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Marketing Psychology and Consumer Behaviour

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Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

15 Lessons (57m)
    • 1. Why you need to understand marketing psychology

      0:58
    • 2. Priming - How to influence unconscious buying decisions

      4:04
    • 3. Reciprocity - How to increase sales by evoking the instinct of reciprocity

      4:31
    • 4. Scarcity - How to boost sales by making your products scarce

      4:39
    • 5. Loss Aversion - How to make customers unwilling to let go of your products

      3:14
    • 6. Social Proof - How to boost the sales of your products by utilizing opinions

      4:09
    • 7. Decision Fatigue - Why and how to offer the right amount of product options

      3:31
    • 8. Confirmation Bias - Why first impressions count and how to influence them

      5:24
    • 9. Cognitive Fluency - How to create a sense of familiarity to entice customers

      4:50
    • 10. How does price affect purchase decisions and the consumer's experience

      4:58
    • 11. Decoy Effect - How to sell products at higher prices

      4:24
    • 12. Anchoring - How to make your product prices look like a bargain

      5:52
    • 13. Free - Why and how to use this powerful term

      3:33
    • 14. New - Why and how to use this potent term

      2:30
    • 15. Conclusion

      0:23
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About This Class

A key component in becoming successful in marketing is understanding psychology. The more you know about it the better. You must learn that certain effects lead to certain reactions, and use that knowledge to increase results and avoid mistakes.

There are many psychologically-based observations about consumer behaviour that are commonly used in marketing. Some people know them by instinct, others learn them by experience.

This course will help you get a firm grasp of them and teach you how to use them to your advantage.

By the end of this course, you'll be able to:


Identify patterns in consumer behaviour.
Understand how they affect purchase decisions.
And adjust your marketing strategy accordingly, to get the best results and avoid mistakes.

The psychological principles you will learn can be applied to your:


• Content
• Pricing
• And sales strategy.

Human nature is perpetual. In most respects it is the same today as in the time of Caesar. So the principles of psychology are fixed and enduring. You will never need to unlearn what you learn about them. The more you understand consumer psychology the more creative and effective strategies they will be able to develop.

In this course we will learn the best methods to increase sales. These things are very important. An identical offer made in a different way may bring multiplied returns.

Marketing psychology isn’t just a nice thing to know, it is essential, if you want to develop effective and highly profitable marketing strategies.

Let's get started!

