An introduction to the psychological foundations of marketing and understanding consumer behaviour.
Marketing is a combination of art and science. All great marketers have a solid understanding of how and why people think and act the way they do. They then build marketing strategies and tactics to inspire and influence thoughts and actions.
Here you will learn about basic psychology of people to better understand their needs and key principles of human behaviour. This article has three parts:
Part 1: Building a Fanocracy
Part 2: Understanding Human Needs
Part 3: Key Principles of Human Behaviour
Part 1: Building a fanocracy
One of the best and most effective methods of marketing is letting passionate, loyal customers do the job for you. With the accessibility of social media for all, your best customers are happy to be posting reviews, how-tos and other information about your products and services - for FREE! User-generated content (UGC) like this is very powerful to potential customers who are far more inclined to believe this information than anything you create in a marketing campaign.
Therefore your job as a marketer is to turn you best, most loyal customers into fans. Fans that are happy to advocate for you, thereby creating more new customers.
A business that builds this fanbase is known as a fanocracy or an organisation that inspires extreme passion from its customers by putting their needs and wants at the centre of everything they do. An example of a brand that has a fanocracy is Apple whose followers are as passionate and loyal as any rabid K Pop fans.
So how do you create a fanocracy amongst your customers?
Fanocracies are built by customers that want to support your brand and not because they feel like they have to. The process does not happen immediately but with two techniques you can sow the seeds that grow from a loyal following to a passionate fanocracy.
1. Get personal
Find ways of interacting personally with your customers. The proximity between your brand and consumers drives more loyalty the closer you get. An easy way of doing this is via social media where you can ensure you respond to all comments and posts mentioning your brand. You can create interactions by asking questions of your followers or asking for their opinions and then responding to their comments. You can also host events for your customers to attend and interact with you or find ways to sell to people in person either by having a store of by visiting your customers, showing your care and investment in their satisfaction by for example setting a product up for them or by personally checking on how satisfied they are after a purchase.
2. Mirror neurons
This is the reaction someone has when observing someone else do something. For example, watching skateboard fails on YouTube can inspire the same feeling of pain for you as the viewer as it does for the skater. The same principle can be used in situations where you don't have physical proximity to your customers. You can do this by using photos of employees or customers, including videos of your HQ or events, or hosting webinars or Live events for those who cannot connect in person.
Countries like Cina, Japan and South Korea are experts at creating fanocracies. Do some research into brands there for inspiration and ideas on how to build a passionate and loyal band of advocates.
Part 2: Understanding human needs
Here we will look at what people truly need to be happy and fulfilled - in other words, our primary needs as humans both physical and emotional. That way we can get a better idea of why humans take marketing-related actions.
In the middle of last century Abraham Maslow created a pyramid of human needs called the 'Theory of Human Motivation'. This later became known as Maslow's Hierarchy of Needs and it is a model that is widely and acknowledged and used as one of the foundations of understanding consumer behaviour.
The theory states that once one level of needs is satisfied we move up to the next level up the pyramid to then satisfy those needs.
We start at the base of the pyramid with the very basic human needs to be fed, clothed, breathe and be safe right up to the top of self-actualisation where we push ourselves to give our lives meaning, legacy and sense of purpose.
By using the model you can market your products or services to satisfy the relevant human need and tap into our intrinsic motivations. Your marketing can create emotionally compelling appeals specific to the needs of your customers.
To be successful in marketing, you must be able to convince a potential customer to buy the item or service being offered. A powerful way to do this is to address one of their core needs. Success can be achieved by satisfying one of Maslow's listed requirements. Even though there are other theories that are applicable, Maslow's theory of needs is still the basis for many effective psychological marketing methods.
For example, if you're trying to sell a car to someone motivated by Maslow's second level of needs, which is safety and security, you should emphasise that it is a dependable vehicle with high customer ratings. For those driven by the desire for self-esteem, you should focus on how implementing your accounting methods could provide recognition from colleagues and make them look good to their boss.
