By Evelyn Nichols, Account Executive
Economists have long believed that people make decisions based on rational analysis of facts, weighing with objectivity the pros and cons of a given choice. However, marketers and public relations professionals have always known that people make decisions based as much, if not more, on the way they feel about their choices – rather than on actual facts and figures. The question is how do you make someone like your product, service, event or story more than your competitors’?
To the rescue is the rising field of behavioral economics. Scientists now use social, cognitive and emotional factors to understand decisions made by individuals and institutions. Although the theory that people tend to make predictable, rational decisions has been debunked, there is evidence to suggest that people have predictable patterns of irrationality, called cognitive biases. Understanding these patterns is key to creating effective messages for your products, services and pitches.
Here are three common cognitive biases and take away lessons for marketing successfully:
1. Denomination Effect
The denomination effect is the tendency to spend more money when it is denominated in small amounts rather than large amounts. Spending money can be a painful experience for many consumers. It’s important to understand how people do their mental accounting. People tend to think about income in shorter time frames such as on a weekly or monthly basis and make mental trades to “afford” what they want.
Lesson Learned:
To help your customers feel a greater sense of control over and, in turn, like their spending decisions more – help them by framing payment options in smaller, less painful amounts with a comparison to a familiar, regular expense.
For instance, when you’re fundraising or marketing an iPhone app or internet service, try stating the cost in monthly amounts such as “only $2 a month–that’s less than adding chips and a drink to your lunch.” Or “make a monthly contribution of $5– that’s the same as a cup of coffee to feed a child for a month” rather than “a $60 contribution feeds a child for a year.”
2. Bandwagon effect
We all know of the bandwagon effect but its importance and relevance can result in powerful behavior changes when used correctly. In a recent energy study carried out by Cal State San Marcos in the San Marcos, Calif. researchers found that they could reduce people’s energy consumption with the help of peer pressure. Households were provided information about the average consumption of comparable households in their neighborhood. Researchers found that people who used less than the average began to use more electricity based on this information, and people who used more than average began to use less. That wasn’t exactly what energy conservation researchers intended. When they began adding smiley faces to households who were below the average in addition, both over-users and low-users reduced energy consumption. The combination of facts about normal usage rates and the cultural approval provided by the smiley face produced the desired behavior changes.
Lesson Learned:
The take away here is that people have an innate motivation to move to the social norm and, to motivate them to act outside of the norm, they need to know that their behavior change is accepted and valued. While doing outreach, try framing your messages in terms of social norms such as “everyone is doing it” or “we’re expecting record turnout” as well as providing rational information to get them to act. In addition, social media can help you visually reach “critical mass” through viral posts, retweets, and recommendations that leverage the bandwagon effect because the medium is based on it.
3. Paradox of Choice
Research has proven that complexity delays or prevents choice. People avoid making choices they view as complex because they are difficult and should be deeply considered. Less is more, as the old adage goes. But when your new product has so many awesome bells and whistles, and your audience is varied, it is hard to hold back and restrain your marketing messages to a few of the simplest and most compelling. However, that’s exactly what you have to do: Information overload causes would-be consumers to think the decision they are about to make is a complicated one rather than providing them just what they need to make a decision. A recent study of how much internet users read, found that most people spend less than four seconds on a page and get through 100 words before deciding to click to the next page.
Lesson Learned:
When writing for the web, printed materials or a pitch, know that you should keep your message to three main points and less than 100 words if you hope to keep your audience’s attention and convert them to a decision or an idea.
Based on the last comment – congratulations if you got to the end of this blog post! You have a longer attention span than the average person.
Economists have long believed that people make decisions based on rational analysis of facts, weighing with objectivity the pros and cons of a given choice. However, marketers and public relations professionals have always known that people make decisions based as much, if not more, on the way they feel about their choices – rather than on actual facts and figures. The question is how do you make someone like your product, service, event or story more than your competitors’?
To the rescue is the rising field of behavioral economics. Scientists now use social, cognitive and emotional factors to understand decisions made by individuals and institutions. Although the theory that people tend to make predictable, rational decisions has been debunked, there is evidence to suggest that people have predictable patterns of irrationality, called cognitive biases. Understanding these patterns is key to creating effective messages for your products, services and pitches.
