Theories of Cognitive Marketing: Top 5 Tips to help bolster your Marketing ROI

Marketers should strive to understand the decision-making process of consumers, and what factors influence their decision to buy one brand, product or service over another. Get as granular as you can; decipher whether or not this was a calculated decision or a random one, whether the presentation, promotion or price was what prompted them.

Logic would say that customers choose the product that brings them the most value and then the cheapest one amongst the other competitors. But we know that humans are rarely logical, they are unpredictable and impulsive, which is why advertising can be so profoundly effective.

Let’s take a look at some of the cognitive biases people employ when making a decision and the marketing functions you can apply accordingly.

1. Confirmation bias

We process information differently according to the questions we are asked and how they are framed.

For example, you know a co-worker called Jenny; she’s not the best person in the world, but not the worst either. If someone asks you “Is Jenny a good person?” you would be inclined to think about something nice that Jenny has done – maybe she opened the door for someone once, she works hard, and she is friendly in social situations. In this case, you would be more likely to answer the question and conclude “Yes, Jenny is a good person”. By way of comparison, if someone were to ask you “Is Jenny a bad person?”, this might inspire different memories. You’ll think about how she jumped in front of your in a queue one time or made an offensive remark. By association, you are more likely to say she is a bad person.

This might sound hard to believe, but studies show that you make a decision, or in this case an assessment of someone’s personality, according to what question you are asked. This applies to other more important decision, for example when it comes to organ donation, whether or not people choose to opt-in depends massively on which box you provide as the default option (opt-in or opt-out). This is because the decision is largely already made for you, all you have to do is tick the box, and we choose to confirm whatever is put in front of us.

The Marketing Lesson:

  • Make sure you have a visible default option (an email subscription, re—reordering), and let people’s perception fill in the gaps. A high percentage of people will opt for whatever you suggest.
  • If feedback surveys and testimonials are important to your business, then use questions that are framed in a positive way, such as ‘Was the quality of this produced of a good standard?’. This will help you to generate better results.

2. The Halo Effect

The halo effect is one of the more commonly known cognitive biases. This is when one positive characteristic of a person largely informs the way in which we perceive that person as a whole.

This is often the case with politicians; people tend to judge their capability and reliability by looking at their facial features. Competency is supposedly signalled by a strong chin and confident smile. This obviously gives no concrete indication of how they will perform in office, but more how they will be perceived at face value. The same can be said for attractive individuals; many studies have shown that they are looked upon more favourably than less attractive people when assessing their intellect, happiness, compassion, job status and so on. As such, being attractive works like a halo. In the same vein if someone presents themselves as being intelligent people concurrently assume they are also kind, courageous and so on.

You can harness the power of this bias in business and it should not be underestimated.

The Marketing Lesson:

  • Take a feature of your brand and market the hell out of it to increase your reputation; for example when a brand projects that they are super eco-friendly, people will presume that it is a ‘good’ company as a whole.
  • Provided exceptionally and consistently good customer service. When a customer has outstanding customer service this gives off the impression of a well-run and organised business.
  • If you sell a tangible product use influencer marketing. Choose good-looking, switched-on people to represent your brand, and by association, this will reflect these qualities onto your brand.

3. The Decoy Effect

The decoy effect is defined as the phenomenon that consumers will change their preferences between two options when you also present them with a third option that is asymmetrically dominated.

Here is an example:

Imagine you are shopping for a Nutribullet blender. There are two options. The cheaper one, costing $89, provides 900 watts and a five-piece accessory kit. The more expensive one, priced at $149, offers 1,200 watts and has 12 accessories.

The model you go for will be dependent on an evaluation of their relative value for money. It is not immediately clear, though, that the more expensive blender is better value. It’s roughly 35% more powerful but costs nearly 70% more. It has more than double the amount of plastic accessories, but what are they worth?

Now consider these two options in comparison with a third choice.

This Nutribullet, for $125, offers 1,000 watts of power and nine accessories. This seemingly allows you to make a more measured comparison. For $36 more than the cheapest blender, you get four more accessories and an additional 100 watts. But if you spend just $24 more, you get a further three accessories and 200 watts more power. Bargain!

You have just experienced the decoy effect.

The decoy effect is the notion that consumers change their preference between two options when presented with a third option – the “decoy” – that is “asymmetrically dominated”.

What asymmetric domination means is the decoy is an unattractive option and priced to make one of the other options much more appealing. It is “dominated” in terms of perceived value (quantity, quality, extra features etc). The purpose of the decoy is to nudge customers away from the “competitor” and towards the “target” – usually the more lucrative option.

The Marketing Lesson:

  • This often used in retail, phone companies use it when they present different price packages. This tactic can be used in any industry, and has been shown to increase sales of everything from sweets to houses.

4. Anchoring

As humans, we are always looking for information to rely on, and multiple studies show that in many situations our brains trust whatever information is presented to us first. This information is called an anchor. Subsequently, ‘Anchoring’ describes the notion of using the information that is provided first as a prompt for making purchasing decisions. For example, if you go into a letting agent and the first house you set your eyes on is being sold for £200,000, from that point onwards you will perceive the other houses in relation to that figure.

The Marketing Lesson:

  • The important thing is to present your first product or service, in your shop, on your website, on your menu, with an inflated price. The effect will take place.

5. The “free breakfast” effect

People love free products. They love them so much that what would normally dominate their reasoning for determining value, logic and their own personal preferences goes out the window.

Let’s take an example. If you offer ‘better’ chocolates for 20p and ‘worse’ ones for 2p, despite the price disparity the majority of people will still choose what they perceive to be their favourite chocolate because this drop in price is so minimal. However, this rule goes out the window when you offer a chocolate for 0p – then demand shoots up.

The reduction of a price to zero hugely increases the value of a product instead of when they are just discounted. It feels like people consider the value of a free product as greater than that of a paid product, which according to basic economic theory is completely incorrect.

Companies do not normally relish the opportunity to give out free products. Free products are often given out with a paid one, which is an incredibly powerful tool considering how something free can completely alter a consumers opinion. The idea of ‘the free breakfast’ emanates from a study which asked consumer’s whether they would rather stay in a well-known 4-star hotel with a standard price breakfast or an unknown 3-star hotel with a free breakfast. The study showed that by adding in the element of the free breakfast this dramatically changed the result in favour of the 3-star hotel. The power of the free breakfast was further underlined when they made the free breakfast just 2 euros, and then the majority of people jumped ship and opted for the 4-star hotel instead.

The reason this happens is because people have a strong, positive reaction to being offered something for free, so much so that they allow themselves to make a slightly off judgement.

The Marketing Lesson:

  • Don’t bother with discounts. Offering your customers something for free is much more powerful, resulting in higher attraction and conversion of customers
  • Make this work for your business by introducing things such as free trials, samples, or prepaid gift cards.

 

Conclusion

Thinking like your customers and studying their behaviour is only going to enrich business and help you to achieve better and better results. By making small changes to your marketing strategy you can make a huge impact on your ROI.

If you liked this article and want help refining your marketing strategy then please feel free to get in touch.

Email: millie@daviesscothorn.com

Or give the office a call on 01283 532780.

Alternatively, come in for a chat and a coffee, our address is: The Studio at Hodges, 82 Horninglow St, Burton-on-Trent, United Kingdom, DE14 1PN

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