KEY PRINCIPLES OF PSYCHOLOGY FOR MARKETING

There are many psychological principles that marketers and advertisers routinely use in order to choose the most effective marketing tactics to reach their customers. In this module, we’re going to explore the most common of these, along with a few examples of how they’re used.

These are powerful techniques and like anything powerful, they can be used beneficially or maliciously. Reading the principles and examples below, it’s easy to understand how marketers use them unscrupulously in order to manipulate people into buying things they don’t need.

However, as ethical marketers, we’re focusing on matching customers to valuable products that actually meet their needs. That’s the ultimate goal of any marketing.

The Endowment Effect

The endowment effect states that we tend to value more what we already own than what we don’t, even if we want it badly. In other words, when you’re selling or trading an item you already have, you’re likely to place a higher value on it than if you’re considering buying it.

In a study by Kahneman, Knetsch, and Thaler in 1990, participants were given a mug and then allowed to trade it for another product of equal price. The study found that once the participants owned the mug, they charged much higher prices for the barter goods. What they were willing to accept was about twice what they were willing to pay.

You can see examples of this anywhere someone trades or sells goods. For example, if you bought a bottle of wine years ago for $10, you’re likely to consider it very valuable now, even if the price has not grown significantly (this is especially so in the case of wine, which is perceived as gaining in value over time).

Marketers take advantage of the endowment effect when they offer test drives or free trials. When you’re driving the car, the salesperson will do everything in their power to make you feel like it’s yours already.

The basis of the endowment effect isn’t anything selfish at all. It’s simply the natural desire to maintain the status quo. You see change, or in this case the giving up of something you already own, as a risk or negative.

Reciprocity

Reciprocity is one of the most well-known and widely understood psychological principles in marketing. It states that we feel obligated to give back to people who have given to us.

In a famous study from 1971, Dennis Regan set up a fake art appreciation experiment where the participants’ “partner” (actually Regan’s assistant) bought one group of participants a soft drink; for the other group, the assistant did not buy the soft drink. At the end of the experiment, Regan’s assistant asked all the participants if they would buy raffle tickets. The subjects who had received the soft drink bought more raffle tickets, even though they hadn’t asked for the drink in the first place.

Reciprocity is a key feature of content marketing. In content marketing, you give away free content, either in the form of web content or a downloaded product. This boosts sales because customers who received free content from you are more likely to feel indebted to you and buy from you. Free gifts, freebies, deep discounts, and other “gifts” work because of reciprocity.

Consistency

We like to keep our actions and thoughts consistent. When we act inconsistently, this causes cognitive dissonance, or great psychological discomfort, so we always try to act the way that we think we always act.

Consistency is the psychological principle at work when you’re leaving a website and a pop-up appears, saying something such as, “Do you want to take charge of your finances and get on the right course for the future right now?” The options are, “Yes, I’m ready to take control of my life”, or “No, thanks. I’m happy staying in debt.”

Any reasonable person who sees this message will instantly think, “Yes, I’m ready.” This is because in your thoughts and actions, you want to get rid of debt and take control of your life. The pop-up encourages you to stay consistent.

The Foot-in-the-Door

Just like a salesperson sticking their foot in your door and physically holding it open so that they can deliver their pitch, the foot-in-the-door technique is where a salesperson asks the customer to make small decisions and then progressively bigger decisions.

Jonathan Freedman and Scott Fraser conducted the first foot-in-the-door studies in the 1960. Their researchers called households to ask about the products they used. A few days later, they called again asking if they could send workers to the house to actually check to see which products the subjects used. The study found that those who received the initial phone call were twice as likely to let the workers into their house.

Charitable organizations often use the foot-in-the-door method by asking you first to sign a simple petition and then moving on to bigger requests, such as asking for money. Another example is a company holding a survey that asks the participants to identify as a fan of their brand. The survey is then followed up with a sales pitch, since the participants have already self-identified as fans.

