Cognitive Biases all Marketers Should Understand (Part One)

If there’s one thing for certain about us human beings, it’s that we’re terrible at making rational decisions.

dilbert decisions
(Image source)

 
When presented with a choice, we often defer to using heuristics, which are simple, efficient rules that help us make quick decisions when faced with a difficult choice, rather than coming to a rational conclusion. (This will likely sound familiar if you’ve read Daniel Kahneman’s Thinking fast and slow, Philip Tetlock’s Superforecasting: The art and science of prediction or Dan Ariely’s Predictably Irrational – all really great books!)

 
Heuristics can be very practical, as we don’t have the time to analyse and rationalise every single one of the 35,000 decisions we make on a daily basis, but they can also result in cognitive biases. These biases are errors in our thinking and decision making that happen when we attempt to process and interpret information, usually influenced by subjective experience or environmental factors.

 
Cognitive biases have fascinated me for a while now. But more than understanding exactly what they are, I think what’s most interesting is seeing them in action, and understanding how, as marketers, we can better understand how our audience make decisions and then use this insight to improve our positioning and communication.
 
In this post, I’m going to walk through four common cognitive biases. I’ll explain different ways you can use them to your advantage, along with examples of brands that are a step ahead and are already implementing these tactics within their marketing strategy. Who knows; you may already be appealing to these biases without even realising it!

The anchoring effect:

Can you ever remember making a purchase simply because it was on sale and compared to its original price, it was simply too good a deal to pass up?

If so, I’m sorry to break it to you but it would appear you’ve been the victim of the anchoring effect.
 

What is the anchoring effect?

Anchoring is a cognitive bias that refers to our tendency to rely too heavily on the first piece of information we receive. This means all new information is only viewed relative to the first.

In the example of a sale, rather than rationally working out “is this a good deal”, we switch this question to the easier one of “is this a good deal compared to the product’s original cost?”. With the “WAS” price in front of us, this is a much simpler conclusion to make.
 
Now think about how anchoring might affect negotiations.

The person who comes in at the starting bid, or price, has the upper hand as all negotiation will be adjusted from that initial starting point.

That’s why if you’re trying to sell a service or product, or negotiate your salary, it’s a good idea to get in first and set the asking price higher than what you’re hoping to get.

 

Similarly, if you’re looking to buy a service or product, or negotiate an employee’s salary, you have the upper hand if you come in first with a lower offer than what you expect to pay.

 

I think this cartoon sums it up pretty well:

anchoring effect comic strip(Image source)

 

Examples of the anchoring effect in marketing:

The most obvious place you see the anchoring effect in marketing is on sales and pricing pages.

 

Take this example from OnePager below:

onepager pricing page

Not only do OnePager showcase their agency packages on the same page as their starter packages, they startwith the agency price, which is significantly more expensive than the next available option.

 

Even if you’d never need the agency package, by seeing this cost first, all other packages are suddenly viewed in relation to $199, rather than to other more comparable packages. Suddenly $15 seems like a bargain, even if you really only need the $8 package.

 

Now let’s take a look at a slightly different example from Nutmeg:

nutmeg fees page

 
If you haven’t heard of Nutmeg, they’re a platform that manages your investment portfolio for you based on your risk appetite.

The screenshot above is from their fees page. What I want you to notice is the slider. The page loads with the automatic expectation that you’ll be investing £25,000, and the position of this to the left of the slider implies that this is a low investment amount.

For a lot of people using Nutmeg, I’d hazard a pretty strong guess that that’s going to be more than what they’re willing or able to part with. When you push the slider down, you’ll notice that the minimum investment amount is £500 – much more reasonable. But by having the automatic suggestion at £25,000, this amount becomes the anchor, so if you were initially planning on investing a small amount of £500 – £1000 – it’s likely you could be persuaded to increase this amount, without them even asking you directly.

Clever.

 

The bandwagon effect:

If all your friends decided to jump off a bridge, would you do that too?

This was one of my mother’s favourite lines when I was growing up. I’m sure a lot of you were delivered something similar by your parents whenever you asked to do something and gave the reason as “But so and so are doing it!”

My mother was certainly clued in on the bandwagon effect.

bandwagon cartoon(Image source)

 

What is the bandwagon effect?

The bandwagon effect is one of the better known and longest-studied heuristics. It’s a bias that occurs as a result of social proof; where we make a decision based on popularity of the options amongst our peers, rather than from rational comparison. (This article from the Economist explains it really well with lots of further reading referenced).

The bandwagon effect is why we’ll choose a cafe or pub with people sitting in it over an empty one, or watch a TV series because everyone’s been talking about it, even if it isn’t a standard genre we’d go for.

For a more topical example, how many of you have secretly or somewhat reluctantly downloaded the Pokemon Go app, even if you wouldn’t call yourself a Pokemon fan?