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Transcripts

1. Why you need to understand marketing psychology: Introduction. Welcome. A key component in becoming successful in marketing is understanding psychology. The more you know about it, the better. You must learn that certain effects lead to certain reactions and use that knowledge to increase results and avoid mistakes. There are many psychologically based observations about human behavior that are commonly used in marketing. Some people know them by instant, others learn them by experience. This course will help you get a firm grasp of them and teach you how to use them to your advantage. By the end of this course, you'll be able to identify patterns and consumer behavior, understand how they affect purchase decisions, and adjust your marketing strategy accordingly to get the best results and avoid mistakes. Marketing psychology isn't just a nice thing to know. It is essential if you want to develop effective and highly profitable marketing strategies. So let's get started. 2. Priming - How to influence unconscious buying decisions: Priming. In this lecture, we will discuss what is primate, what are its effects, and how to integrate it in our marketing strategy? Let's do a little experiment. Answer these questions. What is the color of snow? What is the color of a wedding dress? What do cows drink? Most people would answer milk to the last question, but the right answer is water. But why were you so quick to respond to milk? A fairly complicated process that was executed without your awareness, cause this response. The first thing that happened by answering white, but the first two questions, your brain was searching for objects and concepts associated with the color white. This process of an idea causing other ideas to be triggered is called associative activation. Secondly, since you learn the word milk in a similar context with the word count, they were connected, making it easier to recall. Therefore, we can see that all these elements where somehow linked, either with their properties, where their contexts, and as a result, the response milk was coherent with the rest of the ideas. We can therefore conclude that out of a lot of ideas that come up in our mind when we respond to our environment. Only a few of them are each girl awareness. This process is a largely automatic and produces an effortless response. As Daniel Kahneman points out in his book, Thinking Fast and Slow, our ideas are grouped into categories. Elements are organized with their properties and causes are linked to their effects. In our experiment, the response weight to the first two questions affected the response to the last question. This is what we call primate. In other words, the idea of white prime, the idea milk. Thus our first idea affected our subsequent ideas. The priming of the word white made it easier for us to come up faster with the answer milk. Because milk is also white. At the same time, the priming didn't stop there. The primed ideas made u prime unconsciously multiple related ideas, such as animals and other wide objects. Priming is predominantly an automatic and unconscious process that triggers emotions and actions. How can we take advantage of it in our marketing strategy? Priming and marketing? Because most frequently done with money-related images and words. For example, one could emphasize savings, retirement plans, interest rates, and more. Studies suggest that when subjects are primed with money clues, they are more prone to selfish behaviors, more self-reliant and less helpful towards others. Consequently, money priming targets one selfish interests. Since money priming induces individualism, it is best to be avoided when we are trying to appeal to our consumers caring and nurturing feelings towards others. In this case, it is preferred to encourage warm emotions and to create a sense of urgency and set an expiration date and time for the offer. Other ways to incorporate the effects of priming or by adjusting the background and the words you use on your website. Based on what images and words you use, users will pay more attention to those relevant features of your product. If for example, you prime the comfort that your sofa provides, customers will spend more time looking at those features. So to benefit from private, pay special attention to the small details. Let's sum up what we discussed in this lecture. A great deal of thinking happens without your awareness. The ideas and emotions that are produced during this process affect your subsequent perceptions and actions. Priming is the exposure to one subtle cue or idea in order to affect your subsequent ideas and actions. In marketing, you can employ priming by using money-related words and images to make consumers focus on their self-interest or in more subtle ways, by incorporating backgrounds in words specifically chosen to elicit attention, emotions, and actions. 3. Reciprocity - How to increase sales by evoking the instinct of reciprocity: Reciprocity principle. In this lecture, we will learn about the reciprocity principle, what it is, and how to incorporate it in our marketing strategy. Suppose someone invites you to their party. Would you invite them at your own? If someone gave you a present for your birthday, would you buy them one for theirs? If they did you a favor, would you help them back when asked if your answer to these questions was yes, then you have found yourself exercising the reciprocity principle. This concept was first introduced by Dr. Robert Cialdini and his book, Influence, The Psychology of Persuasion. According to this principle, if someone does something good for you, you feel obligated to reciprocate the favorite. Thus, when opportunity arises, you do something good for them. This process increases cooperation between the two parties and facilitates the development of new relationships or the improvement of old ones. The reciprocity rule is mutually beneficial because it allows