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The Seven Most Important Psychology Studies for Marketers
We like to think of ourselves as highly rational beings, capable of sound judgement even under duress. Though we may take into account facts or others’ opinions, ultimately our choices are our own.
The reality however is a little different. Our decisions and frameworks of logic are tiny rafts, floating on a sea of biological programming and psychological influences and conditioning.
As a marketer and researcher, I have studied cognitive biases and the ways ideas can spread. In the below collection of studies, I highlight some of my favorite examples of how external factors can shape decision making, and the most important lessons marketers can glean from them.
1. We are susceptible to the halo effect.
It’s a common piece of advice that first impressions matter. But, why do they matter so much? We judge more attractive people to be healthier, friendlier and more competent than less attractive people – even less guilty in cases where they break the law. Interestingly enough, the halo effect influences both of these judgements.
The research: Undergraduate students were asked to rate a series of essays written by a classmate of the opposite gender. These essays varied in quality; some were well-written, others were poorly written. The students were then presented with a photo that was meant to be the author. One third of students were given a photo of an attractive classmate, one third an unattractive classmate, and the other third received no photo.
Demonstrating the power of the halo effect, the students rated the more attractive writer as significantly better than the unattractive writer. And this effect was especially pronounced when the students read the poorly written paper. In other words, the students were more willing to give the attractive classmate “the benefit of the doubt”.
The halo effect is well known in the business world. In one study, the same book sold for twice the price when it had “Harvard Classics” printed on its front cover. The halo effect means that we tend to allow a single attractive quality of a person or brand influence our judgement for other unrelated aspects.
Celebrity endorsements can influence perceptions of a brand, where you associate the traits of the celebrity with the brand or product: sophisticated and sexy.
Marketing lesson: Social proof matters, and brands have successfully used the halo effect to sell products for a long time. Take the following built around Steve Jobs and Apple products, or celebrity endorsements. Whether it’s a case study for your product highlighting a recognizable customer, a customer testimonial or a celebrity endorsement, associating with desired companies and people enhances your own brand, even if you can’t hire George Clooney for your next ad campaign
2. When we own something we value it more highly.
While this might seem obvious, have you ever noticed a strong, almost inexplicable attachment to your things – even if those things lacked emotional connection and had degraded in value?
The research: Behavioral economists Daniel Kahneman and Richard Thaler found that when participants purchased a mug, and then were made an offer to trade or sell it for an equally priced item (for example a pen), participants required compensation that was at least twice as high as what they paid for the mug itself.
Similarly, a study by Ziv Carmon and Dan Ariely at Duke found that participants’ hypothetical selling price for NCAA final four tournament tickets were 14 times higher than their hypothetical buying price.
Marketing lesson: Psychologically speaking, once a customer has bought your product, half the battle for their loyalty is won. An increasingly large body of research suggests that many marketers over-prioritize loyalty programs at the expense of trying to convert new customers – the much higher and more important hurdle for winning market share.
3. Language and phrasing can change our choices.
The language we use and the context we provide for a fact can have dramatic effects on choice. In fact, over the last few years this framing effect has been a major tactic in journalism on economic policy. Let me explain.
The research: In one study, people watched a film of a traffic accident and then answered questions about the event, including ‘About how fast were the cars going when they contacted each other?’ Other participants received the same information, except that the verb ‘contacted’ was replaced by either ‘hit,’ ‘bumped,’ ‘collided,’ or ‘smashed.’ Even though all of the participants saw the same film, the wording of the questions affected their answers. The speed estimates (in miles per hour) were 31, 34, 38, 39, and 41, respectively.
One week later, the participants were asked whether they saw broken glass when the accident happened. Although the correct answer was ‘no,’ 32% of the participants who heard the word ‘smashed’ said they had. The wording of the question influenced their memory.
Researchers have also documented the framing effect in hypothetical economic policy decisions. Studies have shown that more people will support an economic policy when employment rate is highlighted, compared to when unemployment rate is highlighted.
Marketing lesson: Evaluating risk is a major factor in buyer decision-making. While framing products positively can be effective, fear of loss can be an important hot button for marketers to push. Test different positive and negative marketing messages (responsibly) to see whether your customers respond better to upside or downside. Also make sure your marketing reinforces that it’s low risk to buy your brand, something that can be accomplished with customer testimonials, online reviews, money-back guarantees, service level agreements and other reassurance resources.
4. We strongly prefer avoiding loss over acquiring gains.
Everyone is familiar with Lance Armstrong’s infamous fall from grace. But what most people don’t know is that Lance Armstrong’s choices can be explained by behavioral economics.