(For the record, I have not… yet…)

Even if you haven’t, are you somewhat curious? I mean, as everyone is playing it and talking about it, it must be pretty good. Right?

Bandwagon effect strikes again.

 

Examples of the bandwagon effect in marketing:

One of my favourite examples of the bandwagon effect in marketing is from Groupon.

They appeal to the bandwagon effect three times above the fold. Take a look in the image below and see if you can pick them out:

groupon page

Find them? They’re not exactly subtle.

You have the average customer review, supported by the total number of 2483 customers; You have the “Over 1000 bought”; and you have the Facebook share count.

Having these multiple points of social proof acts to validate both the Crazy Bear as a venue, as well as the deal itself.

Bonus points if you also noticed the anchoring effect going on here too. £25 for afternoon tea seems pretty bloody reasonable against £63!

 

How you can use the Bandwagon effect

Here are some simple ways you can invoke the bandwagon effect:

Share counts:

If you’re not already doing so, consider having share counters alongside your social share buttons on articles and key pages. Keep in mind this can also work against you (negative social proof) if your content isn’t consistently getting high shares.

I’d opt for a plugin that you can set to hide share counts under a certain amount. Two I know of that enable this are SumoMe, and Social Warfare.

 

Previous and existing clients:

If you’re a service provider, displaying your past and current client base is another way of demonstrating positive social proof.

We have ours displayed on our homepage which show a range of industries, as well as different sizes of businesses:

white clients

 

Total number of customers:

Publicly shouting about the number of customers, users or downloads your product or service has will help with positive social proof and evoke the bandwagon effect.

You’ll often see this for software downloads (think about the app store as an example of this) as well as for webinars and for events. You’ll also see it used heavily in fundraising platforms:

kickstarter page

 

Reviews:

Showing aggregate reviews and ratings is yet another tactic that you can use, and various review sites will integrate with AdWords to show positive aggregate ratings next to your ads. Positive reviews (especially in high numbers) are one of the best ways to boost your click through rates of PPC ads, and boost individual product conversion rates.

 
Further reading:

This article from Forbes goes into a lot more detail on bandwagon marketing then I have here, so if you’re interested in learning more, give it a read.

 

The sunk cost fallacy:

You’ve purchased a book and you’ve started to read it. After a few nights’ reading the early chapters and making solid progress, you realise it’s not nearly as good as you thought it was going to be, but you keep reading. After all, you’ve already invested the time and effort in buying the book, and spent the last 3 evenings getting half-way through, you may as well finish it… right?

What is the sunk cost fallacy?

In economics, sunk cost refers to a cost that’s already been incurred and can no longer be recovered. As such, economists argue that these purchases or investments should not factor into decision making. Instead, you should make decisions based on the expected future costs and benefits.

 

But that would be too logical, wouldn’t it.

 

You see, the problem with this logic is that it doesn’t factor in loss aversion – We’re wired to avoid loss, more than we’re motivated towards gain, so when we invest in something, we are very reluctant to abandon it, often resulting in us investing more and being worse off than if we’d cut our losses, be that financial, time, or effort.

 

My friends, welcome to the table the sunk cost fallacy.

sunk cost fallacy cartoon

(Image source)

 

Examples of the sunk cost fallacy in marketing:

You see people utilising the sunk cost fallacy all the time in marketing, primarily for customer retention.

Any product or service that requires an initial, non-recoverable investment will help tie your users or clients to your service.

Now remember, this doesn’t have to be financial investment.

Think back to when you first signed up to Twitter or LinkedIn – both of these platforms do something very clever when new users register. They don’t make it easy to just create an account. Instead they lead you through a series of processes. You’re directed to enter out your contact information, find and connect with friends, fill in profile information – and they don’t make it easy to skip steps along the way.
linkedin sign up

Trust me, that’s not just them being helpful; that initial investment of time becomes a sunk cost – you’re not going to get that back. Suddenly you’re a lot more motivated to use the service than if you’d just had to enter an email address and click a button.

To emphasise the investment users have put in, having clear progress statuses can be very effective.

Again, LinkedIn is a great examples of this, showing your progress in setting up your profile:

linkedin process

And keeping a profile strength bar on your profile, even as a dedicated user:

skippy linkedin

Another good example of how I’ve noticed the sunk cost fallacy work on me, is with my Nike Plus running app. Every time I go for a run I sign in to the app and track my miles.

 

The app now holds a bank of data of my running performance – and everytime I log in I’m faced with a reminder of the literal blood, sweat and tears that I’ve invested in that app, not to mention the 300+ miles. Trust me – there’s no way I’ll be swapping to Map My Run any time soon, even if it was the better option for what I needed going forwards.

nike plus

(Image source)

How you can use the sunk cost fallacy

 

If you have a shocking product, or simply can’t offer value to a specific user – I can’t help you. But even the best companies have some strong competition these days, and what an understanding of the sunk cost fallacy can do is improve customer retention.