Here are three common cognitive biases and take away lessons for marketing successfully:
1. Denomination Effect
The denomination effect is the tendency to spend more money when it is denominated in small amounts rather than large amounts. Spending money can be a painful experience for many consumers. It’s important to understand how people do their mental accounting. People tend to think about income in shorter time frames such as on a weekly or monthly basis and make mental trades to “afford” what they want.
Lesson Learned:
To help your customers feel a greater sense of control over and, in turn, like their spending decisions more – help them by framing payment options in smaller, less painful amounts with a comparison to a familiar, regular expense.
For instance, when you’re fundraising or marketing an iPhone app or internet service, try stating the cost in monthly amounts such as “only $2 a month–that’s less than adding chips and a drink to your lunch.” Or “make a monthly contribution of $5– that’s the same as a cup of coffee to feed a child for a month” rather than “a $60 contribution feeds a child for a year.”
2. Bandwagon effect
We all know of the bandwagon effect but its importance and relevance can result in powerful behavior changes when used correctly. In a recent energy study carried out by Cal State San Marcos in the San Marcos, Calif. researchers found that they could reduce people’s energy consumption with the help of peer pressure. Households were provided information about the average consumption of comparable households in their neighborhood. Researchers found that people who used less than the average began to use more electricity based on this information, and people who used more than average began to use less. That wasn’t exactly what energy conservation researchers intended. When they began adding smiley faces to households who were below the average in addition, both over-users and low-users reduced energy consumption. The combination of facts about normal usage rates and the cultural approval provided by the smiley face produced the desired behavior changes.
Lesson Learned:
The take away here is that people have an innate motivation to move to the social norm and, to motivate them to act outside of the norm, they need to know that their behavior change is accepted and valued. While doing outreach, try framing your messages in terms of social norms such as “everyone is doing it” or “we’re expecting record turnout” as well as providing rational information to get them to act. In addition, social media can help you visually reach “critical mass” through viral posts, retweets, and recommendations that leverage the bandwagon effect because the medium is based on it.
3. Paradox of Choice
Research has proven that complexity delays or prevents choice. People avoid making choices they view as complex because they are difficult and should be deeply considered. Less is more, as the old adage goes. But when your new product has so many awesome bells and whistles, and your audience is varied, it is hard to hold back and restrain your marketing messages to a few of the simplest and most compelling. However, that’s exactly what you have to do: Information overload causes would-be consumers to think the decision they are about to make is a complicated one rather than providing them just what they need to make a decision. A recent study of how much internet users read, found that most people spend less than four seconds on a page and get through 100 words before deciding to click to the next page.
Lesson Learned:
When writing for the web, printed materials or a pitch, know that you should keep your message to three main points and less than 100 words if you hope to keep your audience’s attention and convert them to a decision or an idea.
Based on the last comment – congratulations if you got to the end of this blog post! You have a longer attention span than the average person.
2 comments:
Great info on the paradox of choice and you can never underestimate the power of the bandwagon effect. The consumers of 2011 are passive. They scream for choices, but what they really want is for someone to tell them what everyone else is raving about. They translate buzz into value and all of a sudden the vast amount of supplementary products don't matter. That's why consumers wait in line for days to buy an iPad instead of picking up a LG Optimus tablet (with built in 3D camera).
Great post!
How true, great post Evelyn! Decisions are so often rooted in emotion than balanced and objective fact. It's just part of the human condition.
And there's irony that in a nation prideful of independent, free-spirited thinking that people feel more comfortable going with the flow than standing apart. It's the current state of the music industry that crucially relies on it - perhaps best evidenced by kids quick to like whatever it is they hear their friends like on the school ground, and reluctant to go against trend and not fit in.
And there's no question that when faced with too much choice people can tend to just shut down and not make any decision.
I think Chance adds an EXCELLENT additional point - society confusing buzz for value. But sadly the reality is that this is the basis of many 'celebrity's' career.
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