A good marketer is a good psychologist. They know that emotions influence buying decisions.
However, these emotions are complex. They are difficult to identify and decode. Therefore, effective marketers take the time to understand the key psychological principles behind decision making. They succeed because they know that all buyers of all types are governed by the same core psychological principles. These principles are like the “factory settings” of our brains.
Here, we examine social science research from Nobel Laureates, leading psychologists, and behavioral economists to reveal and understand the processes underpinning customer decisions.
Behavioral consistency tells us that past emotions influence future decisions.
This finding comes from psychologists at the University of California and Duke University. They describe a study in which participants were asked to cross what looked like a dangerous suspension bridge. This experience incited fear. That fear influenced the participants’ decisions days later. The conclusion was that “emotions on decision making can live longer than the emotional experience itself.” The reason for this phenomenon is something called behavioral consistency. Put simply, initial decisions become an anchor for future behavior.
In fact, behavioral consistency is so strong that getting someone to agree on one issue increases the likelihood of earning their agreement on another issue, according to research published in the Journal of Personality and Social Psychology.
Marketers can use this valuable insight to drive customer decisions. The key is to start small. Begin with messaging that seeks agreement on smaller, simpler things before moving to a bigger call to action. This approach resonates with our innate preference for consistency. If the initial messaging resonates, the follow-up messaging will too.
Myopic Loss Aversion
Myopic loss aversion is the act of making a decision based only on the short term.
This tendency is the reason it is difficult to compel someone to buy. We fear near-term changes. This habit is a problem for both marketers and customers. Marketers struggle to get the customer to see the long-term benefits of a purchase, and customers miss the value of the product or service because they don’t want to disrupt the status quo.
Researchers at Cornell University and the University of Chicago examined this fallacy by reviewing how professional sports teams deal with risk. They reviewed football games in which the team had to make an important choice. They could either kick an extra point to put the game into overtime or choose “sudden death” and try to get the ball into the end zone from two yards away.
They learned that most teams ignored the fast option, which offered a greater chance of success in favor of a slow option with lower odds of success. This bias is everywhere. It’s at the blackjack table. It’s on the battlefield.
Marketers must remember to properly articulate the long-term value of their offer. They must help customers overcome their overwhelming focus on the short term and articulate the downstream benefits of the solution.
Default influence describes how the array of options presented steers the individual’s final choices.
Psychologists at Princeton and Columbia wanted to know more about default influence, so they analyzed 58 different studies. They learned that a person’s choice is influenced by the context of surrounding options. They also learned that there is “substantial variability in defaults’ effectiveness, suggesting that both when and how defaults are deployed matter.” Duke University Psychology and Behavioral Economics professor Dan Ariely explains this variation with an example.
He explains that you can have a free trip to Rome or a free trip to Paris. Some people choose Rome, and others choose Paris. However, things change when he includes a third option: a free trip to Rome in which you must pay for your coffee. His research shows that this third choice makes the free trip to Rome (with free coffee) superior to not only the free trip to Rome (coffee not included) but also the free trip to Paris.
Marketers must remember that what they’re offering will become more appealing if what surrounds it looks less appealing. They must clearly outline the contrast between their offer and those of competitors. It is not enough to be good. The solution must be better than the rest.
Prospect theory is the work of Nobel Prize winner Daniel Kahneman who discovered that the aggravation of losing a sum of money is greater than the happiness associated with gaining the exact same amount.
Kahneman’s work on this phenomenon is one of the most cited behavioral research papers of all time. Since making this discovery, others have seen prospect theory at work in the real world. Other research from the University of California, Berkeley found an example of prospect theory at the 1992 Summer Olympics.
They observed that bronze medalists almost always appeared happier than silver medalists. The reason: the bronze medalists perceived their medal as a win — after all, they probably weren’t sure they would even place. However, the silver medalists believe they lost the gold. This perception of loss was so much stronger that the higher-ranking silver medalists were, in fact, less happy than those with a bronze.
Marketers must remember that customers want to avoid feelings of loss. Marketers must make customers comfortable with risks involved in a purchase. Risk appears double in size through the customer’s eyes.
Context preference tells us that customers choose based on convenience.
It is easy to believe that customers have a set of core preferences guiding their purchases. However, research from Columbia University shows that this is not the case. They offer the example of a shopper in a store. This customer repeatedly buys the same product. This consistency suggests that they have a clear preference for that product. However, if that product is moved to another location in the store, and another similar item is substituted in the original location, most customers begin purchasing the new item. The customer’s preference is shaped by the ease of purchase. The item is at eye-level and easy to find.
The researchers summarize their findings by explaining that “when consumers construct their choices, the critical variable affecting their choice is the context of the decision.”
Marketers take note: If you want a customer to take the next step, make sure that step is an easy one. Make the path to the purchase easy, clear, and short. The convenience of the purchase is often just as important as the product itself.
Engaging the customer means engaging their base psychological tendencies. Those who can identify and interpret the customer’s psychology are positioned to meet their needs and deliver a more compelling proposition.