Have you ever wondered if there is another or additional way to increase the conversion rate on your website? If so, have you considered implementing behavioral economics practices? This is a field of science that will move not only the hearts (emotions) of your potential customers, but also their minds. Thanks to this, you will finally stand out from the crowd and be remembered.
If you are interested in how to behavioral economics into your business or marketing strategy, click on this link.
In this article you will learn:
- What is behavioral economics and what sciences does it draw from?
- When we meet techniques of behavioral economics on a daily basis.
- On the practical application of behavioral economics in business.
- About consulting in behavioral economics for companies and marketers.
Behavioural economics examples just for a good start.
Let’s focus on examples of behavioral economics, but first answer the question yourself – do you consider yourself a person who is not affected by advertising messages? If you’ve just had the thought that this is about you, we recommend that you continue reading this article. Whether you’re a consumer, entrepreneur, or marketer.
There is a phenomenon of not recognizing and not allowing that advertising messages affect each of us, this effect is called the Third Person Effect. It consists in overestimating by recipients their skills as to the impact of various types of messages both on the Internet and outside it (traditional media). Such consumers often believe that media messages do not affect them, but others, more susceptible people, do.
There is a phenomenon of not recognizing and not allowing that advertising messages affect each of us, this effect is called the Third Person Effect.
Behavioral economics in everyday life
But let’s go back to behavioral economics itself – think about the last time you shopped, whether online or at the supermarket. It is very likely that you have noted a discount that more or less caught your attention. It is possible that the original price was deleted but visible, and next to it there was a new, more attractive one. Or try to think back to the last time you visited a famous fast food place. When asking for small fries or Coke, the shop assistant offered you larger capacities, explaining that it was only a matter of a few euros difference and your stomach may be even more full.
These are all techniques in the field of behavioral economics that you may not have even realized about, and you encounter them on a daily basis. Designing choices based on heuristics and theories have an impact even if the consumer acts on the so-called autopilot. State of unconsciousness in which we perform activities and make choices routinely.
If you are interested in these behavioural-marketing methods, then the first of the described effects is called the Anchoring Effect and the second is the Destroy Effect. You will learn a little more about them later in the article, and they are worth exploring (as are many others). No matter what role you play in the world of consumerism – but you are certainly a consumer!
What is behavioural economics?
So, returning to the original question, what is Behavioral Economics, it is a science very close and favorable to the true nature of human. Unlike standard economics, it does not assume that human decisions are calculated and always in favor of the buyer. On the contrary, it stands in opposition to the unrealistic assumptions of economics and assumes that people make irrational and sometimes even unfavorable decisions.
A science based on many other sciences
To explore the meaning of human choices, behavioural economics is also based on other fields of science. It also consists of neuroscience or sociology. Thanks to which it generates a lot of key materials based on the comprehensiveness of research.
|Behavioural economics explains human cognitive errors and heuristics (simplified methods of reasoning). Based on them we can both shape people’s behaviour and help in making better choices.|
So what influences our decisions? A lot of things. Mood, emotions (positive differently from negative), memories, impulses, and even professed values. It is difficult to predict the spontaneous reflexes of a person in every situation during the day, but it is possible to develop predictions and assumptions based on a number of studies and observations. Thanks to which we know how sapiens can behave in a given situation in a shopping environment or related to making a choice.
Therefore, answering the question of what behavioral economics is, we must bear in mind that it is a series of constantly conducted and updated studies that analyze and explore human cognitive biases and heuristics.
Behavioural economics theory – is it a top secret?
The theories of behavioral economics are available to all interested and are not some secret knowledge. Over the years, many articles on the Internet, books, and courses on this subject have been created. This knowledge can be interesting both for consumers who want to be more aware of their purchasing decisions and for marketers.
However, despite the fact that the theory, heuristics and issues are available to everyone, their amount can be overwhelming, which means that implementation in your business activities may not be easy. The difficulty is in choosing the right heuristic or theory for your business, and then combining it consistently with your company’s standard marketing techniques and measuring the effectiveness of the chosen strategy.
A thousand theories and heuristics
There can be from a dozen to several dozen techniques of arranging pricing strategies, taking into account various variants and combinations. However, these strategies can be very flexible and evolve as markets and technologies develop.
