The Psychology of Marketing: Behavioural Economics Principles to Boost Sales

Behavioural economics is an academic discipline that studies the effect of psychological factors on our economic decision-making. It aims to better understand decision-making and predict human behaviour in certain situations.

When it comes to marketing, behavioural economics studies how a customer’s purchasing choices are influenced by factors that are seemingly unrelated to the product itself. These factors can be psychological, cognitive, emotional, cultural, or social.

The core principle of marketing is to ensure that the consumer chooses your business over a competitor. Behavioural economics aids marketing strategies by understanding how consumer decisions can be influenced. As a result, making small changes to the product, the branding, or the choices you offer can massively influence consumer behaviour.

Here are some ways to use behavioural economics principles in marketing campaigns:

1. The power of FREE: One of the most powerful words you can use in marketing is “Free”. While both of these deals are fundamentally the same, consumers will get a lovely hit of dopamine when they see the word “Free”, and that will be reinforced when they take advantage of that offer.
2. Social proof: Social proof is one of the most powerful tools in behavioural economics, particularly in online marketing. It is the tendency to be swayed by other people’s choices, especially in ambiguous circumstances. People are more likely to buy products or services that are popular to gain social standing amongst their peers, which is why so many consumers read online reviews in order to gauge how trustworthy a company is.
3. Anchoring: Anchoring is the tendency to rely too heavily on the first piece of information received when making decisions. In marketing, this can be used to influence the perceived value of a product or service. For example, if you’re selling a product that costs $100, you could first show a similar product that costs $200. This will make the $100 product seem like a bargain.
4. Scarcity: Scarcity is the principle that people want more of what they can’t have. In marketing, this can be used to create a sense of urgency and exclusivity. For example, if you’re running a sale, you could say that the sale ends in 24 hours or that there are only a limited number of products available.
5. Choice architecture: Choice architecture is the design of the environment in which people make decisions. In marketing, this can be used to influence the choices that consumers make. For example, if you’re selling a product online, you could highlight the most popular option or the option that you want consumers to choose.
6. Loss aversion: Loss aversion is the tendency to prefer avoiding losses to acquiring equivalent gains. In marketing, this can be used to create a sense of urgency and fear of missing out. For example, if you’re running a sale, you could say that the sale ends in 24 hours or that there are only a limited number of products available.
7. Personalization: Personalization is the process of tailoring a product or service to the specific needs and preferences of an individual customer. In marketing, this can be used to create a sense of connection and loyalty with customers. For example, you could send personalized emails to customers with product recommendations based on their past purchases.

Marketing is all about understanding consumer behaviour and influencing their purchasing decisions. Behavioural economics principles can help you do just that. By understanding how consumers make decisions, you can make small changes to your product, branding, or choices to influence consumer behaviour.

Happy marketing!