How Cognitive Biases Affect Marketing
Do your customers use logic and reason to make decisions? Does the unconscious brain make errors? Can you make your marketing more effective by recognizing those errors?
The answers might surprise you. Almost all decisions to buy are made quickly and often irrationally by the fast-thinking, emotional part of the brain. Neuroscience research shows that errors in thinking are often the deciding factor. A cognitive bias is a tendency to make fast decisions based on emotional or intuitive responses, instead of logic and reasoning.
Experimental Research Tells the Story
In a study in the Huettel Lab at Duke University, subjects in two groups were each given $20. Then, they were presented with two options. The first group could choose to:
- Keep half of the $20 for sure.
- Flip a coin: Heads, you keep it all; tails, you lose it all.
The second group got different choices:
- Lose half of the $20 for sure.
- Flip a coin: Heads, you keep it all; tails, you lose it all.
If you think about it, both scenarios have the same outcome. But, in the first group, more chose to keep half. In the second group, more chose to take the gamble. Subjects could keep $10 or lose $10. Those who saw the word “lose” were more prone to gamble. Their reactions were driven by their emotional reaction to losing, not logic.
Cognitive Biases Affect Decision-Making
That simple experiment shows that people often make choices quickly. We can be led toward a specific decision by memories, fixed ideas, first impressions, what others have done, or many other factors. Neuroscientists and behavioral scientists have studied this phenomenon. What they learned has enormous implications in many areas of life. In marketing, understanding why people decide can be the difference between success and failure. Here are some recognized cognitive biases that affect decision-making.
- Relativity Bias – How the Brain Compares Prices – How your internet marketing handles prices has an enormous effect on conversion rates and sales. The fast-acting, unconscious, intuitive parts of the brain can’t handle calculations well. Instead, it makes fast, rough comparisons to compare values. Recognizing this is the key to presenting prices, discounts, savings and other price considerations effectively. Learn how this bias can trigger buying decisions.
- Anchoring Bias – Persistent Values for Comparison – The fast-thinking brain isn’t good at calculations. It can only handle simple comparisons. The first price seen becomes an anchor. The brain quickly compares later prices to that anchor. So, during car shopping, if a person sees an average price of $27,500 early, a car priced at $25,000 will seem like a bargain. Very often, we see pricing information is created to trigger this thinking anomaly.
- Confirmation Bias – Established Ideas Are Deeply Rooted – Everyone has their own beliefs. Right or wrong, they are securely embedded in our brains. When decisions are needed, the brain acts quickly, based on those beliefs. We trust certain brands, for example. We expect certain outcomes. We have unconscious habits. As Coca Cola learned with New Coke, attempts to replace a popular brand often fail. Understanding this bias is crucial to successful marketing.
- Attentional Bias – Focusing on What’s Important – The conscious brain can only focus on a limited number of things at once. It responds to emotional information first. Fear, desire, pleasure, and pain take priority over other things. People also tend to focus on familiar things. Dieters, for example, home in on images of food. First impressions and repetition can also dominate attention. Guiding customers’ attention is key to get your products or services noticed.
- Bandwagon Bias – Following the Crowd – In marketing, the power of social proof is based on this bias. We respond to what others do unconsciously. Following others is deeply ingrained in our behavior. Testimonials, references to actual numbers of people who also bought something, and positive review statistics work because of this. Smart marketers know how to take advantage of this tendency in many ways.
- Availability Bias – The Stories We Know – Every decision made by our brains is based on experiences, either real or imagined. We use those old and new stories to predict outcomes. We fear flying more if we’ve recently heard of a plane crash. We play slot machines more if people near us are winning. That’s why story-telling is an effective marketing strategy. Help customers visualize a positive outcome and you’ll sell more.
- Conservatism Bias – The Power of Branding – Our brains are biased toward past success. Habits, associations, beliefs, and positive experiences tend to rule our decisions. We prefer the brands we’re used to. Breaking that pattern is difficult. General Motors unsuccessfully tried to save Oldsmobile as brand-loyalists aged. They could not change fixed attitudes about the brand. Understanding this anomaly can help you avoid wasting your advertising budget.
- Outcome Bias – Someone Wins the Lottery – Imagining a positive outcome can lead the brain to ignore logic in decision making. Auto companies sell fancy sports cars through images of romantic success for their owners. People eagerly buy lottery tickets, despite impossible odds, because they visualize winning the lottery. An image in the brain of a positive outcome can overpower rational thinking. Appealing to this bias is a powerful marketing tool.
- Loss Aversion Bias – Fear of Losing Out – The fast-acting brain is quick to react to risks that involve missing opportunities. This emotional response is related to instinctive fears of shortages of food. Neuromarketing can stimulate decisions through time-limited offers, limited availability of products, and other strategies. The value of these triggering cues is well known.
- Other Cognitive Biases – Irrational Decision-Making Errors – Behavioral scientists have identified many other brain tendencies and common logic flaws. Through experiments and technological monitoring, they’re learning more about why people’s decisions often defy logic. From Blind-Spot and Zero-Risk biases to the Ostrich Effect and the Overconfidence bias and many more, these error-causing tendencies can affect marketing success. Neuromarketing understands them all and can make them work for you.
Neuromarketing – Understanding of Decision-Making
Get a handle on all the ways people think when they make decisions. Neuromarketing helps make websites and other online marketing more effective. That’s why we’re providing information on cognitive biases here. We’ll be linking to new pages regularly on the topics listed above, as well as explaining other erroneous tendencies and thinking flaws of the brain. Through stories and examples, we’ll help you understand how to improve your strategies to increase sales and boost your conversion rate. Contact us for a free, in-depth analysis and price quotes on our proven Neuromarketing services.