There are also many other issues of behavioral economics, not directly related to prices, and they are constantly being researched and evaluated. Most often, they are based on actions aimed at evoking extreme emotions in a person, e.g. a sense of fear. However, as I mentioned earlier, this is a very broad topic that deserves a separate article.
However, if you’ve made it this far and are waiting for an explanation of the two behavioral economics techniques mentioned in the introduction – those about attractive prices in the store and offering other food options in the famous fast food, then you will find short explanations of how they work below.
The information that is presented to customers at the very beginning somehow anchors in our mind and becomes a reference point for our further decisions. During the promotion, the crossed out regular price acts as an anchor that is cast in our unconscious mind. We are convinced that the promotional price is attractive.
The Decoy effect
When choosing between two products, adding a third less attractive (a decoy) may affect our perception of the two original choice options.This means that they are completely worse to the one option that is the goal of the consumer’s choice. However, is only partially worse to the other, which is a competitor.
Behavioural economics examples in business
Behavioral economics is present in many areas of business and advertising activities. After discussing the theoretical side of behavioral economics, let’s get to know more examples where, as consumers, we encounter this field of science in everyday life. So how can we, as marketers or business owners, be inspired by decision-making methods?
- Surely you use one of the many well-known subscription platforms nowadays related to video streaming or content creation. Surely you received a message one day informing you to pay for the next month as soon as possible by clicking on the link provided, because if you are late with the payment, you may lose access to the services offered by this platform.
Motivating right? This procedure is called Loss Aversion. People are afraid of loss and will go to great lengths not to lose something they are used to. In addition, research shows that loss can hurt up to twice as much as gain.
- It often happens that when the customer finally makes a decision related to the purchase, he or she is accompanied by a sense of excitement immediately after making the purchase. This is a moment that is worth taking advantage of and presenting the customer with the option of buying an additional product – similar or at a bargain price.
Thanks to positive emotions, he or she will be more likely to make a next purchase. For me, this feeling of euphoria usually accompanies me after buying an interesting book or online course. And do you know what kind of feeling this is about? This theory is called the Excitation Effect.
- Let’s go with another example – let’s say you use the free period of a language app that gives you the ability to do unlimited lessons without losing hearts and without watching ads. After a month of using the application, funds are automatically deducted from your account. You pay and you learn the language without any distractons, even though you might as well learn the language using the free version and save some money.
However, you leave it as it is, because you’re used to it – it’s good and comfortable. People are skeptical about changes and do not like to make drastic decisions. If it’s good, let it stay that way. Such a theory is a tendency to maintain the status quo.
- Another heuristic is called the Priming Effect. It consists in creating intuitive stimuli to lead to a final and specific decision. Using an example – if you want to sell perfumes of a given brand through your website, insert a photo of this product on the main page of the website or in a pop-up. In such a rather discreet and non-obvious way, you can suggest customers what they should buy from the very beginning of entering your website.
These rules seem very obvious and familiar, right? Now you can see that in everyday life you meet with them even a few times a day.
|You should also implement them in your business or marketing strategy so as not to lag behind the competition that also uses these techniques of behavioral economics.|
We managed to briefly go through the description of the basic heuristics and cognitive biases that characterize consumers. If you would like to learn about specific behavioural economics strategies in details, then I highly recommend this article.
This is a concrete thing that you can really be inspired by when creating your own brand strategy. In addition, in the article you will find descriptions of many theories and heuristics in the field of behavioural economics, which we have not discussed in this article.
Behavioural economics – consulting is needed or not?
Today you have learned six proven techniques used by the largest concerns to create consumer behavior. To implement them in your business, we recommend:
- Conducting market research to obtain demographics, preferences, concerns and purchasing behavior of potential audiences.
- Set specific and timed goals for your behavioral economics activities.
- Visualizing what your customers might feel when interacting with your business.
- Testing whether your actions bring benefits, e.g. performing A/B tests on the website.
When displacing a company that offers consulting in Behavioral economics, pay attention to whether they implement given strategies by combining them with trends in the field of digital marketing and new technologies. This is important not only for the consistency of the strategy, but also for the effective development of your business in every field.
If reading this and you think that all this looks really promising, but you don’t have the time or enough knowledge to implement the above-mentioned activities into your business, then remember about consulting at beaaviorual economics.
Many companies offer the first consultation or audit completely free, as part of a promising cooperation. This can put you on the right track in terms of creating behavior towards your offer and product or be a good start for your long-term cooperation.