Humans approximately make 35,000 choices per day with approximately 2,000 decisions per hour or one decision in every two seconds.
Do you think this enormous figure really holds true? Surprisingly, yes, numerous eminent psychologists and neuroscientists have found this to be true. When you start to really think about it, we have become used to a vast variety of choices; in fact we expect them. The choices/options are endless when purchasing a commodity on Amazon or browsing through Google.
It sounds overwhelming! But our brain has a strategy to counter it: relying on heuristics.
We use heuristics in all types of situations. These are mental shortcuts that help us to facilitate problem-solving, and decision making. These strategies are generalizations that reduce the cognitive load and can be effective for making immediate judgments.
In this article I will discuss three types of heuristics and how marketers can leverage them to impact their sales effectively:
- Availability Heuristic
- Anchoring Heuristic
- Scarcity Heuristic
1. Availability Heuristic
We have been taught not to assume yet our mind is conditioned to do so. For example, we assume that a person with a lab coat is a doctor, or a man with triceps is a fitness freak. Our brains are wired to make quick decisions and assumptions, and this heuristic directs us to use the information that is most readily available.
The availability heuristic is a bias in which a person relies on immediate information (as a consequence), often easily recalled information when making a decision. The person may also ignore less easily recalled information even if it is statistically more important and valuable. This heuristic operates on the notion that if something can be recalled, it must be important, or at least more important than the alternatives that are not easily recalled.
When deciding which chips to buy, you may choose Lays or Pringles because it comes to mind faster. You may have chosen another brand if you had more information available on that brand. We often rely on how easy it is to think of examples when deciding.
Some other examples may be: A customer believes that a business will run a discount or a sale campaign because they have done so in the past. A lead would believe that the product or service is good after they see the posts and ads of a particular product or service offered online and are likely to get converted.
Subjecting consumers to a product/brand that stands out from the competition gets registered on an emotional level and triggers an immediate recall at the slightest stimulation. This occurs because the brain has ‘saved’ the product as a mental shortcut and can reciprocate the memory/emotion attached to it in the future. It is vital for the brand/product to be ‘mentally available’, that is, to easily come to mind when the consumer is exploring what options are available to them.
One way to employ this heuristic is by showing success stories of the product/brand on its landing page. For example, you may post a picture of a prize that your brand received 2 years ago in some virtually unimportant contest. The buyer then makes a quick decision that this brand must be a good one based on the most recent available information.
Some other ways marketers have implemented this heuristic in their strategy are by:
- Publishing blogs, press releases and other promotional content to create buzz around a product launch.
- Journalists using sensationalism in news headlines
- Advertising campaigns casting celebrities as brand ambassadors.
2. Anchoring Heuristic
Wansink, Kent, and Hoch studied how multiple pricing of the products increased supermarket sales. On sale were either “4 rolls of Bathroom Tissues for $2” or On sale, “$0.50 for one roll”.
The researchers found that the buyers were more attracted towards multiple units than the single units pricing even though the sale value was the same. The multiple unit pricing performed 40% better than single unit pricing. Wonder why?
The brain used the number four as the anchor.
When buyers are trying to make a decision, they often use a reference point or an anchor to start. It is human tendency to rely on the first piece of information offered (anchor) when making decisions. Once the anchor is set, decisions are made by adjusting the initial anchor number, regardless of the legitimacy of the actual anchor number.
For example, a real estate agent lists a house at a higher price than its actual value, and the potential buyer will use that price as an anchor to further negotiate it down until they reach their desired price.
Experiments have mentioned that merely mentioning or showing a number has influenced participants’ numerical judgements. For example, in one experiment participants were asked to use a roulette wheel that was rigged to stop either at 10 or 65 (Participants were not aware of this). They were subsequently asked to estimate the percentage of United Nations members that were from African countries. Participants whose wheel had stopped on 10 (25% approximately) guessed lower values than participants whose wheel had stopped at 65 (45% approximately).
In marketing, brands use the anchoring heuristic strategically to set a product’s price point. An effective way of doing this is to present relatively expensive options and then introduce discounts to create a certain bias. This type of product pricing lets the user take advantage of the lower price as an anchor for a higher priced product.
Another strategy is to introduce either a higher or lower priced product first depending on how they want to influence a consumer’s subsequent decision. If the marketers start by introducing a higher priced model first, then the lower priced model would look like a better deal.
Marketers can also utilise leverage this principle by:
- Picking prices ending in 99: The customers tend to latch onto the number before the decimal point (that is, 99) as an anchor. For example:
- Make discounts more attractive: Marketers could indicate the price difference as a percentage. When customers see a sale price, they do not quickly calculate how much they are actually saving but get anchored to the percentage off, for example, “50% off” and register “What a bargain! Don’t miss out!”
3. Scarcity Heuristic
Items or products that are rare or limited are often valuable and having these items in your possession shows others that you are unique and interesting. One can drive people to use the product by creating a perception of scarcity. Buyers are likely to engage in a behaviour that makes them part of an exclusive group. Users are more likely to purchase an item now versus waiting for it later if they know the products are limited in terms of quantity.
In a study conducted, researchers asked the participants to rate the quality and amount they would be willing to pay for cookies from two jars: one containing ten cookies and the other one containing two cookies. Results of the study indicated that individuals rated the jar with less cookies as higher quality and that they were willing to pay 10% extra for them. The cookie jar that went from abundance to scarce were rated more valuable and higher in quality than those that were constantly scarce.
Many e-commerce sites inspire the scarcity heuristic by displaying Limited number or Limited time deal offers. For example:
Just the fact that the offer is limited in terms of time and quantity, it creates a heuristic or mental shortcut. It immediately places a high value on the product.
Interestingly, research has indicated that even if the consumer feels that the scarcity portrayed is fabricated, a marketing ploy, they will still feel an urge to buy so they miss out. That is why it is a heuristic; logic is replaced with the urge to avoid missing out on something.
4. How Scarcity made Clubhouse the trending app in 2021?
In April 2020, a social networking app named clubhouse was launched that facilitated connection through audio conversations. The conversations are scheduled and organized in rooms with specific topics and speakers. Users have the option to jump from room to room and listen to any conversations. Many people have turned to this application to learn about interesting topics, network with professionals and hear from CEOs or celebrities. The catch in this application that makes it unique is: it operates on invite-only principle, both in its admission process and in the conversation it hosts.
All the social networking apps operate on the principle ‘the more, the merrier’ by giving unlimited referrals to users. However, Clubhouse, by limiting the number of invitations, is making it seem more valuable and covetable. By leveraging the heuristic of Scarcity, they have not only gained more users but have also powerfully created a brand image. Clubhouse’s algorithm promoted FOMO (Fear Of Missing Out) in users who were not using the app. Everyone wanted to get into conversations with Elon Musk or Tiffany Haddish.
Further, Clubhouse employed invitations as a variable reward for continued usage. Users do not know how much they must use the app to get more invitations, thus when they receive the invitation, it’s a pleasant surprise. This creates a ripple effect when people talk about the app in future. Giving more invites to users who highly engage also benefits Clubhouse’s user base.
Some of the ways by which marketers can leverage this heuristic is by:
Not all decisions that consumers make are rational. They come with a big preferential baggage which influences their decision making. Marketers should consider heuristics when nudging potential customers who are further along in the conversion funnel and know their soft points to capitalize on their biases and influence their decision making to their benefit. Prompting prospects to take these mental shortcuts can be an effective blueprint for increasing sales.
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