From a Marketing standpoint, we can tap into Behavioral Economics to create environments that nudge people toward our products and services.
Hey guys! Hannah here. This week I want to focus on going deeper into the psychology behind marketing and pinpoint WHY we are able to influence people with marketing tactics.
Traditional economic models indicate logically people make rational choices in everything that they do all the time BUT because we are human we know that this isn't true.
What people should do vs. What they actually do
Behavioral economics is a combined field of study designed to answer why customers purchase. It seeks to answer questions like: why do people buy a bag of sweets instead of a healthy snack when they’re trying to lose weight? or (my personal favorite - guilty as charged) why do people buy $7 lattes when they’re trying to save money? The answer is typically not rational. It suggests people purchase with emotion!
“People buy on emotion and justify with logic”
Let's say I subconsciously made a decision to buy something after seeing a sign while driving down the road - a coffee for example - this subconscious decision is based on a subconscious mental process that follows its own logic. My subconscious decision to buy a coffee is then communicated to the conscious mind via an emotion (buying a coffee = happy feeling). My conscious mind then searches for rational reasons to justify the desire to purchase a coffee by telling myself it would help me to be productive or that I need a pick-me-up.
How we can tap into this in marketing
We as marketers and small business owners can tap into behavioral economics by using 2017 Nobel Prize Winner Richard Thaler's nudge theory. According to this theory, a nudge can be any form of choice architecture (different ways a choice can be presented to decision-makers) that alters people's behavior in a predictable way without restricting options or significantly changing their economic incentives.
Interested in learning more?
"From Cashews to Nudges: The Evolution of Behavioral Economics" Richard H. Thaler delivered his Prize Lecture on 8 December 2017 at the Aula Magna, Stockholm University.
Nudge Example: Musical Stairs
The musical staircase in this video motivated subway users to change their behavior and is, therefore, a nudge to take the stairs instead of the escalators!
From theory to practice
The smallest nudges can have the biggest impact you just need to figure out what that looks like for your business! Here are some ideas for your business to try:
For Online Brands Try
Product badges (100% organic, verified, most popular, etc.)
Smart notifications (think Uber letting you know it's raining so you leave a larger tip)
One-click purchases (think Amazon encouraging impulse buying with their "buy now" option)
For Brick and Morter Brands Try
Strategically placing items together (like peanut butter and jelly)
Offering a discount if more units are sold (buy three; get one free)
Personal Connection (think of employees who make you feel good and ask if they can help vs. employees who ignore you until checkout)
It's important to note that nudging can be effective but should never involve deceptive practices or manipulation. Instead, it should aim to guide consumers toward choices that align with their best interests and preferences. Transparency and respect for consumer autonomy are crucial when implementing nudging techniques in marketing campaigns.
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