By Tracie Varvir, Response Labs
Behavioral economics is a way of studying how our brains, feelings, and relationships affect how we make decisions about money. It examines how people make decisions in real-world situations, rather than assuming they behave rationally, always making the best decisions for their financial interests.
Using behavioral economics in marketing can improve results by understanding (and using) the psychological factors that impact how consumers make decisions. Sometimes the tried and true marketing tactics can perform more effectively with an added layer of behavioral economics. Being a consumer-centric company, we are always tapping into the best ways to resonate and communicate with our brands’ customers through omnichannel marketing programs and tapping into the psychology of why that consumer may purchase is one of the tools in our kit.
Here are a few ways we have applied behavioral economics principles to marketing campaigns:
Use Social Proof
People tend to follow the behaviors and actions of others when they are unsure of what to do or how to act. Social proof can be used in marketing campaigns by leveraging consumer data. We focus on leveraging consumer data to showcase key data points like how many people have purchased a product or service. In doing so, we can further understand how consumers react to our client’s specific offerings and how we can then provide key insights into our marketing strategy. In addition to taking a look at purchase data, we can take things a step further and identify key customer testimonials and reviews to influence buying decisions.
Create a Sense of Urgency
Consumers have a higher likelihood to take action when they feel as if they might miss out on something aka FOMO. Creating that sense of urgency in marketing campaigns can be done by using phrases like “limited time offer” or “while supplies last.” You can also introduce things like countdown timers and limited availability.
As a best practice, continuing to iterate new messaging tests in all of your campaigns will yield stronger results. We are huge proponents of continuous testing and providing insights based on things like regular A/B tests in subject lines, trying new CTAs to understand what resonates best with the audience, and our favorite – strong audience segmentation.
Creating that sense of urgency is also great for targeting fence sitters. Abandoned cart or abandoned browse messages like “the item you have in your cart is almost out of stock” can assist in yielding conversions from members of the audience who are stuck in a decision making loop.
This goes beyond just a CTA in an email or in a paid media campaign, it involves taking a deep dive into consumer behavior and understanding what’s moving the needle. Our team here at RL has continuously provided support to our clients when conducting these types of campaigns. Whether it’s testing subject lines for a national restaurant chain’s promotional emails or figuring out the best CTA for products in a grocery chain’s communications, our goal is to leverage key insights from the data to inform our omnichannel approach for these clients.
There is also a higher likelihood for a consumer to take action when they feel like they will receive a reward for doing so. By offering incentives in marketing campaigns such as discounts, free gifts and flash sales, a consumer will be more inclined to interact with the brand whether that be making a purchase or booking a service. Different incentives for different segments gives our clients the ability to get more value from the offers they send.
When working with a restaurant client, Response Labs focused on engaging with consumers who actively dined, but had not yet signed up for the rewards program for this restaurant chain. The rewards program perks, although great, were not enough for some customers to sign up without an incentive. Additionally, we are often faced with situations where giving out more coupons or offers is not financially feasible. When this happens, we work with our client to build the case of how to use offers that are appropriate to the value of the customer. Winning back a high-value customer that has lapsed is worth the $20 off incentive versus a $5 incentive for mid-to-low value customers. The return of bringing back that top customer is worth it.
We find campaigns like this one often drive noticeable increases in reward member activity and ultimately revenue.
Framing your Messages with Behavioral Economics
In instances where offers aren’t an option, framing is an alternative. Framing focuses on the way in which something is presented to a consumer. The idea of framing is that people are strongly influenced by the way choices are framed or presented.
In most instances, a consumer will react differently when a choice is presented as a loss rather than a gain. For example, if a consumer is looking to lead a healthier lifestyle, they might be shopping for the best food items to meet their needs. In this scenario, the consumer would be more likely to choose an item that reads “80% fat free” versus the one that reads “contains 20% fat”.
Another great example of framing, and one we often strive to help our clients leverage, is the Goldilocks approach. This consists of providing consumers with 3 options that could meet their needs, but allowing them to choose which one meets their needs, all while keeping the decision making process simplified. And that leads us to our last point…
Simplify the Decision Making Process
Providing consumers with fewer options, and simplifying their path to a final decision, can result in higher conversions (like purchases).
In your marketing campaigns, and something we stress often when developing and executing omnichannel marketing campaigns, highlighting the most important features of the product or service you offer can result in an over complication of benefits. Simplification will assist the consumer in their decision-making process.
For many of our clients, we recommend focusing on what the consumer behavior is telling us from users who have actually converted. Amazon does this best by making recommendations for products the customer may also like based on their past purchases and purchases similar consumers have also made. Mining your consumer data to understand the next best product to recommend takes some of the guesswork out of your consumers’ engagement with you, leading to a more seamless purchase experience.
Ready to leverage behavioral economics in your marketing campaigns?
By applying the principles of behavioral economics to your marketing campaigns, you can gain a better understanding of your customers and boost their engagement and loyalty to your brand. RL employs these strategic approaches when ideating, strategizing and executing on our client work.
We work with a number of clients across several industries to help our clients leverage this key tactic in their marketing campaigns. We do more than email, using SMS, digital advertising, and everything in between. We don’t shy away from the complex intersection of data science, media, technology, and creativity. That’s where we thrive. We help brands find opportunities to connect with customers in meaningful ways. Our purpose is to Make Every Message Matter™.