giving to others without losing anything. This is the case because the person that receives our favor will probably help us in the future. As a result, following this principle is encouraged by our society and failing to comply with it by not giving anything after receiving something that violates social norms. Studies found that this principle is so powerful that in most cases, people would feel indebtedness and reciprocate a favor to strangers or even people they dislike. As a result, this rule can be easily incorporated in your merchandising activities in order to affect the conversion prospects of your customers. This can be done by offering something to your customers or followers first and then asking them for something in return. For example, you could offer free samples. This strategy is great because it gives a chance to your product to gain exposure. More consumers have an opportunity to interact with it. And it instills the need to reciprocate the favor and your customers, which makes it more likely that they will choose your brand. Another way to benefit from the reciprocity principle is by offering free content on your blog when designing how visitors get access to your blog content. Most of the time, one of two strategies are implemented. You could either ask for something from the user's before allowing them to access the content, such as their contact data. Or you could offer them free access to it accompanied with a call to action later. With the first strategy, we reward the users for submitting their data by allowing them to access our content. And with the second strategy, we employ the reciprocity principle. We give them free access to our content. And at the end, we asked them for something in return. And it's up to them to decide if they want to return the favor. With the reward strategy, more users would leave our website without taking any action because they would be reluctant to offer their personal information before seeing the content. Usually, the second strategy is more successful since it leverages the reciprocal nature of human transactions. Therefore, in this case, users would be more inclined to return the favor by buying what we offered or complete other actions. At the same time, they also view us as a giving brand and they are more willing to cooperate in the future. Of course, depending on the value of the content you are offering, there are a lot of things to take into account. There are plenty of opportunities to leverage the reciprocity principle. Some of them are by offering free trials, periodically newsletters, branded items, exclusive content, and more. Another element of reciprocity that increases cooperation is trust. Generally, when we show trust towards others, in return, they exhibit trust towards us. Again, this is a natural reaction that is ingrained in us and facilitate social bonding. There are a lot of ways to utilize this principle. One of them is to show that you trust your users by not asking for excessive information with lengthy forms. Let's summarize what we discussed in this lecture. According to the reciprocity principle, we feel obligated to give back to someone who has given something to us. This is an innate reaction, right? It is also strengthen during the process of socialisation to appease this innate reciprocal instinct, brands can offer to their customers free samples, trials, and more. Intertwined with the reciprocity principle is the concept of showing trust towards your customers and in return, they are inclined to do the same. Following these principles helps you increase the cooperation of your customers and improves their perception towards your brand. 4. Scarcity - How to boost sales by making your products scarce: Scarcity. In this lecture, we will learn about the effects of scarcity, the reason behind its effectiveness, and how to use it to your advantage. In 1975, Social Psychologist Steven Warshall conducted an experiment. He asked participants to taste and rate a chocolate chip cookie that was given to them from a jar. The jar for half of the participants contain ten cookies, and for the other half, they contain just to the cookies. In both cases we're the same. But the cookies in the jar that contained only a few of them received the highest ratings. What does this experiment reveal about human nature? We base part of our judgement towards the worth of an item on its availability. Items that are more rare are perceived as more valuable compared to easily accessed ones. This psychological phenomenon is what we call the scarcity principle. The principle is not only limited to items, we also use it when assessing opportunities, content, and more. There are a lot of factors that lead to this perception of worth when it comes to less available items, the most important is that usually items that are less available are a better quality. Therefore, we use this rule when evaluating an item. But bear in mind that in order for the item to be more desired, the loss of availability has to be a result of high social demand for the item. Conversely, items that are rare because only a few are produced, won't induce the same extent of the scarcity principle. When we see that there is limited quantity of an item because of its popularity, we view it as a limited resource and we are scared that someone might get it before we did. This activates our competitive instincts. These instincts usually motivate those who are indecisive about the item or service and forced them to take action and to complete the purchase. Meanwhile, when an item becomes a less available, we feel like we lose our freedom to buy it whenever we want. Therefore, since the market decides if we will have the opportunity to get it, we experienced loss of control over the situation. The awareness of this fact makes us want to protect our freedom of accessing the item and simultaneously makes us desire the item that we risk losing more than before. The scarcity principle appears to be very powerful in