The Relativity Bias – How the Brain Compares Numbers
Why does an 11% discount convert more people than a 10% discount? How can a higher priced product help you sell more of a lower priced one? When is $15 an effective discount, and when is it useless? The fast-thinking emotional brain can’t perform difficult calculations. Instead, it does rough comparisons and estimates and reacts. It sees numbers in relationship to other numbers. That’s why the relativity bias is important to understand in neuromarketing.
When Williams Sonoma first introduced its breakthrough bread-making machine, it started by offering just one model. It was priced at $275. Sales for this new product were slow. Why? Because consumers had no idea how much it was worth to them. Was that a good price? Was a machine that made bread a good value? It was a new concept, and people were confused. In a brilliant move, the company introduced a larger model of bread-maker and priced it at $429. They showed both products together. The more expensive model sold poorly, but the lower-priced unit flew off the shelves. Why? Because consumers could compare two products and believed that the smaller unit was a great buy.
It’s All Relative – Values, Discounts and Prices
Try this thought experiment. You want a new set of computer speakers. Looking through your Sunday newspaper ads, you see a set advertised for $25 at a nearby retailer. Then, you see another ad for identical speakers, but for only $10, a $15 discount. The store with the lower price is 12 miles away. Would you drive 12 miles to save $15? Researchers found that 80% of consumers would make the drive. Now, think about shopping for a laptop computer. The nearby store has one you like for $1,100. The store that is 12 miles away offers the same model for $1085. Would you make the drive to save $15? Researchers found that 80% would not. The value of the discount is relative to the total cost of the item. For the speakers, $15 was a 60% discount. For the computers, it was only a 1.3% discount.
Consumer Decisions Are Fast, Intuitive and Emotional
95% of all consumer decisions are made quickly and unconsciously by the-fast thinking emotional part of the brain. While that part of the brain can do rough comparisons of numbers, it can’t perform precise calculations. The relativity cognitive bias is closely related to the anchoring bias, which ties value calculations to recently-seen numbers. In online marketing, there are several ways you can use this relativity comparison tendency. They can influence consumers and trigger conversion decisions:
- Avoid Easy Calculations to Stimulate Fast Thinking – Even the fast-thinking, intuitive brain can instantly calculate a 10% discount. It moves an imaginary decimal point one place to the left. The actual discount amount is immediately known. If the discount is set at 11% or 12%, though, that calculation doesn’t happen. By keeping the brain from recognizing the actual amount immediately, you can trigger a commitment more often.
- Sell More by Offering a Higher Priced Product at the Same Time – Showing two similar products side-by-side satisfies the fast-thinking brain’s need to compare. As Williams Sonoma discovered, the availability of a higher priced product improves sales of the lower-priced item. Consumers compare prices instantly and recognize the lower priced item as a bargain. Amazon uses this conversion triggering technique on almost every product detail page.
- Rounding Down Helps the Brain Compare Prices Instantly – The fast-thinking, decision-making part of the brain makes only rough comparisons. To do this, it performs unconscious rounding down of prices. For example, it sees $189 as a significantly lower price than $211. Similarly, a $16,995 car price is seen as a real bargain, compared to $18,200. This principle has been used for many decades. Neuroscientists, through research, know why it works.
- Actual Discount Amounts Are More Effective Than Percentages – At decision-making time, percentage discounts can confuse the intuitive brain. Often, such discounts will divert from the decision as the consumer tries to do the calculations by using the slower-thinking parts of the brain. Instead, put the discount in actual dollar amounts. $500 Off! Immediately identifies the amount saved and can lead to a quick, intuitive purchase decision.
- Show a Previous Price with the Current Lower Price – You’ll sell more of a product if you show its regular price along with the current sale price. The emotional, unconscious brain will always do a fast comparison and identify the discounted price as a bargain. As a trigger for an immediate decision, adding a time deadline activates both the relativity bias and the loss aversion bias for even more brain-aware effectiveness.
- Sell More Mid-Priced Items by Showing Three Products – Consumers like to see comparative prices. Too many choices, however, can block conversion decisions. The eyes and the quick-acting parts of the brain can handle three items for comparison easily. Studies have shown that consumers decide to purchase an item more often if its price is between lower and higher-priced items. The price comparison happens instantly. The mid-priced item is seen as the best value of the three. That’s the relativity cognitive bias at work.
Understanding Common Cognitive Tendencies Boosts Sales
The examples shown above are just some of the ways neuromarketers can help online sales of products and services. The relativity bias is just one tool that can help you outsmart your competition. Often, more than one tendency in the brain to act quickly can be used at the same time. That amplifies the effect. A comprehensive neuromarketing strategy, applied throughout your internet marketing will ensure your success. As the Midwest’s only neurormarketing firm that specializes in web design, SEO, and PPC advertising, we can help you achieve your goals. Contact us to get the conversation started. Let us show you how neuroscience-based marketing can boost your revenues.