take a page from behavioral economics and unpack the psychological, emotional, and behavioral factors that impact consumer decision-making. Here are 5 ways you can use S-Media to guide your clients’ “irrational” consumers to a predictable result.
1. Wink, Wink, Nudge, Nudge
Nudges are small—the most effective are often barely perceptible. They’re not about pushy CTAs (“Do This Or Else!”); they’re more akin to suggestions. The most commonly used nudges in the marketing world are those that suggest the exclusivity and scarcity of a product: “Only 2 Seats Left!” Playing to our deep-seated fear of missing out, these notifications urge consumers to act.
Scarcity is a vital factor in fueling the customer’s desire to buy. This was backed up by a study published in the Journal of Marketing Research, which showed that participants exhibited extra enthusiasm when presented with gift cards described as scarce, rather than freely available. You can see examples of websites using nudges like this every day: Amazon heightens consumers’ desire to buy by showing when an item is low in stock, or placing time limits on when a purchase qualifies for free shipping.
Put theory into practice:
Highlight urgency in a purchasing opportunity to drive customers to act, especially if they’re positioned as smart shoppers who are ahead of the curve.
Try this S-Media tip:
S-Media’s Customer Journey builder can help you channel the power of the nudge by triggering messages to customers when they’re most likely to purchase. Adding Promo Code content blocks to your clients’ emails can also help create a sense of scarcity with limited-time offers.
2. Mental Jam
It seems counterintuitive, but choice—at least too much choice—isn’t always a good thing. In a study conducted by psychologists Mark Lepper and Sheena Iyengar, customers were presented with two different jam displays: one with 24 jam varieties, the other with just 6. For both displays, customers were given a coupon for a €1 discount on any jam. Although the larger display attracted more attention, the display with fewer items yielded better sales numbers.
People love choice, but decision paralysis is real. The more options you have, the harder it becomes to select the right option, or sometimes any option at all.
Put theory into practice:
Curate your clients’ marketing. Offering fewer choices can lead to better engagement and sales.
Try this S-Media tip:
S-Media’s CRM and segmentation options allow you to target and filter audiences to ensure you’re showing the right content to the right people. Refine your marketing strategy even further by using the dynamic content and predicted demographics features. Don’t drown customers with content—tailor it to them specifically.
3. Prove It!
Some might call it herd mentality, but behavioral economists call it social proof. This theory explores how people are influenced by the popular course of action. Basically, it’s the “but everyone else is doing it” rationale.
The hospitality industry has embraced the power of social proof with a small but mighty investment: a 3-by-4-inch piece of laminated paper. In a study published in the Journal of Consumer Research, the authors partnered with a large American hotel chain to test towel reuse messaging. They began with messages that encouraged guests to reuse their towels “because it‘s good for the environment.” This resulted in a 38% success rate. However, when the message appealed to behavioral norms, asking guests to “please reuse your towel because most people do,” rates jumped to 44%.
Thanks to this social proof, many hotels are saving more than just water. With fewer towels to wash, labor and energy costs go down, while the lifespan of the linens goes up. Yes, it’s all good for the environment, but that’s not what motivated guests to change. It was appealing to their need to fit in that yielded the best results.
Put theory into practice:
Leverage social proof by sharing customer testimonials. Reviews—both good and sometimes bad—have become an e-commerce necessity. Want to collect more reviews? Here are some great ways to gather those invaluable word-of-mouth recommendations.
Try this S-Media tip:
With S-Media’s first-purchase automations, your client can send an email to the person who just bought their product and ask them to write back with a product review. Or, they can periodically send out a survey to collect feedback.
4. Duck Decoys
The decoy effect is the phenomenon whereby consumers change their preference between two options when presented with a third (inferior) option: the decoy.
In a National Geographic experiment staged at a movie theatre, filmgoers were offered two popcorn options: a small for €3 and a large for €7. The small vastly outsold the large, which seemed expensive by comparison. After a third option—the decoy, a medium popcorn priced at €6.50—was introduced, sales of large-sized popcorns skyrocketed. Suddenly, the large seemed like a great deal.
Put theory into practice:
Want to sell more of a product or service? Here’s a counterintuitive idea—offer your clients’ customers a similar but inferior option, at about the same price. This can subtly guide consumers to select the option you want them to purchase.
Try this S-Media tip:
Use S-Media’s Product Recommendation blocks to highlight specific products in your campaigns and include a decoy product that is more expensive or less relevant than the options you want customers to choose. With e-commerce integrations like WooCommerce, you can personalize these product recommendations based on what they’ve purchased in the past to make your preferred option even more appealing.
5. Ostrich Effect
Pity the poor ostrich. Or at least hire them a PR agency. Two millenniums ago, a Roman myth painted these giant birds as cowards who bury their heads in the sand when afraid. Since then, ostriches have become the go-to metaphor to describe the confrontation-averse set. In behavioral economics, the “ostrich effect” describes a consumer who, when overwhelmed by a process or task—be it a purchase, a survey, or an action—drops off.
Some marketers might jump to conclusions and categorize these consumers as lazy. But that isn’t the case. In a study published in the Journal of Economic Behavior & Organization, neuroscientists proved that anticipation of a negative experience is just as emotionally taxing as living through it. When the subjects in this study were about to receive a painful electric shock, their brain activity mirrored that of someone being electrocuted. In this sense, knowing that you’re about to be shocked is just as bad as the shock itself—so much for living in the moment.
Put theory into practice:
Help ostrich consumers along with guardrails to keep them on track. You can do this by outlining purchasing steps clearly, making website navigation intuitive, and using goal gradients at checkout that let them know they’re on the right path.
Try this Mailchimp tip:
Think about using S-Media’s abandoned cart automations to encourage ostrich consumers to complete their purchase, or use shoppable landing pages to make the path to purchase quick and pain-free.
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