Your Marketing Strategy Could Use a Behavioral Economics Lesson
For marketers, especially growth marketers, there is a lot of trial and error on the journey to moving the revenue needle.
As we try to achieve sustainable increase, we move through dozens and hundreds of measured trials.
Some work, some don’t and we try to learn as much as we can from both.
Looking for the most effective means to achieve growth can look like shooting arrows wildly into the air, hoping that a few will hit their target. While, on rough days, this seems like an accurate portrayal; most of the time the process is more calculated.
Growth marketing should be more like creating an environment (over time) that attracts and converts your ideal prospects naturally. Each adjustment and trial is just making your world all the more compelling until it reaches a peak level of influence.
The difference between our two analogies makes it (super) important to understand your overall goals when it comes to influencing your audience. Do you want short, concise actions or an immersive experience?
Enter behavioral economics.
Behavioral Economics (be·hav·ior·al ec·o·nom·ics): A method of economic analysis that applies psychological insights into human behavior to explain economic decision-making.
In short, it’s fancy speak for methodically finding out external influences that motivate people in matters of their finances. If you’re wondering if this has anything to do with marketing your stuff, it most certainly does.
Engineering the Consumer’s Experience
When people come into contact with your brand, are they instantly being drawn into a world that you control, or are you shooting arrows at them in hopes of getting a quick action?
Implementing a certain strategy or adding an element on your site can achieve positive results quickly. Stringing several successes together helps you gain momentum allowing you to see rapid (even exponential) growth in terms of audience size, brand recognition, and lead generation.
However, putting successes together can not only be made easier by using the incredible power of designing an experience; it can also be a formula for long term growth with the bonus of creating loyal brand ambassadors.
Whether you’re B2B or B2C, using the psychology of buyer behavior, you can create a world that motivates a prospect’s overall experience.
How about an example.
Example One: A dad is walking with his very young daughter through a big box retailer doing some shopping. She spots a stuffed animal prominently displayed and asks her father to buy it for her. Pops takes a look at the large numbers displaying a low price and throws it in the buggy.
Takeaway: No one knows or cares about the details (brand, materials, etc.) Both parties were strictly motivated by placement and price.
Example Two: Dad and daughter round two. This time they’re walking around and the little girl spots a “make your own” teddy bear shop. She poses the same question, and both proceed into the store.
They are both whisked into a story of how a child (the little girl) can bring the bear to life with the help of a one on one employee. She chooses what she would like, the attendant does the filling, and the daughter gets to fit a wooden heart inside her soon to be toy. Finally, the father pays the (higher) price without a care since his little one really thinks she brought her new friend to life. He also gives the cashier his email (when asked) to receive promotional materials.
Takeaway: Both the father and daughter now have much more than a bear. They have a memory and a story that will most likely be remembered and shared with others.
Influencing Human Behavior Correctly
Let’s have a moment of extreme honesty here: Both of the examples used behavioral economics, but one did it better.
The dad in the situation wasn’t influenced by his budget, his overall financial goals, or anything other than the events of the father/daughter trip.
The price and location were instrumental in the first bear being sold. Presumably the store put the bears in a prominent location to allow children to see and ask for one. A child’s desire mixed with a low price point allowed the behavior of the father to be influenced into giving up his sweet sweet economy.
The equivalent of an arrow that hit.
Our other example has an entirely different motivator. While the first was desire and price, the second was experience. A world was created.
Think of all of the brands you love versus the ones you just use.
- You get a Starbucks at Starbucks, or you order a coffee at McDonalds.
- You buy a MacBook, or just a laptop.
- You Google it…or you Google it.
All of these brands (and many more) are successful because their consumers are ushered into a place that is created and controlled. It’s an orchestrated experience that makes you want to not only buy what is being sold, but to feel a certain way about a brand.
- Starbucks creates a physical five senses environment that McDonald’s couldn’t replicate even if they gave out a free pair of non prescription hipster glasses with every coffee. They’ve also created an all out infatuation for a good cup of joe.
- Apple has (on multiple occasions on several industries) created a world of customers brand fanatics that wear, use, and buy all things Apple proudly.
- Google has created a world that empowers anyone with an internet connection to find accurate and relevant information immediately.
Important: Keep in mind that behavioral economics is a relatively young science and more data is being revealed everyday.
Using Behavioral Economics For Growth
Now that you’ve got the (extremely) short version, you may want to know how you can start using it for your business.
Creating an environment that provokes your audience with certain psychological prompts may not be easy, but it doesn’t have to be overly complicated. You’re not whisking them off on a magic carpet ride, promising the world.
Instead, you’re interacting and communicating with prospects and customers using behavioral and emotional triggers in a manner that will eventually become predictable (so you can replicate it).
It’s not just for the Fortune 500, or direct to consumer businesses either. Here are a few of the ways to begin with behavioral economics no matter what industry you’re in.
Fun Fact: As one of the biggest and best storytelling companies in the world, Disney has ownership in the largest share of media outlets including ABC, Hulu, NBC, A&E, Marvel, Star Wars, and many others.