 

The examples above teach us that we should get an initial investment from our customers as soon as possible. The more emotional this investment is, the better.

 

They also showcase the importance of maintaining contact with our customers – providing them with a status update or virtual (if we can’t provide a real) progress bar, and providing ways that they can continue to emotionally invest in what we have to offer them. As an agency, flexible roadmaps, access to project management tools, and a system to ensure weekly and monthly catch-ups is not just great from a client experience perspective, it also reinforces the investment both parties have made.

 

Further reading:

This post from You Are Not So Smart analyses the sunk cost fallacy, using a key example of the 2010 Facebook app game, Farmville.

 

The choice-supportive bias:

We’ve all heard of buyer’s remorse; that sinking feeling we get after making a purchase that we know, retrospectively, we didn’t need.

 

But think carefully about this – what do we usually do to get rid of this feeling, or to avoid it in the first place? This might be hard to answer, and that’s because it comes quite naturally, without us consciously deciding to do so. And when it does, the choice-supportive bias is at play.

 

What is the choice-supportive bias?

Choice-supportive bias is what it’s called when we think back to choices we’ve made and ignore or downplay the faults of the option we chose, and exaggerate the faults of the options we didn’t select.

 

By doing this, we reduce the likelihood of feeling regret or remorse over the decision.

choice supportive bias

(Image source)

Essentially, we don’t like to be wrong – so we avoid recognising we’re wrong and instead skew our recollection of the decision making process to reinforce that we made the right decision by focusing on the good aspects of the journey, and ignoring the bad.

 

Examples of the choice-supportive bias in marketing:

 

The choice-supportive bias really comes into its own after you’ve gained a customer. It also compliments the sunk-cost fallacy beautifully; once users feel invested, they find it harder to break away.

 

Email marketing campaigns that are triggered after a conversion are one of the best examples of how marketers trigger the choice-supportive bias.

 

The best kind of emails are those which contain information that reinforces the customer’s positive perception of your brand. This could be as simple as helpful information about the product, a free Ebook sent out when people sign up for a webinar, or customer testimonials of a service that a new customer has just signed up for. Better still, it could say something positive about the user themself!

 

Dollar Shave Club do this very well by reinforcing that by signing up, you’re now part of an “elite club of geniuses” – That right there is choice-supportive ammunition handed to you on a silver platter.

dollar shave club(Image source)

Toms is another example, this time reminding you that you’ve not just purchased a product – you’ve joined “The movement!”:

toms

(Image source)

 

These are both post conversion tactics, but companies can also trigger the choice-supportive bias during the marketing funnel itself.

 

This is usually achieved through micro-conversions. Filling out a lead-gen form, opting in to a newsletter or liking a brand on social media all count as “choices” to align with your brand that your users will defend, and which will help ease their journey through the rest of the conversion funnel.

 

Dollar Shave Club is a great example of this. They don’t just flatter in their confirmation emails, they provide flattery throughout the entire customer journey, along with a brilliant user experience.

 

Everything about the user journey is positive, providing lots of reference points for users to justify a purchase.

 

There’s a very in-depth post on the choice-supportive bias by Jeremy Smith, in which he also uses Dollar Shave Club as an example: “Throughout the conversion funnel, the messaging gets warmer and more self-satisfying. By the time I’m done buying, I feel like I’m some sort of shaving god.”

dollar shave club products

(Image source)

How you can use the choice-supportive bias in marketing:

Something worth noting is that the choice-supportive bias is especially likely to be triggered when the choice reflects positively upon the user, and as such – it’s possible to trigger the bias during the conversion process itself, not only after you’ve made a sale. This is what makes the Dollar Shave Club’s conversion process work so well.

The great feeling of having a seamless user experience, seeing brilliant customer testimonials, noticing a relevant and clear value proposition, and having access helpful customer support not only makes users more likely to convert, it means they’ve already got positive connotations of the brand, which they’ll actively reinforce following the purchase.

After a user does convert, sending confirmation emails that point out the positives of the decision they’ve made will mean you’re doing a lot of the hard work for your customers.

 

Summing up:

In this post I’ve run through only four out of hundreds of identified cognitive biases.

 

I’ll be doing part 2 of this article in the near future, delving into another four common biases and how you can use them to improve your marketing efforts, but if you’d like to do some further reading in the meantime, I suggest starting with this crazy list on Wikipedia.

 

I also recommend looking into the books I mentioned in the introduction, which I’ve linked to here as well along with a couple of other good’ns:

 

 

If you’ve got other examples you’d like to share, or questions about other resources I can point you to, do leave a comment or feel free to reach out on the Twitters!

The post Cognitive Biases all Marketers Should Understand (Part One) appeared first on White.net.

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