Do you really understand the way your customers think?
Can you confidently say you know what drives their decisions - and use that knowledge to shape your marketing strategy?
If so, ask yourself this: How much of our decision-making is driven by logic, and how much by subconscious urges like intuition? The answer might surprise you.
We are not as in control as we think we are. Research has shown that more than 95% of our decisions are governed by subconsciousness, shaped by forces like emotions and instincts. Why are we more likely to purchase a product which says “Buy 1, Get 1 Free” instead of the “Buy 2 with 50% discount” offer, which is essentially the same? We like to think of ourselves as logical beings, but research proves otherwise: it’s clear that there are many more forces, sometimes irrational, which drive our choices.
Behavioral economics is a term referring to the psychology of buying. Unlike traditional economic models, behavioral economics highlights the psychological factors that influence our economic decision-making. These can be cognitive biases or mental shortcuts that operate in our brains without us even noticing. Why? They are designed to simplify our decision-making and lighten our mental load.
Nice, you might say, but how does this connect to marketing? What if I told you you could use your knowledge of these shortcuts to not only predict your customers’ behavior but also influence the way they think? Sometimes, a simple tweak or as little as a turn of phrase is all it takes.
In this blog, I will introduce you to three behavioral economics principles that should not be missing from your toolkit. While there are many more, it’s important to start small. If you’re a skilled marketer, you’ve probably already been using these tactics for years, whether consciously or unconsciously.
However, applying these insights in a more structured and conscious way will allow you to design more effective marketing strategies that engage and, most importantly, convert more customers.
Are you ready to find out how behavioral economics can supercharge your marketing?
If you’re curious about behavioral economics, I recommend reading Thinking, Fast and Slow by Daniel Kahneman or Predictably Irrational by Dan Ariely.
Imagine you’re purchasing a new website plan. You’ve narrowed down your choice and now you’re deciding between two options. The first one says “Sign up now and save 20% today,” which is a pretty good deal. However, the second one says: “Hurry! 20% off ends tonight - don’t lose your discount!”
Which option are you more likely to go for?
You are probably more inclined to purchase from the second provider, purely because something’s telling you you don’t want to miss the discount. Their marketing message has successfully tapped into your instincts using the loss aversion principle.
Loss aversion is a cognitive bias in which losses are felt more intensely than equivalent gains. By framing your offer around what the customer stands to lose, rather than just what they stand to gain, you can drive them to take action more quickly and increase conversions. Using phrases like “don’t lose out”, “offer ends today” or “limited-time offer” are tactics as old as time.
You can mostly see them in ecommerce when you’re about to close a site with a full shopping cart. But how can you incorporate them in your B2B marketing?
Loss aversion is just as effective in B2B marketing as it is in B2C, especially when framed around missed opportunities or the potential loss of valuable business advantages. The idea is to highlight what a business stands to lose by not taking action - be it a competitive edge, cost savings, or potential revenue.
Example:
“Our solution will help you save 30% in time and reduce your operational costs. If you don’t act now, you’ll miss out on these efficiency gains. Prevent your team from wasting valuable time.” The prospect of wasted time can act like a strong motivation for businesses to purchase, playing into loss aversion.
“Sign up for our enterprise plan today to get priority access to new features launching next quarter. If you wait, your team could be behind in using the latest tools and functionalities.” The loss of early access to features can feel like a disadvantage - businesses don’t want to be left behind while competitors get ahead with new technology.
How many times did you give up on reading an article that looked like a wall of text? Or left a website just before purchasing because the process seemed too complicated? Yes, you might have been dead-set on a certain product, even convinced it might change your life for the better. But something stopped you from committing all the way. Why?
It simply felt like too much work.
Perceived effort - when we avoid doing something based on how difficult it seems - is another powerful bias driving consumer behavior. “Perceived” is the key word here. This doesn’t have to mean that the solution itself or the process of implementing it is hard or impossible. It’s all about how it looks.
The human mind wants to save resources. If something seems difficult, it will simply assess that it requires too much cognitive effort and automatically check out.
This applies especially to the B2B landscape, where purchasing decisions can often be complex, with multiple stakeholders involved. The goal is to not make this process more difficult and lengthy than it already is. Think about it: are you communicating your services clearly? How easy is it for your customers to move from the initial call to implementation, and how much guidance do you provide in the process?
Luckily, there are proven strategies to address the perceived effort bias which help you move more customers through the funnel. By simplifying the buyer’s journey, you can make it easier for decision-makers to overcome this initial reluctance and take action.
First of all, make sure your content is clear and concise. Present information in a digestible format, such as short, easily-scanned case studies, summaries, and FAQs that clearly answer common concerns. Use bullet points and headings to break down the key benefits of your solution, rather than overwhelming the customer with long paragraphs of text.
In addition to this, make the process of getting started as clear as possible. Map out the steps for your clients so there’s no confusion. Visual guides, timelines, and easy-to-follow instructions can make the transition from interest to purchase smoother.
Example:
If you’re a software provider, your website copy might look like this: “Getting started with [product name] is as easy as 1-2-3. No complicated installs, no steep learning curve - just a smooth, guided setup that gets you up and running in minutes.”
How it works:
By breaking down the process step by step and showing your customers how easy it is to engage with your product, they are much more likely to stay engaged and not lose interest halfway.
Let's say you're looking to buy a new car. You walk into a showroom and the salesperson makes you an offer to take the model you've shown interest in for a test drive. You say yes.
As you’re driving the car, you notice it feels so much better than your current one. You begin to grow fond of it and when you return to the shop, it feels somewhat harder to walk away without it. After all, you’ve driven the car already, and it feels like it’s yours.
What if I told you that now you’re more likely to feel that the car is worth its price, even willing to spend more on it than your initial budget was?
This is due to the endowment effect, which refers to people placing more value on things they possess. The willingness to pay more for things which we feel are already in our ownership impacts us both as buyers and sellers. Think about the time you listed an item on a secondhand site for what you considered a very friendly price - and the lowball offers that started rolling in and, frankly, offended you. However, when buying the same item from someone else, you would probably offer a much lower price, too.
So, how do you leverage the full potential of the endowment effect in B2B marketing? By focusing on making the customer feel like they already own or are emotionally invested in the product or service. Some such tactics are offering free trials, samples, or free introductory offers to let them experience the product - which will make it harder for them to walk away.
Another option is allowing businesses to customize a product or service, as customized features also evoke a sense of ownership. They are less likely to part ways with a solution if it’s more tailored to their needs and already integrated into their business process. Implementing low-commitment strategies like offering free initial calls or consultations is also always a good idea.
Example:
A SaaS platform could offer a 30-day free trial: “30 Days to Own Your Workflow - Try It Free, Make It Yours”, during which customers become accustomed to using the platform regularly. Over time, they will feel more “ownership” over their experience and are less likely to cancel because they perceive the tool as a necessary part of their workflow.
Behavioral economics is revolutionary for understanding the decisions we make. Once you realize how much of your thinking and choices is determined by cognitive and emotional biases, you will never be the same. Recognizing these patterns will not only help you be a better marketer, but a more conscious consumer, too.
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