Quick Wins Aren’t a Bad Thing (Just the Opposite)
This post isn’t to bash a lot of short term success. Growth is often best achieved by a series of goal centered experiments resulting in several short term successes. A typical growth marketing process is a great way to use behavioral economics to connect the dots of success to a strong brand.
Quick successes are necessary for any company, but especially important to startups and bootstrapped young companies. This makes accurately predicting behavior essential in all marketing efforts. The video below is a real company that was recently crowd funded.
Their product name is literally “Who Gives a Crap” and they sell toilet paper.
Right away you may either love it or hate it (which is another trait of many of the top brands mentioned above). Don’t count them out right away and learn from their short term success that immediately transferred into a strong community.
Simon Griffith the star of the video and the CEO did indeed sit on that toilet until the company received over $50,000 in orders ($66k actually).
How Behavioral Economics Were Used
If you look and listen closely, this new brand had so many behavioral prompts. They hit the social responsibility buttons, eradicated the high priced fear, and even went over something called a “poke through ratio”. All wrapped up in a compelling and comedic package.
On the longer term, they’ve created something that people can feel good about without sacrificing anything. The TP costs as much as a name brand competitor, is the same quality, and 50% of the proceeds go to an incredible cause. It’s a win-win-win.
Let’s break down their success even further.
Removing Fears Immediately
These entrepreneurs knew they had a winning idea, but also anticipated the fears and questions that would immediately interject into the minds of anyone watching. Some of these included:
- Environmentally friendly products are expensive
- Recycled toilet paper is usually thin and poor quality
- The company may not be legit
If you watched the video you know that they addressed all of these in an entertaining way in less than three minutes.
How You Can: While you may not want to sit pants-less on a pallet for your company, you can still remove fears.
One of the most successful tactics is sending an email to your “on the fence” leads with a list of apprehensions and questions and their answers and alleviations. You can also add this to your web copy or create a less risqué, but hopefully as entertaining video.
Seek to provide content that does this or maybe even offer qualified consultations to remove doubt. Remember our big brand examples?
Think about being in a Starbucks for the first time. Your barista will (in most cases) guide you through and remove all your doubts about getting a good coffee. Apple has stores and an online support system full of the most knowledgeable people around.
Pile On the Benefits (for Customers and Others)
Continuing to boil down our toilet paper case study, we see how well they piled on the good things that come with using their particular product. The benefits were for everyone it seemed. The customers (no dyes, etc.), the environment, a helpful charity (and the people they help), and the company (they keep half the profits).
All of this piles up to create a great buy for anyone paying attention and has the need (who doesn’t need toilet paper?) It doesn’t even matter if their customers want all of the benefits, it still helps that they are there.
Don’t really care about your carbon output? So what, you probably like that your bathroom visit isn’t costing trees. Get the point?
Bonus Study: In another recent study coffee was given away for free to several test groups. When the coffee had a large amount of potential additives (including weird ones like paprika) those drinking it believed the coffee was of higher value and seemed to affect the overall satisfaction with the coffee.
How You Can: While you may have some pretty detailed buyer personas (a good thing) you could add some tier 2 and 3 options that they would like, but might not consider “business critical”. Add something(s) that give your customers the benefits of a win without the dedication. Donate to a good cause or start purchasing some renewable energy credits. Using psychology to associate positive emotions with your brand helps in the long run and the now.
Make It Count
While scarcity doesn’t apply to all business models, choosing the proper timing in a marketing effort can be a critical factor. there are many ways to create the need for immediate action. It would make ZERO sense for company that makes consumable goods (like TP) to say, “act now, before we run out”.
But this didn’t stop them from coming up with a solid way to move people to buy quickly. Sitting on a toilet until your initial inventory is paid for took thinking outside the box pot.
How You Can: This tactic is going to vary wildly depending on your product or business model, but there are a few common options.
- Price increase: If it’s time to up your rates, you might as well give your leads a good stir and increase revenue before you switch. Giving a week or so before the rate goes up usually give you a large boost in sales.
- Shut Down: If you are about to develop or introduce a ton of new features to a software or course you can shut down for a period of time, get the changes right and open back up. Before you shut down, you can use a similar method to price increase (and they work very well paired together).
- Custom Option: This is where you think outside your own box. Think donations, contests, or just a plain ole promotional period where you offer a ton of bonuses to get people to buy during a certain window.
Building Your Customer’s Experience Over Time
Believe it or not this is just scratching the surface. By building every aspect of interaction (over time) with how you want your buyer to feel, you’ll notice that buyers will react to marketing efforts and your brand differently.
Gaining insights on the behavioral economics of your industry can be applied to every phase of a buyer’s life from introduction, to the sale, to becoming a loyal customer, and finally to an advocate for your brand.
If there is one thing to gather from this what would it be? Long lasting growth comes through pairing continual experimentation (marketing) with overall goals of creating an experience (using buyer behavior and emotion) that produces a broader outcome than just the sale.
What are you doing to bring your customers into your business?