Part 3: Key Principles of human behaviour
Are you aware of the psychological elements that shape the behaviour of your customers? It would be beneficial to be able to guess or understand their behaviour and use that knowledge to improve your marketing strategies. By learning a few theories of psychology, you can have a better understanding of how to reach your target audience more effectively. Here, we will explore some of these theories and how they can be applied to marketing.
Priming
Priming is about what happens when you're exposed to one stimulus, how it affects how you respond to another subsequent stimulus. Psychology Today gives the example of two groups of people reading the word “yellow” followed by either “sky” or “banana.” Because people have a semantic association between the fruit and its colour, the “yellow-banana” group will recognize the word “banana” faster than the “yellow-sky” group recognises “sky.”
There is a strong link between marketing and the use of subtle influencing tactics such as priming. These techniques can be used to encourage website visitors to recollect essential information about the brand, potentially even affecting their decision to purchase.
It’s been tested before. In a study by Naomi Mandel and Eric J. Johnson, researchers
manipulated the background design of a website to see if it’d affect consumers’ product
choices. Participants were asked to choose between two products in one category (like
a Toyota vs. a Lexus). According to Psychology Today, “they found that visitors who
had been primed on money (the website’s background was green with pennies on it)
looked at price information longer than those who had been primed on safety. Similarly,
consumers who had been primed on comfort looked at comfort information longer than
those primed on money.”
If you're attempting to capitalise on priming in your advertising, consider the minor details. These might be the factor that determines whether someone purchases your most expensive product or exits your page.
Reciprocity
When we receive a gift we often experience warm feelings that make us want to give something back in return. This is the basic premise of reciprocity. In other words, if someone does something for you then you will naturally want to do something for them.
When you offer something first for free, if it's helpful, people feel a real sense of indebtedness towards you.
According to Cialdini, when servers bring a check to their patrons without a mint, the diners will tip according to their perceptions of the service given. With one mint, the tip jumps up 3.3%. Two mints? The tip jumps "through the roof" to roughly 20%.
This indebtedness is a real phenomenon, and it has a significant effect: Your subsequent requests would make them much more likely to return the favour. For example offering a small gift or samples for free before purchase to potential customers, you can create a social obligation for them to return the favour.
There are three factors that will make this principle more effective:
Offer something first - allow them to feel indebted to you
Offer something exclusive - allow them to feel special
Personalize the offer - make sure they know it’s from you
Prior to requesting something, make sure that you are providing something for free. Not only will individuals be more likely to fulfil your request, but you will be displaying your company in a beneficial manner, forming brand allegiance, and constructing a network of devoted supporters.
Social proof
Social proof or the closely related peer comparison is all about 'me too' or the 'fear of missing out'. In other words social proof theory is when people see that others are engaging in a certain activity, they may be more likely to follow suit and do the same. This effect can cause an individual to assume that they should also be engaging in that activity. This also links to the beliefs of a group of people or individuals that we like, respect and trust.
Think of when you are at a meeting with a group of strangers. No one wants to be the first to speak up but will gain more confidence once one or two other people have said their piece. Just like at a wedding - no one wants to be the first on the dance floor but once a few people are up, the masses will usually follow.
A powerful example of the importance of social proof is customer reviews. Reviews are more effective in influencing a consumer than any marketing campaign you create for better or for worse. Word of mouth and referrals are also examples of social proof at work. We are far more likely to be convinced to act by the word of trusted friends and family who have used your product or services than any slick advert.
As well as encouraging reviews on your website, Google Business or other social media pages or third party review sites you can host social proof on your website by using social sharing and follow buttons that display the number of followers on your accounts or the number of times a piece of content has been shared.
Other ideas are to feature customer testimonials and case studies on your website and other owned channels. Also consider embedding one of your social media channel feeds into your website so people can easily see others interacting and mentioning your brand.
Decoy effect
The decoy effect explains how the addition of a third, less desirable option can sway our opinion when selecting between two alternatives. This decoy is known as being 'asymmetrically dominated', meaning that it is weaker than the target option but has more qualities than the competing option. For this reason, the decoy effect is also called the 'asymmetric dominance effect"'
The Decision Lab provided this explanation of the decoy effect in practice. In an ideal decoy situation, there are three choices available:
The target is the choice someone else (for example, a business) wants you to make.
