POV
The Science of Influence: Could you be using behavioural economics to nudge customers toward action?
By: Lavana Pauk
Picture this: you are at your favourite coffee shop, torn between your usual latte and the seasonal special. Suddenly, a sign catches your eye: “Today’s Special: Summer Refresher – While Quantities Last!” In that split second, your decision feels urgent, yet different from the one you had only planned moments ago…
Welcome to the world of behavioural economics – where choosing a coffee becomes a window into the complexities of human decision-making.
What is Behavioural Economics?
Behavioural economics combines insights from psychology and economics to understand how people make decisions. Unlike traditional economics, which assumes rational decision-making, behavioural economics recognizes that people often make irrational choices due to various biases and heuristics or mental shortcuts. Read more on the power of emotions in decision making in our past article here.
For marketers, this presents an opportunity to design strategies that align with how customers naturally think and behave to effectively guide them along their journey from awareness to conversion.
Key Behavioural Economics Principles to Supercharge Marketing Effectiveness
1. The Power of Defaults: Making the Desired Choice the Easy Choice
Defaults are pre-set options that take effect if no alternative is selected. People tend to stick with defaults due to inertia and the perception that it is the recommended choice.
Example: Subscription Services – a free trial that rolls into a paid subscription unless the customer opts out.
Question to consider:
Are there areas where you can implement default settings that align with your business goals, such as automatic renewals, pre-selected options, or opt-out mechanisms for additional or premium services?
2. Framing Effect: Presenting Information to Influence Perception
The framing effect occurs when the way information is presented influences decision-making, either by making an option seem more appealing, to discourage inaction, or to discourage your competitor’s alternative.
Example: Retirement savings plans that highlight the future peace of mind, rather than the immediate cost of contributions. Or brands that highlight the risks or potential losses by not acting such as cyber security updates.
Question to consider:
Could you reframe your offerings to focus on savings, gains, positive experiences or avoiding unwanted experiences?
3. Social Norms: Leveraging the Influence of Others
People are influenced by the behaviour and opinions of others. Highlighting what others are doing can encourage them to take similar actions.
Example: Energy Conservation Programs that show customers how their usage compares to their neighbours,’ ultimately encouraging them to match or exceed the norm.
Question to consider:
How are you using social proof or user statistics to encourage action?
How might you encourage exploration by highlighting what others with similar preferences were interested in?
4. Commitment and Consistency: Encouraging Small Initial Commitments
Once people commit to something small, they are more likely to follow through with larger commitments to stay consistent with their initial decision.
Example: Free Trials with limited features. People are more likely to upgrade to paid plans to access premium features maintaining consistency with their initial commitment.
Question to consider:
Can you create entry-level offers or trials that deliver value with minimal initial investment, encouraging customers to consider longer-term commitments later on?
Final Thoughts
The key to unlocking consumer behaviour lies in the nuances of human psychology. By asking the above questions and considering how each principle applies to your unique situation, you can begin to craft marketing strategies that effectively nudge your customers towards desired actions.
Curious to explore further? Don’t miss out on the chance to transform your marketing strategy with behavioural economics. Reach out to us today and start making impactful changes… before your competition does.