Freedman and Fraser found that the reason this method works is through the small initial decision, where there is a bond created between the asker and the person being asked. This makes it harder for the person being asked to say no.

The Door in the Face

Foot-in-the-door relies on gaining consent but the door-in-the-face relies on rejection. This is where a person makes a large request first. Once rejected, they offer a smaller request. The person being asked will feel somewhat bad about saying no the first time and be more likely to say yes to the comparatively reasonable, smaller request. In addition, the bigger request makes the smaller request look even smaller than it would otherwise.

This is the technique used when a salesperson starts out offering to sell something to the buyer. The price is too high or the sale to sudden, and after the customer says no, they agree to sign up for the email newsletter instead. If the salesperson had started with the newsletter, the customer might have seen it as a large request.

The Ben Franklin Effect

Supposedly, Ben Franklin was once facing a fierce political opponent who favored the other candidate. Ben Franklin managed to win this opponent over in a very peculiar way. He told his opponent that he’d heard he had a very rare book and being a well-known bibliophile, Franklin asked to borrow it. The opponent obliged and Franklin returned the book two weeks later with a small note of thanks.

The next time the two men met each other, Franklin’s opponent started a conversation with him and offered to help him with anything he needed in the future due to his great fondness for him.

In other words, Ben Franklin won over his opponent by asking for a favor and not returning it. This is an illustration of what has since come to be called the Ben Franklin effect.

It also works in a very similar way to the foot-in-the-door method. When you do a favor for someone, you’re more likely to keep doing favors for him or her. Like the foot-in-the-door, there is also the creation of a bond.

The Ben Franklin effect is being used when a company asks a customer for feedback without offering any compensation or deal in return. The next time the customer has contact with that company, they feel positive sentiment toward it, even though they were the one that helped out the company initially.

Loss Aversion

Loss aversion is similar to the endowment effect. It’s based on the same psychological principle that we value what we have more than what we want. Loss aversion is the endowment effect’s negative; we feel the negative effect of loss much more strongly than the positive effect of gain, so we try to avoid loss.

Consider getting a $10 a month raise or losing $10 a month from your paycheck. It’s likely that you’d see the $10 raise as a small but slightly helpful bump in your pay that you can use somewhere. On the other hand, if your company cuts your pay even a paltry $10 a month, it feels like an outrage.

Loss aversion is used in a variety of ways to sell products by emphasizing what you save rather than what you gain. For example, a cloud storage service might sell itself as a way to prevent losing your data rather than a way to gain more storage.

Scarcity

Scarcity is similar to loss aversion. When the supply of something is limited in quantity or time, we feel a more urgent need to buy. This is why companies advertise that if you don’t act now, you’ll miss this opportunity. In addition to increasing urgency, scarcity also boosts the value of a product because there’s only a limited number.

Scarcity is used often but not always ethically. It tends to play on fear more than the other psychological principles mentioned here, and for that reason it can be easily abused. If misused, scarcity can backfire, so it should be used sparingly.

Social Influence and Conformity

People are more likely to make a certain decision if others have done so. Even if the person believes in this decision, they may feel hesitant unless they see that others have done so before them.

The word “conformity” is often used in a very negative way. People who conform are spoken of as “sheep” and it lends itself to a dark view of humanity. However, this isn’t the case at all. Even the most socially independent of us has a social consciousness. We all have a need for conformity, even if to a very limited degree.

There are endless studies that show how important conformity is to us. Solomon Asch’s study in the 1950s showed that people were willing to give obviously wrong quiz answers just because others had done so. Other studies have shown that people could be influenced to incorrectly identify suspects in a police line-up.

Social influence and conformity can be seen with online reviews. We trust our friends and even complete strangers more then we trust companies. This is why testimonials are powerful, as well as reviews on sites like Yelp!

Mere Exposure

Mere exposure means that the more we’re exposed to something, the more we tend to like it. Perhaps there is a popular song that is played everywhere all the time. At first you hated it and then you started to not mind it so much, and eventually you bought the album. This is mere exposure at work.