generating sales. There are multiple ways to leverage it. The most popular one is by showing to your customers how many items are still available for purchase. This method is predominantly used in e-commerce websites, and it serves the purpose of making the item appear scarce and therefore more desirable. To reinforce this effect, you could use phrases like almost sold out. Or you can be more specific by stating only one left and stock. Apart from this, you can display items that have been already sold out in order to create a sense of urgency to your customers. Another way to instill a sense of scarcity is by setting deadlines. In other words, you set a time period of the availability of your item or service. You could, for example, offer a sale on some items for a few days. The most powerful method is a combination between the two. More consumers will be inclined to buy an item when the quantity that is left available is low. And the time they have to bind is shrinking. Apart from setting quantity or time limitations on item availability. You could increase the desirability of a product by making the item exclusive and therefore allowing only some customers to access it. These exclusive products attract customers who seek to obtain something scarce and consequently more valuable and special. Such items can be those that are part of a limited edition. In this case, you need to highlight that these items are exclusive. When it comes to services, exclusivity can be established by allowing access only to some members or by offering premium or extra features. Let's summarize what we discussed in this lecture. According to the scarcity principle, we tend to consider things that are harder to obtain as more worthy of. A lot of factors contribute to this outcome. The most significant is that to determine the value of an item, we base our judgment on whether or not there is a demand for it. We also get competitive when our resources become limited and at the same time, we dislike losing the freedom to get the item. All these factors make the item more desirable. There are plenty of ways to employ this principle and boost your sales. Some of them are by showing to your customers that the number of available items as declining, by limiting the time period of availability and by creating exclusive items and services. 5. Loss Aversion - How to make customers unwilling to let go of your products: Loss aversion. In this lecture, we will learn about the loss aversion principle and how to utilize it in our marketing strategy. Suppose you are given the option to choose between a $5 discount on your purchase or a $5 gift card. What would you choose? Chances are you would rather have the discount. There is a psychological principle that operates behind the scenes and influences your decision-making. We, as humans, are designed in a way that we tend to pay more attention to negative information. This mechanism is necessary because it is vital for us to analyze threats in our environment and managed to survive. We also respond stronger to negative news, even if they aren't actual threats. But simply words about something negative. Positive information is still important, but negative information weighs more heavily on us. In this context, it is no wonder that we dislike negative experiences such as losing something we own more than we enjoy positive experiences such as gaining something new. This preference towards avoiding losses compared to acquiring gains is called loss aversion. Researchers Daniel Kahneman and Amos Tversky discovered this principle. Participants in their study where given an object, then they were asked whether to keep their object or exchange it for another object of similar value. 86% of the participants decided to keep the object they were initially given. How can we employ this principle in our marketing strategy? The loss aversion principle can be implemented for items or services that customers have the option to own before vying. For example, you could give to your customers a free trial period to your service. During this time, potential buyers would familiarize themselves with your product, become accustomed to using, and when the trial period ended, they would be more motivated to avoid losing access to it since they would consider it. There's the same logic can be applied to specific features of your service or product by making them available to everyone for a certain time and then withdrawing access to them. It's also significant that customers will feel loss aversion even before owning the product. The loss of opportunity to get it is a strong motivator. Therefore, we can employ the scarcity principle by presenting our product as a limited resource. We could, for example, inform our customers how many items are still available in stock. Or we could limit the time they have access to an offer. Similarly, loss aversion will be caused if they don't get what is available to them as part of a purchase. For instance, you could offer a discount code, free shipping, or free samples. These offers will motivate those were indecisive about the purchase. Let's do a synopsis of what we discussed in this lecture. We are designed to give priority to negative news. Therefore, we are driven more strongly to avoid losses. Because by losing something, we could feel negative emotions rather than to achieve gains. This psychological principle is called loss aversion. Utilizing this principle in your marketing strategy can be highly effective. To do so, you may offer free trials, create limited time offers, provide gifts to facilitate the final purchase and more. 6. Social Proof - How to boost the sales of your products by utilizing opinions: Social proof. In this lecture, we will learn about the psychological principle of social proof. What it is, as well as how to utilize it. Have you ever been looking for a nice place to eat with your friends? And as you pass by, you notice that some restaurants are quite empty and others are full. To