There are many different types of cognitive biases in marketing that we all deal with on a daily basis. These mental shortcuts and errors in judgment can be used for marketing if you know how to use them correctly.
In this blog post, we will discuss 10 ways to use these biases for improved marketing. Cognitive biases can be extremely helpful when it comes to making decisions, both personal and professional. By understanding these mental shortcuts and tendencies, we can work towards mitigating their effects so that we make better choices overall. In terms of marketing, cognitive biases can help us connect with customers in a more meaningful way, create ads that are more effective, and build trust with potential buyers.
1. Anchoring Bias:
The Anchoring bias is when we rely too heavily on the first piece of information we are given about a topic. When we are setting plans or making estimates about something, we interpret newer information from the reference point of our anchor, instead of seeing it objectively. This can skew our judgment and prevent us from updating our plans and predictions as much as were needed to.
Anchoring bias makes us depend too heavily on a particular piece of initial information when making decisions and subsequent judgments.
The Minds Journal
The anchoring bias refers to the notion that the first piece of information we receive when making a decision influences us throughout the decision process.
- If you put a $30 price tag on something or have a $30 price as an option in an A/B test, and it performs better than a $50 option, you’re more likely to recommend $30 to other people.
- When you are trying to increase prices for a service, don’t just compare yourself against the immediate competition. Compare your service against a competitor who is significantly more expensive.
- If your website has gained a reputation for poor quality, no matter how much better you get from then on, it will be hard for customers to fully forget about that previous experience.
2. Bandwagon Effect:
The bandwagon effect refers to the tendency people have to adopt a certain behavior, style, or attitude simply because everyone else is doing it. A collection of people adopting a trend is called a bandwagon. The more people that adopt a particular trend, the more likely it becomes that other people will also hop on the bandwagon.
If your website visitor think lots of people are using your product or service, they’re more likely to use your product or service. That’s why social proof is so much important for conversion Optimization
that’s why social proof is so powerful. A reader who knows that a lot of other people have bought your book will be much more likely to buy it themselves. Or a visitor who sees that all of their friends have Liked your Facebook page will be much more likely to Like it themselves. And if they see that your competitors haven’t done something, they’re less likely to buy from them and more likely to buy from you instead.
Tips : If you want your customers to ignore their gut instincts and buy your product or service, appeal to the bandwagon effect by showing examples of others who have purchased it.
This can work on two levels: show an example of someone famous (or not famous) who uses your product to create credibility and appeal to the average customer’s desire to be like everyone else. For example, if you run a clothing store for young women, include pictures of young women wearing your clothes on your website. That will give potential customers a sense of reassurance that they should purchase from you too.
The opposite of the bandwagon effect is called the “counterfeit consensuality”. When consumers feel that everyone believes something is popular when it actually isn’t, the consumers are less likely to buy the product or use the service.
3. Confirmation Bias:
The tendency to search for, interpret, remember, and act on information in a way that confirms our preconceptions.
Confirmation bias is to blame for most failed experiments.
As humans, we’re naturally inclined to reach conclusions and then look for information that supports those conclusions. We can’t help it; it’s how our brains work.
The best way to avoid confirmation bias is to remember that the aim of your experiments is to discover the truth—not to prove yourself right. When you’re running an A/B test, try your best not to have any idea in advance how it will turn out. If you’re designing a website, don’t decide which version is “better” before you even begin testing.
In other words, set aside your opinions and preconceived notions long enough so that you can be as objective as possible when interpreting the results of your experiment.
If you find yourself jumping to conclusions based on the early stages of an A/B test, take a step back and remind yourself that the difference you see might not be due to the change you made but could instead be due to chance (or some other factor).
Don’t draw any conclusions until you’ve seen what happens over time—and have a chance to eliminate other factors that might skew your results.
4. Gambler’s Fallacy:
The gambler’s fallacy is the mistaken belief that future probabilities can be estimated from the results of previous events. It arises from a misinterpretation of randomness. For example, suppose you flip a coin ten times and get heads each time. You might then feel that tails are “due” and therefore more likely next time.
In fact, the chance of getting heads or tails on any particular flip is always exactly 50%, no matter what happened before. There are many examples of the gambler’s fallacy in real life.