The research: Behavioral economists Daniel Kahneman and Amos Tversky demonstrated people’s preference for loss avoidance in a simple coin toss experiment.
Participants were offered to take a bet on a coin toss, with the requirement that if the outcome was tails, they would lose $10. The majority of participants required that if they won the toss, they would need to gain at least $20 in order to take the bet. Kahneman was able to replicate the results with wealthy individuals where the loss was $10,000. Here too, subjects required at least double what could be lost ($20,000) in order to take the bet.
Marketing lesson: There are two important lessons here. 1) Crafting a message that explains why your product can prevent bad things from happening is just as important as explaining what the positive-feeling benefits are. 2) Particularly if you are in the B2B space, from the consumer’s perspective a relatively new product comes with risk and fear. Marketers should empathize with these customers and have a strategy for quelling concern.
5. We change our preferences between two options when there is a third, less attractive option present.
Have you ever noticed how Apple presents its older line of products side-by-side with its newer products? Which of the below iPhones would you choose?
The research: Duke marketing professor John Huber conducted an experiment where he asked people whether they would prefer to eat at a five-star restaurant that was 25 minutes away or a three-star restaurant that was 5 minutes away. When a two-star restaurant 15 minutes away was added as a third choice, subjects reliably chose the three-star option. When the two-star restaurant was swapped with a four-star restaurant 35 minutes away, subjects reliably chose the five-star restaurant. In these studies, the third option served as a decoy, intended to sway preference to one of the first two restaurants.
Marketing lesson: Have you figured out which iPhone is the decoy? The 16 GB, $229 phone serves as a kind of measuring stick for evaluating the newer phones. Most consumers in this scenario would be expected to choose the newer 32 GB phone, which seems like a steal at only $70 more than the older one but with twice the memory. When presenting product pricing, consider how the placement of other offerings might affect consumer choice.
6. We use the first examples that come to mind when making judgements.
If you selected a random word from this text, which is more likely – that the word begins with the letter “K” or where “K” is the third letter?
The research: In one study, Amos Tversky and Daniel Kahneman asked participants to consider the description of a neighbor:
“Steve is very shy and withdrawn, invariably helpful, but with little interest in people, or in the world of reality. A meek and tidy soul, he has a need for order and structure, and a passion for detail.”
Participants were then asked to decide Steve’s occupation from a list of possibilities: farmer, salesman, airline pilot, librarian, or physician. While most people chose librarian, in fact Steve is far more likely to be a farmer because there are many times more farmers than librarians in America.
Likewise for the question above, while most people can more easily recall words beginning with the letter “K”, in a typical text there are far more words that have the letter “K” as the third letter. This effect is known as the availability heuristic.
Marketing lesson: Successful brands build (then reinforce) broad and deep memory associations. Make sure your marketing message considers your customer’s purchasing journey, with different, relevant message reinforcement at each step. Moreover, what you might think of as logical next steps to your marketing may differ from your customers’ actions, because they may have a different library of associations and experiences that they’re drawing from.
7. We change our behavior to be more like others, even if we know it’s wrong.
Imagine being part of a psychology study. You are asked to complete a basic task, but suddenly realize everyone around you is doing the opposite. What would you do?
The research: Social psychologist Solomon Asch at Swarthmore showed the below figure to a group of subjects, all but one of whom was secretly one of Asch’s partners in the experiment.
Each member of the group was asked one by one to say which choice from Exhibit 2 matched Exhibit 1. When the confederates all gave an incorrect answer, the subject went with the erroneous majority 37 out of 50 times. According to Asch, people conform to the majority because they either want to be liked, or because they believe the group is better informed than they are.
Alex Laskey, founder and president of energy savings company Opower, found that adding social pressure (“your neighbors are doing better than you”) to messaging around energy use decreased consumption.
Marketing lesson: We are highly susceptible to the influence of others’ beliefs and opinions – or our perceptions of others’ beliefs and opinions. If you can earn a customer’s loyalty and nudge them towards giving recommendations or talking about your brand positively, you are more likely to influence the buying of their peers. As a marketer, consistently generating positive word of mouth for your brand influences buying among your customers’ peers. In recent years, technology companies like PayPal, Dropbox, Spotify and Uber have capitalized on this effect by incentivizing their existing users to share promotions that benefit both the sharer and the recipient. In e-commerce, the world’s top 500 retailers earned over $3 billion from social shopping in 2014, driven by digital referrals and recommendations amongst friends. Make use of customer testimonials and positive word of mouth in your marketing – science has proven it matters.