which would you be more drawn toward why most people in this instance would prefer the crowded one solely because it appears that more people have chosen. Trusting others and imitating their actions is attributed to the phenomenon of social proof. Social proof, in other words, as Cialdini describes, it, is the theory that people will adopt the beliefs or actions of a group of people they like or trust. Why is that the case? We always come across new information and experiences. Examining everything from the start would take an enormous amount of time. And therefore, when we are unsure about something, we simply notice how others view the situation. We assume that they are doing the right thing and we simply imitate their actions. And in fact, most of the time, this assumption works quite well and helps us avoid mistakes. Another reason why we follow the steps of others is that we want to operate within the social limits of what is acceptable and correct behavior. By doing what other people are doing, we probably are within those limits. An interesting fact about human psychology is that to evaluate the correctness of a behavior, we check whether or not others are adopting it. Also, the more people are doing an action, the more right or justifiable and is considered to be the mere fact that we believe an idea to be correct based on the volume of social evidence for it, has made social proof one of the most widely spread marketing methods of convincing consumers to buy products. Social proof can be used in a variety of ways. Some of them include claims from authority figures and others, content generated by the users of the product. We tend to trust the opinion of those who are more knowledgeable than we are on a topic. Therefore, it is no wonder that when an expert recommends a product, we consider it proof of its quality. As a result, having experts promote your products can be beneficial since it will increase its trustworthiness. Along with experts, celebrities can also provide a form of social proof. Usually, celebrities have a large number of followers that like them, relate to them and also trust their opinion. Thus, if you want your product to target their followers, you could pay a celebrity to endorse your product or service. Another way to increase the social proof of your website is by showing what previous users have done. For example, you could display the number of shares opposed as had. Or if it is an e-commerce website, what are the most popular products and the bestsellers? Previous users can also contribute to creating a sense of social proof for a profit by providing their ratings and reviews. Another part of social is unity. In other words, the state of being united or joined as a whole. We are social creatures and we need to feel included and part of a group. Thus, we are willing to buy a product or service if it can help us achieve that. To benefit from this principle, you can strive towards fostering a sense of belonging when marketing your product. You could, for example, use phrases like, join our community or get exclusive access. Let's review the key points of this lecture. Social proof is the theory that suggests that we adopt the beliefs and actions of others and especially of those we trust. A few factors contributed this phenomenon. We are most of the time faced with uncertainty and we need guidance. We look up to others so we can define the appropriate behavior to follow. And we also evaluate the correctness of an action based on how many other people do the same. To include social proof and your marketing, you could ask experts and celebrities to endorse your product or service. And you could also ask users for their ratings and reviews. Finally, you could create a sense of unity and belonging by marketing products as items that will help your customers become a part of a community. 7. Decision Fatigue - Why and how to offer the right amount of product options: Decision fatigue. In this lecture, we will learn how consumers react when they are faced with a variety of options, as well as how to offer your products in a way that makes it easier for them to navigate and buy them. Have you ever visited a supermarket and felt overwhelmed by the multitude of options and unable to decide which items to pick. It's pretty common when it comes to making choices. Consumers enjoy having a variety of objects, but they tend to buy less when presented with a plethora of items. This is the conclusion that a Columbia University study reached. Researchers conducted an experiment where they offered a different number of jam options to potential buyers. Some customers, we're presented with a collection of six jams and others with four times more jams compared to the first group. The bigger variety of jams attracted more attention and more potential buyers started looking through them. But this wasn't enough to generate sales close to the ones that the small collection of James did. In fact, those who encountered the small selection, we're about ten times more eager to buy one from the customers who visited the small selection. 30% bought one. Compared with the big selection where only 3% of the customers bought a jam. This study makes it quite clear that an overabundance of choices caused consumer choice overload and discouraged them from selecting and buying products. To avoid this outcome, try to limit the amount of options a potential buyer has. This is especially necessary if you're offering a variety of similar options. In that case, try to make them distinct from each other. So each option offers an essential variation. You need to offer a sufficient number of choices so that consumers can find what they need. But not so many, that they can't pick one of them to find a good balance between the two. Try testing the options that are being offered and their number. Be aware that choice overload happens not only when consumers are presented with the items they might buy, but through their navigation to your website