Your practical guide to cognitive bias and marketing.
In a time where we can access a wealth of information at the swipe of a screen or the click of a button, consumers are in the driver’s seat.
Today’s tech-savvy digital natives are less likely to fall for cheap sales messaging. Modern shoppers command more from brands, with flawless customer experiences, personalized content, and shared values at the top of the priority list.
But even the most discerning or savvy consumers have a tendency to think and act a certain way. This is referred to as cognitive bias. As an eCommerce or retail store owner, you can use cognitive bias to your advantage.
Here, we’re going to explain what cognitive bias is and show you five biases you can tap into to engage more customers and earn more sales.
Let’s get started.
What is cognitive bias?
Cognitive bias refers to specific human thought patterns. We all have a particular way of viewing or processing the world around us or the information before us, and these internal processes can influence our actions or decisions.
Most cognitive biases are shaped by our personality, beliefs, social interactions, and life experiences. While some biases may be glaringly obvious, many are subtle and hard to detect.
The reason we all have cognitive biases is that our attention spans are limited (especially in a world rich in choices and information), so we take mental shortcuts when making decisions. These decisions are often led by cognitive biases because they’re instinctual.
As an eCommerce or retail business owner, you can use this concept to attract shoppers to certain offers, products, or pieces of content, influencing more sales as a result.
5 ways you can use cognitive bias to your eCommerce or retail advantage
Now that you understand what cognitive bias is and how tapping into certain thought processes can influence a shopper’s decisions, we’re going to explore five examples of “consumer sway” and how you can apply them to your business.
1. The backfire effect
Also referred to as confirmation bias, the backfire effect is based on the notion that when consumers connect with hard-hitting facts that go against the grain of their beliefs, they’re likely to reject the information and go elsewhere.
Most consumers search for products, services, and information that sits comfortably in line with their beliefs and find it difficult to break away from them, particularly when they’re “in the moment.”
There are two ways that understanding the backfire effect can help you earn more sales:
- You can use data to segment your customers and get to know them on a deeper level. Doing so will empower you to deliver hard facts and stats that align with your customers’ preferences or beliefs and earn their trust or engagement. Our guide to proper customer segmentation will help you get started.
- You can analyze your existing content or messaging to see whether it’s too strong or hard-hitting and soften it with a more conversational, emotional approach. Doing so will alienate fewer of your prospective customers and is likely to result in more sales. Our guide to emotive marketing will tell you all you need to know to refine some of your existing messaging.
You can use both of these approaches in unison. For website content and landing pages, taking the emotive route will prove most effective. And if you’re branching out to customers through email, mobile apps, or social media messengers, using segmentation will work in your favor.
2. The decoy effect
The decoy effect plays into direct choices and how we perceive certain services or products. When we compare options, it’s not unusual to become torn and overthink our decisions. This often results in shoppers giving up and abandoning their potential purchases. No product for the customer and no sale for you.
But, by using the decoy effect, you can influence your customers’ buying decisions without them knowing.
For instance, if you have two similar products or bundles, you can add a third as a decoy. The decoy product, option C, will have a higher price point than options A and B, offering little extra value for money.
By adding this third decoy option, you will make either option A or B look more appealing, influencing more customers to commit to buying your preferred product.
Customers looking for a new Android phone arrive at a product page. Option A is $400 for 32GB, and option B is $350 for 26GB. Some people will sway towards option A and others B—depending on budget or storage preferences.
But, by adding an option C—a slightly more “advanced product” with a $500 price tag but less storage (say, 24GB)—you’ll instantly make option A more attractive or, at the very least, cement your customers’ original decisions, inspiring them to press the “buy” button. This is an effective method of removing hesitation from the decision-making process.
3. Hyperbolic discounting
The human brain responds to potential rewards, and it’s usually the more immediate incentive or “payoff” that works best. This cognitive phenomenon is known as present bias, and as an eCommerce or retail business owner, you can tap into it by using a little something called hyperbolic discounting.
When presented with two similar rewards or incentives—a smaller discount to use the next day or a slightly larger discount to use in 3-5 days—most shoppers will go for the more immediate option.
By using hyperbolic discounting, you can use peoples’ preference for immediate rewards to your advantage, earning more sales in the process. Here are a few ways you can do so:
- Offer your customers “speedy” or “fast-track” shipping options that cost a little more than your standard delivery choices.
- Send your customers personalized “limited time only” discounts or deals with a time limit to create a sense of urgency and prompt more sales.
- Promote two discounts, one at 15% to use on the “latest products or arrivals” immediately and one at 20% that can be activated in 3-4 days, for example. This technique will encourage most people to take the smaller, more immediate discount, driving more sales with healthier sales margins.
Read: Our rundown of definitive upselling tips for more revenue-boosting eCommerce & retail persuasion tips.
4. Availability heuristic
This form of cognitive bias refers to the mental shortcuts we take based on recent information or memories.
The availability heuristic is powerful, as it plays into the fact that many shoppers use information that sits fresh in the mind to conduct research and make buying decisions.
For example, if someone recently watched a number of news reports on a string of animal cruelty violations, they might be inclined to reduce their meat consumption or donate to a relevant cause.
Now, if you’re a plant-based protein shake provider, you can harness these recent events to catch consumers with animal cruelty on their mind, creating content based on these news reports while highlighting the importance and benefits of plant-based dietary supplements.
If you grab the attention of your audience when a particular subject is likely to be fresh in their minds, your content will become more persuasive, inspiring more people to invest in your brand.
Our guide on how to create thought-leading content will give you tips and ideas on how to use the availability heuristic to attract more customers.
5. The Barnum effect
Last but not least, we move onto the Barnum effect. This branch of cognitive bias is potent, as it taps into the notion that people respond to information or messaging that aligns with their personality type, believing the information is tailored to them as an individual, even if it might be a little vague or general.
The Barnum effect is the very reason fortune-telling and horoscopes are so popular. They’re aimed at some of your personal information (the month or year you were born, for example) or character traits so they can appear incredibly engaging or accurate. Thus, an entire cross-section of your audience will feel like you’re talking to them on a very personal level.
With the right level of customer research, a little segmentation, and a specific customer focus, you can appear personal without creating tailored content for every member of your audience. It’s a productive way of speaking directly to a wider audience and, ultimately, enjoying more sales.
This video ad from Tangerine Bank is an excellent example of the Barnum effect in action, as it appeals to almost any hardworking consumer with a strong work ethic using a personable, aspirational approach:
We hope this practical guide to cognitive bias will steer you towards retail or eCommerce growth. For more business-boosting pearls of wisdom, read our definitive guide to trend marketing for small businesses.