The competitor is the option competing with the target.
The decoy is the option that is added to nudge you towards the target.5
The crux of the decoy effect is the fact that the decoy must be asymmetrically dominated by the target and the competitor, with respect to at least two properties—let’s call these A and B. This means that the target is rated better than the decoy on both A and B, while the competitor might be better on A but worse on B.
Imagine you’re lining up at a movie theatre to buy some popcorn. You’re pretty hungry, so you think you’ll get a medium-sized bag. When you get to the concession stand, you see the small costs $3; the medium is $6.50, and the large is $7. You don’t really need a whole large popcorn, but you end up buying it anyway, because it’s a much better deal than the medium.
Scarcity
One of the oldest and most used marketing 'tricks' is scarcity. 'Available for a limited time', 'only two seats left', and 'last 24 hours of the Black Friday Sale' are all examples of this theory in use. Using the laws of supply and demand, the scarcer something is the higher in value we perceive it to be or the more we want it.
To make the most of this idea, the way you phrase it is very crucial. The idea of scarcity works best when you phrase it in a way that implies that the product or service used to be abundant but due to high demand, it is now in short supply. Conversely, if the product or service was always rare, the idea of scarcity will not be as effective. The research also suggested that if a product or service that initially had limited availability suddenly becomes widely available, it may be viewed as having less value.
Anchoring
At a deep psychological level, our choices are often directed by something referred to as anchors. It is information that we may not even be aware of, but it serves as a point of comparison. Studies have revealed that this seemingly insignificant exposure has a huge effect on the decisions we make. When it comes to marketing, anchoring is about exploiting the fact that we use points of reference to evaluate various options, regardless of how random the anchors may be.
The first option the client sees is going to be the price that anchors in their mind. If you want to sell your mid-price choice, anchor the top-priced product by placing it first or in the centre in a larger font to draw attention. This will make the mid-price option look like a bargain in comparison.
When selling the most expensive option, make sure you set the lower price in a similar range. This way, you can present how much more value comes with the slightly higher price.
Another example can be the suggested “retail” original price crossed out, and you’re given a lower price. The final price can still be high, but the initial price was anchored, and how customers perceive the final price is not as high as it seemed before.
The Baader-Meinhof Phenomenon
Have you ever been made aware of something for the first time and then, seemingly overnight, it seems to be everywhere? That's the Baader-Meinhof Phenomenon at work. Once you have been exposed to something, it begins to appear frequently in your daily life. You may notice advertisements for it airing on the television, or you might unexpectedly find it in the grocery store. Even your friends may all have it.
According to PS Mag, this phenomenon (also called “the frequency illusion”) is caused by two processes. “The first, selective attention, kicks in when you’re struck by a new word, thing, or idea; after that, you unconsciously keep an eye out for it, and as a result find it surprisingly often. The second process, confirmation bias, reassures you that each sighting is further proof of your impression that the thing has gained overnight omnipresence.”
The theory behind this mere exposure effect is that you are more likely to have good feelings toward something that you’re exposed to often.
Once a person starts to pay attention to your brand - by visiting your website, connecting with you on social media, or browsing your blog - you should aim to make them feel like you are everywhere. You need to help in this process by sending them emails personalised to their behaviour and interests and retarget ads to them on other sites. Doing this can increase the chances of them taking a desired action like converting to a paid customer.
It is important for your brand to be visible across a variety of platforms. Paid online adverts and retargeting are useful tactics for boosting your visibility and creating a lasting impression with your customers. This way, even if they are currently not in the market for your product, the next time someone needs a product you offer, your potential customer will think of your brand first.
Loss aversion
The meaning of this theory is straightforward - once we have something, we don't then want to lose it.
When Daniel Kahneman studied this concept, participants were given mugs, chocolate, or nothing. Then, they were asked to make a choice between two options: If they were given an object, they could trade their objects, or if they were given nothing, they could choose one of the two items. The result? Roughly half of the participants who started with no items chose mugs, but 86% of those given mugs to begin with stuck with that item.