How marketers use Gambler’s fallacy
A new TV show comes out, and the network airs it twice in a row on the same night. (I guess this is so viewers who are out can watch it when they get home.) The first time, the show gets 10 million viewers. Subsequent airings get 9 million. In other words, more people watch the first airing than subsequent ones. Why? Because of the gambler’s fallacy. If a show is only going to be on once, people make a point of watching it; if they know they can see it again, later on, they don’t bother.
- Another example is that if you tell people you have an exciting new product, they will often say they will wait until the next version comes out before buying. But if this were really true then companies would never bring out a new product; they’d wait until the previous generation was fully obsolete.
If your product is really great and people are loving it, and people are waiting for the next version of your product, you can increase the product price a little. People will not care too much.
5. Herd Instinct:
The herd instinct bias refers to marketing marketers’ tendency to follow and copy what other marketing gurus are doing. They are largely influenced by their emotions and instincts, rather than by their own independent strategy. The herd instinct bias is a very dangerous problem because it can lead to short-term wins and losses in the market. Marketers focus more on what the competition is doing rather than what the consumer wants. The herd instinct bias can also be dangerous for marketers because it can lead to negative long-term effects on your business.
The herd instinct bias refers to the way people act without any rational thoughts or decisions, just going with the flow of events and actions that are occurring around them.
The herd instinct bias gives rise to “social proof.” For instance, if a mass number of people say that a particular product or service is good or bad, then, consumers will believe and follow suit. They will accept whatever is said about the product even though they did not try it out themselves.
Furthermore, humans are likely to stand online for hours just to get a new gadget when it is first released; otherwise, they would not be able to find out what all the hype was about.
That’s creating marketing hype is more important than ever. This is the same technique used by companies like Apple, Xiaomi, Tesla.
6. Hyperbolic Discounting:
A series of studies have shown that people tend to value immediate gratification over future rewards even when those future rewards are certain. The finding has been called “hyperbolic discounting.”
It was discovered by the economists Richard Thaler, now at the University of Chicago, and Shlomo Benartzi, now at UCLA, who was then at the University of Rochester. The hyperbolic-discounting effect appears in a wide variety of situations.
For example, college students would rather have $30 today than $35 in a year—or would pick $30 today over $45 in three years. In one experiment (conducted by Thaler and Suzanne Boyce), subjects were going to be paid for participating.
They could either receive their payment on the spot or wait and receive twice as much (as long as they agreed not to cash it for a week). A third option was to wait only one week and get three times as much. The surprising result: a large majority of subjects chose the smaller payment right away. And when researchers offered them an additional opportunity to switch later from the small immediate reward to the larger delayed one, most of them took it.
Example: Offering free shipping on orders of $50 or more makes sense because consumers will likely choose the discounted option instead of paying for shipping costs. However, offering free shipping with any order means profits could take a hit as no matter how much someone spends at your store, they don’t have to spend an extra penny on delivery fees. This discounts their long term satisfaction in favor of short term savings
7. Empathy Gap:
If you’re not your user, who is? Your users’ experience lives in their heads and hearts (not to mention their pocketbooks), so the only way you can really know what they want is to ask them—and not with a survey or a focus group.
You have to really listen, and then act on those insights. You may be surprised at what you learn when you listen more closely to your users. Being empathetic doesn’t mean simply understanding their wants and needs; it means being able to step into their shoes and see the world as they do.
That may sound like a tall order, but fortunately, there are some proven ways to get there, including Get out of the building—Stop talking to co-workers and friends about how great your product is and go get some real data from real people. Personally visit six customers for every feature that gets built.
If you don’t have six customers for a given feature or function, consider whether it should be built at all. Make sure the research method is right for your audience—If you’re not sure whether interviews or surveys are best for your situation, try both! If you do decide to use interviews, make sure they are your actual target aduience.
8. Hindsight Bias:
Hindsight bias happens almost every time someone makes a decision, as it is a very human tendency to think you know what will happen in the future, even when there is no logical reason for you to predict something.
In marketing, it is important to convince potential customers that your product or service is better than the options they already have. However, if you are too forceful in telling them why your product will be better for them and not giving them room to discover this for themselves, you run the risk of pushing them beyond their point of satisfaction.