and across the whole shopping process. For this reason, you need to limit the number of small decisions they have to make from the product list page to the checkout. This is the case because when consumers have to make many choices, eventually their cognitive resources get depleted. As a result, every subsequent task seems more daunting to them and they become more reluctant to continue making choices. All in all, this equates less sales. To combat this phenomenon, you may tailor the available choices do your consumers needs. So he has less options and the one he sees are relevant to it. This can be done by using recommendation engines, offering the option to filter and sort products, and also by suggesting similar products. To also help the consumer find faster what he wants and pay attention to specific features of a product. You could use labels, tags, or zoom buttons. Let's summarize what we discussed in this lecture. Offering a variety of available options isn't always a good thing. And it can have an unforseen adverse effect on sales. Your best bet is to reduce their number and make them distinct from each other. Always test them to find a perfect balance. Consumers also experienced decision fatigue when they are expected to make multiple choices throughout their navigation to your website. Try to simplify their decision-making process by directing their attention to what they might need and by tailoring the items they see to their preferences. 8. Confirmation Bias - Why first impressions count and how to influence them: Confirmation bias. In this lecture, we will learn about the confirmation bias, what it is, its effect, and how to utilize it in your marketing strategy. Suppose you come across a homeless man on the street and you start wondering why did he end up homeless. You would probably come up with one of two reasons. You would either think he didn't try hard enough to achieve worn his life or that life is unfair and no matter what, he couldn't make it. Either way, you came across effect in this case, but he is homeless and you applied a justification to it. But the truth of the matter is we don't really know why he is homeless. So where do we base our assumptions? This phenomenon is what psychologists call confirmation bias. It refers to our tendency to use our preexisting ideas and experiences to generate assumptions about situations and things in a way that matches them. So in the previous example, if we think that life is unfair, seeing the homeless man will confirm and reinforce that idea. It is quite significant that we are open to information that confirms our preexisting ideas. But we are prone to shun or disregard ideas that are in opposition with the ones we hold. This is especially prevalent when discussing topics like politics and religion. Bias creates a lens through which we view pretty much anything we encounter. If we see something new and we don't have yet an opinion about it, we will quickly form it. For instance, when someone visits your website for the first time, it takes them about less than a second to get an impression about it based primarily on its visual appeal. This impression, once it is formed, it remains consistent through their interaction with your product or service and affects how they view all of its individual aspects. Generally, users that have a positive impression of a website tend to spend more time on it and they persist more in completing tasks. Therefore, it is important that we create a positive first impression on our consumers with our products and services. Let's review some ways to achieve that and use the confirmation bias to our advantage. One of the most important things you can do is to create an appealing product. Try to test different designs with different target audiences to find the best. And always try to create user-friendly websites to eliminate the frustration users might experience when using it. It is also necessary to make them feel that they are in good hands. Their money is safe and they will get the product they need. To achieve this, you can offer social proof. This may consist of testimonials, reviews, ratings, celebrity endorsements, and more. By doing so, potential consumers will view your product as trustworthy, since other people are happy using IT. Also when it comes to their money, you may offer money-back guarantees and payment with credible payment methods. Another more subtle way to take advantage of the confirmation bias is to appeal to your consumers needs for a solution to a problem. When your product offers that solution. To accomplish this, you need to first and foremost, understand the problem that your target demographic is facing and showcase how the solution you are offering can benefit them. By doing so, you acknowledge that a problem exists, reinforcing their preexisting bias, and you provide a way to solve it. And also take into account who your target audience is and who they are trying to become. And then mirror that ideal self and your products. For instance, if your audience is active young men with environmental consciousness, you may show a picture of a man and a bike moving around town while wearing the clothes you want the cell. By doing so, consumers will associate your products with a version of themselves they are aspiring to become. Their cognitive bias will be triggered and they will be more prone to buy that product. A more broad use of the confirmation bias would be to create a positive brand image. And as a result, make your consumers see your brand in a positive light. In other areas, this phenomenon is called halo effect. To create a favorable brand image, strive to offer a great shopping experience to your consumers. You may also offer them free shipping and guarantees for your products. At the same time to show your awareness towards bigger issues. You could support and promote political, social, or environmental causes. For example, you could offer sustainable and eco-friendly items. In this case, you need to be in touch with what your target audience cares about the most. Let's sum up what we discussed in this lecture. Confirmation bias refers to our tendency to interpret information based on our preexisting ideas in a way that confirms them. We prefer ideas that confirm our own and we are less susceptible to foreign or opposing ideas. Our interpretations are formed quickly and they rarely change. To create a positive impression for your product. Try to make them visually appealing and user-friendly. Make consumers trusted by offering guarantees for their money and by providing social proof. Showcase how your product can fix your audience's pain points, inspire them to be their ideal self. And finally, create a positive brand image by offering a pleasurable shopping experience and by supporting causes that interest your target audience. 