Studies have shown that the more frequently banner ads are shown on websites, the more favorably participants think about those ads.

The biggest use of mere exposure is in product placement. It seems strange that simply showing a bottle of Coca-Cola in a scene in a movie could have such a powerful effect on sales, but companies pay a great deal of money for product placement and they don’t waste their advertising dollars.

The Decoy Effect

The Decoy Effect leads customers to change their preference between two options when a third, less appealing option is added. This third option is the “decoy”.

In 2007, Joel Huber, a professor at Duke University, set up an experiment where subjects were given two choices: a nearby 3-star restaurant and a 5-star restaurant that was much further away. Subjects were split fairly evenly between the two options. When he added a third option, a 4-star restaurant that was even further away, many more subjects chose the 5-star restaurant. This third illogical option made the 5-star restaurant seem more reasonable in comparison.

The decoy effect is most commonly seen with price points. For example, a software package may offer two pricing options; one is lower but has fewer features and the other is higher with more amenities. If only the two are offered, the higher priced item looks expensive. But if the company ads a third, higher-priced option and calls it the “Executive Suite,” this will drive sales of the (now) middle-priced model, especially among regular consumers who think, “I don’t need an ‘executive’ package.”

Framing Effect

How a problem is framed can influence perception, especially whether something is framed as a loss or a gain. We covered some of this with the endowment effect and loss aversion, which are both types of framing.

A study by Tversky and Kahneman in 1981 showed that the way a treatment for a deadly disease is framed significantly affects the option that people choose. They were more likely to choose the option that stated X lives would be saved versus the one saying that X people would die, even when the actual numbers were the same.

Research at the Harvard Business School found that people are more likely to buy a TV with all-inclusive pricing ($500 including shipping) versus partitioned pricing ($490 for the TV and $10 for shipping).

In general, products that are positively framed will sell better regardless of the actual numbers. If you have a product that’s 97% fat-free, it is better to say this than that it contains only 3% fat.

Fewer Options

We often take it for granted that more options are naturally better for customers, but this isn’t always the case. With too many options, customers can feel overwhelmed. This can lead them to choose to buy nothing. It’s better to present fewer options.

What if you have a variety of options you want to present, such as a large product line? You could cut out products that aren’t selling, but an even better way to simplify and offer fewer options is to put all of the options together into categories.

This is how a supermarket works. A supermarket has nearly any food item you can imagine, but everything is broken up into clear categories so that you know where to go in order to find what you need. This is why the supermarket has a deli, a produce section, a meat section, bread, and so on. You see this in bookstores and any other retailer that sells a great deal of products.

Cognitive Dissonance

Cognitive dissonance occurs when things somehow didn’t seem to turn out how you thought they would. There is some kind of disconnect between what’s in your mind and what’s actually going on in the world.

Cognitive dissonance can occur after a purchase if a customer feels the product doesn’t deliver on its desired outcome. If you remember the ideal versus real situation, cognitive dissonance occurs when the outcome of the purchase isn’t the ideal situation the customer envisioned (or you told them would occur).

You can prevent cognitive dissonance by offering the same post-purchase care for your customers that you offered before their purchase. Make sure you have customer service that actually helps when your customers need it. Through your interactions with them, try to demonstrate to them how the purchase has met their needs.

You have to avoid cognitive dissonance at all costs because it will prevent customers from buying from you again.

Customer Focus

One final psychological point to keep in mind is that the buyers are thinking of themselves. No matter what products or services they’re considering, they’re always thinking about what it will do for them. Your marketing needs to be in line with this principle or your message will be lost.

Keep everything focused on the buyer and their needs, not your amazing products or your unique brand. Even when talking about your product or brand, always bring it back around to how it helps them with their needs.

Learning Activity:

Pick at least 3 of the principles listed in this module and brainstorm other tactics that you could use.

Keep a running list of tactics in a notebook and add to it as you think of more ideas or see the psychological tactics being used in practice.

To Your Success

Marcus

masteraffiliatetraining.com

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