Once a customer feels like they’ve made the right decision, they always want to feel like they knew it all along. We must remember that there is always more information out there that we do not know about and customers do not want to be talked into buying something they don’t feel they need.
Example : When marketing to customers, you need them to hit a point where they select your product or service and are later so satisfied that they congratulate themselves. These customers are genuinely happy that they bought your product as they feel that the value they receive was worth more than the price they paid.
In fact, you want them to be at the point that they they are telling their friends, “I knew this would be the best company to buy A from.”
9. Survivorship Bias:
Survivorship bias happens when we concentrate on people or companies that were “selected,” while overlooking those that were not selected because of their lack of visibility. Survivorship bias is a reality in marketing, and one that we need to be aware of in order to avoid. The problem with most marketing tactics written about online is that they are successful. Not many authors choose to write about marketing tactics that failed.
The problem with this is that we are constantly chasing the next greatest tactic. This is otherwise known as shiny object syndrome. Instead of truly understanding the context of the situation, we are looking for a quick fix to our problems. It’s akin to a get-rich-quick scheme, rather than letting our tactics flow from a well-thought-out strategy.
The latter takes a lot more effort, which makes it a less appealing decision in the short term. The best way to avoid survivorship bias is to have clear goals and strategies for your business and then implement tactical plans based on those strategies. That way you can ignore the shiny objects and still create long-term value for your brand.”
The way to avoid survivorship bias is to educate yourself. The better you understand why other tactics failed, the better you will be able to understand what will not fail.
Marketing tactics have a variety of motivations behind them, and they all fall into one or more of five categories:
1) Tactics that are targeted at the wrong market segment.
2) Tactics that rely on outdated information.
3) Tactics that place too much emphasis on short-term satisfaction instead of long-term growth.
4) Tactics that depend on hype rather than substance.
5) Tactics implemented by an inexperienced marketer with limited resources and no plan for growth.
10. Sunk Cost Fallacy Bias:
First, let’s define sunk cost bias, it’s a psychological trap that occurs when we act in order to avoid feeling like we’ve wasted time or money.
For example, let’s say you buy a meal at a restaurant. The food is terrible and you spend the rest of the night feeling bloated and sluggish. The next morning, you vow never to eat there again. But then, on your way home from work, you pass by the restaurant and decide to give it one last chance. You sit down to eat and order the same meal again. But this time around, it tastes delicious! Why? Because now you don’t have to feel like you wasted your time or money eating there twice in one night. You got your money’s worth already!
But of course, when making purchase decisions online, consumers aren’t influenced by physical locations or bad first impressions (they are influenced by reviews though). So how can retailers use this idea to boost their conversion rates?
Loyalty programs work because of sunk cost bias. People who belong to these programs are more likely to stay loyal, but it doesn’t stop there. They’re also more likely to buy from you, and buy more from you.
The reason for this is that the loyalty program gives people a sense of accomplishment. They’ve already invested money into the program, which makes them feel good. And when they spend money on your products in order to get rewards, they feel like they’re getting something for free. And that feeling is powerful enough to make people want to stay loyal and spend more with you.
10. Post-purchase rationalization Bias:
The most common example is the “post-purchase rationalization bias,” which we all have. After you buy something, you start to believe it was the right decision. It’s a kind of cognitive bias that affects everyone, including you (and me). Even though we know about the bias, we are not exempt from it (that’s called your bias blind spot).
I was stunned by how many people spend thousands of dollars on software, marketing tools, and coaching programs without ever getting any results.
In almost every case, I see that buyers had huge opinions about what they wanted and how they wanted it done. They were making decisions and taking actions based on those opinions instead of data.
So the big question for me was: Why? And why do smart people fall victim to this more than others? Why Smart People Fall Victim to Bad Decisions** We all have biases that cause us to make bad decisions. If you read Malcolm Gladwell’s book Blink, you know that experts can miss obvious mistakes because they rely too much on their brains without enough input from their instincts.
Using cognitive biases as part of your conversion optimization strategy is a great way to make your site more appealing to customers, and to improve their experience. By understanding how our minds work, we can create better systems and interfaces that leverage these biases to influence our users’ actions in the right direction.
Given how numerous the biases are, there is plenty of room for you to discover new ways to integrate them into your marketing strategy. If you learned something new today, please feel free to comment below.
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