Cognitive Biases used by Marketers to Influence Customers

In e-commerce, conversion marketing is the marketing technique to increase conversion from website visitors to paying customers. Cognitive bias is the tendency to make a decision irrationally. This article will explain some of the cognitive biases marketers use to influence and persuade people to make decisions, which increases their conversion rate.

• Hobson’s + 1 choice Effect: If the only option provided for a product is “Buy now,” the customer is confronted to either take it or leave it. In most cases, the customer may choose not to buy. Instead, if provided one more option like “Save for Later/Add to wish List/Cart” and “Buy now,” this makes customer decision making easy, and the customer may choose one of the active choices instead of deciding not to buy the product.

• Partitioned Pricing Effect: Partitioned pricing is splitting the price of a product into two parts – base price + surcharge/delivery charges. Reducing the cost of a product by not including delivery charges in the main product listing will make the price more attractive and competitive. The customer will then decide to purchase based on the base price alone. The base price will stick within the customer’s mind. The delivery charge separated from the base price will look like a better deal and increase customer conversion rate, though the total cost is the same.
• Foot-in-the-door Technique: Foot-in-the-door-Technique is “It is more effective to start by asking people for something small and then when they give it to you, you are better able to ask for bigger.” Marketers use the Foot-in-the-door-Technique in sign-up forms. Asking too many details in one document (like age, dob, address, postal code) may annoy people, and they are more likely to abandon the sign-up process. Instead, asking a simple question at first (just the name) will help people become engaged. After they have done this, we can move to the following form stage, asking for more information. As they are already engaged, they will likely complete the sign-up process.
• Autonomy Bias: Autonomy bias is our innate need to be agents of our own lives. We have the urge to make our own choices and the ability to implement the favorites at our will. Marketers can increase the conversion rate by providing customers with options. A customer will likely complete a purchase if offered multiple options to choose for delivery like when (24 hours, two days, one week) and how to deliver (can collect from the nearby store, club together with other orders, no contact delivery)

• Scarcity: We assume that scarce things are valuable and good and abundant things are not. Marketers use this bias to increase conversion. The display of the remaining quantity available for sale, like “Only two left in stock,” will nudge the customer to either book or buy the product. This technique can also stimulate demand by providing limited edition products and flash sales.

• Immediacy Effect: People prefer an instant reward over receiving something of more value in the future. Delivery time is likely to affect customer purchases. Count down timers like “order within 2 hours 43 minutes to get same-day delivery” will create an immediacy effect and make the product more desirable, and increases the chances of a customer buying the product.

• Anchoring Bias: We rely too much on the first piece of information about a topic than a piece of subsequent information. This effect is likely to influence people in their purchase decisions when offered huge discounts or offers by striking out the initially quoted higher price, which serves as a reference point or anchor.
• Bandwagon Effect: People tend to believe something or adopt certain behaviors when others do the same. This effect enhances the marketing effectiveness by classifying a product based on its ratings as ‘Best Seller,’ ‘#1 Rated Brand’, ‘Number of People Who Bought,’ and more. This widespread adoption can act as a cue and will persuade people to buy the product, convincing them that what is suitable for others would be right for them too and safe to adopt.

• Present bias (or Hyperbolic-Discounting bias): People overvalue current rewards and satisfaction over a more significant future reward or payoff. By offering products immediately with ‘Buy Now, Pay Later’ / ‘EMI Options’, Credit Card payment options, the pain of paying is delayed, which exploits the human tendency to favor the immediate rewards more and undervalue future losses. The present bias persuades people rather indebt themselves to buy a product immediately.

Conclusion

The human brain is mighty and uses shortcuts called ‘heuristics’ to seek efficiency. The cognitive biases expressed are often a way to speed up the decision-making process and can lead you to draw inaccurate conclusions. To avoid these cognitive biases, one must take time in decision-making, think it through slowly and carefully, consider alternative options, expand the range of reliable sources, use checklists, algorithms, and other measures. Though it is probably not possible to avoid the cognitive biases altogether, being aware helps you recognize them and counteract them, thus reducing the probability that it will lead you off course.

“This article is created as part of the Behavioral Dynamics in Decision Making course at IIM Trichy. The opinions expressed in this article are the personal view of the authors.”?

-Co-authored with?Velayutham and Hemamalini Vasudevan