The concept of loss aversion may play a significant role when it comes to marketing free and paid versions of products. For instance, you could make a feature available for free for a certain period of time, after which it would be removed unless the user upgrades to the paid version.
Foot in the door
This technique describes that you are more likely to get a big 'yes' from someone if they have already given you a small 'yes' first.
Establishing a connection between the person who is requesting something and the one who is being asked for it during a minor request will likely cause them to comply with a bigger one. People also tend to act in accordance with how they initially responded to the first request. Therefore, it is not a good idea to ask someone to purchase your item or set up an hour-long demonstration when they first visit your website. Rather, make a smaller request, such as an invitation to a 15-minute talk to mull over something related, but not directly, to the product or service, similar to a consulting session. Small requests create a basis for bigger ones.
Similarly, asking someone for a very small favour, primes them to be more likely to grant you a request for a larger favour next.
Environment effect
Our choices can be affected by subtle environmental signs which we may not be aware of. These triggers can be powerful enough to direct our decisions by bringing back past experiences, sentiments, and predispositions connected with a certain topic. With regards to setting up sales calls for a product demonstration or price negotiation, it is recommended to schedule the call when the possible customer is in an area where they would use the product - typically the workplace, not at home.
It has been established through the 'temperature premium effect' theory that the temperature in a person's environment has a significant influence on their emotions. A study by The Journal of Consumer Psychology discovered that warm temperatures, which produce positive emotions, can lead to a higher appreciation of products. It was found that those in a warm environment were willing to pay a greater amount for a pen compared to those in a cool environment.
Expected vs surprise rewards
Researchers Mark R. Lepper and David Greene from Stanford University wanted to find out if rewards are effective motivators in all situations. To conduct their experiment, they gathered 51 preschool children that already had an interest in drawing and randomly split them into three distinct groups: regular rewards, surprise rewards and no rewards. The children were then placed in a room and asked to draw by themselves for six minutes. Depending on which condition they were randomly assigned, they were later given an expected reward, a surprise reward or nothing. The experiment was observed through one-way mirrors to determine the amount of time the children spent drawing after receiving their rewards (or lack thereof). Research results showed that predicted rewards diminish enthusiasm for a task, but unexpected rewards increase enthusiasm for the same task. Expected rewards decrease inner motivation, and unexpected rewards keep inner motivation alive while also improving one's state of mind.
To apply this in your marketing, it is better to give your potential customers unexpected coupons or offers, rather than having a regular promotion that occurs on a weekly basis at the same time.
Clustering
People are only able to store a finite quantity of information in their short-term memory, with the average person being able to recall seven items (plus or minus two) at any given time. To work around this limitation, many people have a tendency to combine related pieces of data together. For example, if you have a grocery list with assorted items, a person may mentally categorise them into groups like dairy, grain, and meat for easier recollection.
Therefore, when creating content, consider how you can structure it to improve memory retention. A good way to do this is to sort similar topics under numbered bullet points or headers of varying sizes. This can make it simpler to scan, and it will also help make the content easier to recall later on, particularly if it is a lengthy list of facts.
Verbatim effect
People are more likely to remember the gist of what someone said, not the specific details. They called this the “verbatim effect.” And it can have a huge effect on how your content performs.
It is worthwhile to put in some extra effort and make sure your headline is as perfect as it can be. It should be optimized for search engine results as well as social sharing, while still accurately summarizing the content of the article. This way, when people are looking for more information on a particular topic, they will be reminded of the helpful article they read in the past, and can locate it easily by searching for it on Google. With the right headline, your article should appear at the top of the search results.
Conclusion
Much of the practice of marketing is based on consumer psychology. Understanding how humans are motivated and make decisions are a critical foundation for the success of your marketing efforts. Use the 'tricks' learned here ethically and combine them with creative thinking and commercial acumen to craft highly effective marketing strategies, tactics and campaigns.
Reference for this article: Hubspot
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