The idea of cognitive biases was first introduced in a 1972 research by Daniel Kahneman and Amos Tversky. A cognitive bias is a systematic error in the thought process which affects the judgment and decisions of a person. To simply put it, your brain is working against you!
Yes, your brain has a mind of its own, and it refuses to follow you. These biases cause us to behave irrationally. Here’s more – most of the time, we are not even aware of it.
If you are an online retailer, learn how you can integrate them in your marketing strategy in e-commerce.
This cognitive bias shows that people are greatly affected by loss rather than by gains.
Loss aversion comes into play regarding data protection. These days, information is an important commodity that we obsess on how we protect it. Furthermore, we make sure that the people we deal with are trustworthy. In order to do this, you conduct a background check on them using a reputation platform like Monetha. This tool securely stores relevant information about a person or thing and lets you access it before initiating a transaction. That way you can evaluate how trustworthy the other party is in order to confidently meet your expectations.
You can use this cognitive bias through time-bound offers similar to what hotels and airlines do. When you are booking airfare or a hotel room, you would often encounter phrases like “only three tickets at this price are available,” or “two more rooms left, and five people are looking at them now.”
So what do you do? You readily grab the ticket and stop searching, or you might lose it to someone else.
You are setting up your e-commerce store, and you have to set up a payment gateway. Let’s say you have to choose between one that costs around $25, but you have no idea how secure it is, and something proven and reliable but costs around $30?
Looking at the figures, the brain automatically guides your eyes to the cheaper one – imagine how much you can save if you choose the $25 payment gateway even if you are not sure how it will work?
But what if the pricing will be presented this way:
- Less reliable payment gateway – $25
- Reliable and proven payment gateway – $30
- Reliable and proven payment gateway – $45
Of course, you will choose the middle option because it is reliable, proven, and cheaper than the other one.
That is called the decoy effect where you present a third option almost similar to the choice you want people to choose but has minor benefits to them. It works well if you want people to buy a specific product from your store.
In this cognitive bias, once you get used to owning something, you don’t want to let it go. That’s because we have placed a higher value on it than it should have.
For example, when someone gifted you a $20 watch, you might not value it at first but if it has been in your possession for years and begin to value it up to the point you take good care of it for fear that it might get damaged.
The endowment effect is at work in e-commerce through trial periods. For example, Hulu has a free one-month trial offer. Once you’ve watched and followed some series, you will undoubtedly continue the paid subscription or miss the series you’ve learned to love.
This cognitive bias shows how people tend to choose things that provide instant gratification. In other words, if they can get the reward much longer than now, they will dismiss it even if it promises a more excellent and better offer.
One of the most effective ways of using this bias in e-commerce is by offering a small discount if they buy now. For example, buy this product now for a 10% discount. Or you can present it by showing the price without the discount and the discounted price so your visitors can see the difference of how much they can save if they purchase now.
Cognitive biases significantly affect our decision making far more than you realize it. Thus, understanding them and what they can do to your e-commerce business can increase your conversion rate, even your sales.
Start tapping into the power of these cognitive biases by creating professional landing pages, smart pricing, and offers.
Using this bias in e-commerce is by offering a small discount if they buy now. For example, buy this product now for a 10% discount. Or you can present it by showing the price without the discount and the discounted price so your visitors can see the difference of how much they can save if they purchase now.