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10 Irrational Human Behaviors and How to Leverage Them to Improve Web Marketing

by admin on Dec.30, 2008, under SEO Tips & Tricks

Posted by randfish

I couldn’t help but love Chris Yeh’s Outline of Predictably Irrational: The Hidden Forces that Shape Our Decisions. It’s a fascinating look into the surprisingly predictable psychology that powers human actions and reactions and I think there are some definitive lessons we can take away from the piece and apply to web marketing. Let’s run through the list:

I: The Truth About Relativity

When Williams-Sonoma introduced bread machines, sales were slow. When they added a "deluxe" version that was 50% more expensive, they started flying off the shelves; the first bread machine now appeared to be a bargain

When contemplating the purchase of a $25 pen, the majority of subjects would drive to another store 15 minutes away to save $7. When contemplating the purchase of a $455 suit, the majority of subjects would not drive to another store 15 minutes away to save $7. The amount saved and time involved are the same, but people make very different choices. Watch out for relative thinking; it comes naturally to all of us.

Lessons to Apply to Web Marketing:

  • Offer a premium version of your product/service and make it easy to compare
  • Charging more has the added benefit of reducing the "bargain shopper" mentality

II: The Fallacy of Supply & Demand

Savador Assael, the Pearl King, single-handedly created the market for black pearls, which were unknown in the industry before 1973. His first attempt to market the pearls was an utter failure; he didn’t sell a single pearl. So he went to his friend Harry Winston, and had Winston put them in the window of his 5th Avenue store with an outrageous price tag attached. Then he ran full page ads in glossy magazines with black pearls next to diamonds, rubies, and emeralds. Soon, black pearls were considered precious.

Simonsohn and Loewenstein found that people who move to a new city remain anchored to the prices they paid in their previous city. People who move from Lubbock to Pittsburgh squeeze their families into smaller houses to pay the same amount. People who move from LA to Pittsburgh don’t save money, they just move into mansions.

Lessons to Apply to Web Marketing:

  • Want to be a premium product and charge a premium price? Set yourself against "premium" competitors in premium markets. Positioning is critical to perception of value.
  • Anchoring happens - plan for it in your sales models and be prepared that old customers will be resistant to new pricing, even when the circumstances are very different

III: The Cost of Zero Cost

In the real world, this effect was demonstrated by Amazon’s free shipping. After Super Saver shipping was introduced, Amazon saw sales increases everywhere except for France. It turned out that the French division offered 1 franc ($0.20) pricing instead of free pricing. When this was changed to free, France saw the same sales increases as elsewhere. Another real-world example: People will wait in line for absurdly long times to get something for free. Free is one of the most powerful ways to trigger behavior.

Lessons to Apply to Web Marketing:

  • Offer free stuff, but make sure you get ROI from it (traffic/ad views/email addresses/etc)
  • Be prepared for the fact that people will ENJOY free stuff more than normal, simply because it is free. Use this to your advantage and give away to those whose love & affection you need (reporters, bloggers, pundits, haters, etc.)
  • Making people work to get something for free is a great way to trigger behaviors that might otherwise cost a fortune (think web surveys, information classification, data entry, etc.)

IV: The Cost of Social Norms

Vohs, Mead, and Goode: Participants were asked to unscramble sentences that were either neutral ("It’s cold outside" or related to money "High-paying salary").  Then they were asked to solve a puzzle.  The experimenter left the room, and the subjects were allowed to go to him for help.

  • "Salary" participants waited 5.5 minutes to ask for help; "neutral" participants waited only 3 minutes
    • Thinking about money made people more self-reliant and less willing to ask for help.
    • On the other hand, they were less willing to help others.
  • The conclusion is that thinking about money puts one in a market frame of mind.  Subjects were:
    • More selfish and self-reliant
    • Wanted to spend more time alone
    • Were more likely to select individual tasks rather than those that required teamwork
    • Chose to sit farther away from others

A real-life example: The AARP aksed lawyers to participate in a program where they would offer their services to needy employees for a discounted price of $30/hour. No dice. When the program manager instead asked if they’d offer their services for free, the lawyers overwhelmingly said they would participate.

Conclusion: Market norms drive out social norms.

 Lessons to Apply to Web Marketing:

  • Those who freely contribute to your site/business with recommendations, referrals, content (think blog comments or UGC articles), etc. might not be willing to do so if paid. Think twice before paying for what you might be able to get for free.
  • The mindset of volunteers vs. employees is very different - consider which behavior set you want before deciding on the type of labor to attract

V: The Influence of Arousal

Ariely and Loewenstein conducted an experiment on Berkeley undergrads (Ariely tried to do this at MIT, but couldn’t get the necessary permissions).  They asked them a series of questions.  Then they had the undergraduates stimulate themselves to a state of sexual arousal, and asked them to answer the same set of questions. The results show that people simply don’t realize how different their decision-making is during a state of arousal.

Implications - Someone may promise to just say no, but that promise is less likely to hold up during a state of arousal.

Lessons to Apply to Web Marketing