9. Cognitive Fluency - How to create a sense of familiarity to entice customers: Cognitive fluency. In this lecture, we will learn what is cognitive fluency? How it affects consumers, and how to use it in our marketing strategy. Have you ever wonder why people tend to do the same things by the same products and have the same opinions throughout their life and almost never change. Part of this outcome is fueled by our preference toward things that we consider easy. It's easier to do things we are used to do it rather than experiment with something new. This is caused by a cognitive bias called cognitive fluency. It refers to the feeling of ease or difficulty one experiences when he processes and complete a mental task. The emphasis here is not on the task in itself, but how the consumer perceives that task to be in terms of difficulty. Generally, if he perceives a task to be easy, he is more inclined to complete it. At the same time, he is more likely to make quick decisions when processing the task without investing much mental energy on it. On the other hand, if the task is perceived as difficult, consumers slow down, think through their decisions and evaluate them more often. Why do some tasks appear to be easier than others? A major factor to this is familiarity. Tasks that were repeated in the past don't require a lot of analysis from us. We have already done that mental process and we already know how to do it again without much thought. The familiarity principle extends to more than repeating tasks. We develop a preference towards a variety of things we have been exposed to an experienced before. This could be people, beauty standards, words, expressions, and more. This phenomenon is known as a mere exposure effect. In other words, the more we encounter something, the easier it is to process it, and we develop a preference towards it. An important aspect of the familiarity principle in connection with cognitive fluency is that we tend to equate easy with familiarity. If something feels easy, it will be perceived as familiar. Thus, we will feel as if we have encountered this thing before and we view it in more positive light. For example, when we encounter name similar to ones we have heard before, like Linda, we find them easier to remember compared to rare and unique names like Henrietta. Therefore, when designing websites and other products, you need to make them look familiar. So they require minimum effort to process. Follow the conventions most web sites use. For example, plays a header at the top of the page. By doing so, users will be able to find faster what they are looking for because everything will be at the expected place. You may also create websites that have a simple design to achieve that, avoid clutter and distractions like running screens and big animations. Instead, use more whitespaces. This minimalistic design is very common nowadays. But keep in mind that you need to adjust your design to your target audience preferences. So it feels easy for them to navigate and explore your website. Also, pay attention to how user-friendly your website is and if needed, provide easy-to-follow instructions on any complicated task. Another important part, how cognitively fluent a product is, play the fonts that you use. Opt for fonts that are easy to read. Studies have shown that the harder is to read instructions for an activity, the harder and more time-consuming the activity is expected to be by those who read it. The readability of the fonts also affects how truthful your claims appear to be. So make sure to use the right contrast between the color of the font and the background, because this will allow faster mental processing. Another way to create cognitive fluency is by using words your consumers understand. If, for instance, you are selling electronic products to non tech savvy consumers, adjust your vocabulary so they can understand. At the same time when naming your products, use words that are easy to pronounce. As a result, they will be easier to process. And remember. Let's review the key points of this lecture. Cognitive fluency refers to the feeling of ease or difficulty when experiences, when presented with a mental task, we tend to prefer things that seem easy. When that is the case. We also make quick decisions that don't require much mental effort and evaluation. And we consider them familiar. To take advantage of the cognitive fluency bias, create simple, user-friendly designs. Use easily readable fonts and words that are comprehensible and easy to pronounce. These adjustments will help consumers process faster the information, understand it, and memorize it. 10. How does price affect purchase decisions and the consumer's experience: Effects of price. In this lecture, we will learn about how the price of a product affects consumers and how to take advantage of these effects in our marketing strategy. Do you expect an expensive bottle of wine to taste better than a cheap one? Experiments revealed that people actually do. Participants were given the same bottle of wine. But half of them were told that the y costed $45 and the other half, but its price was $5. Those who try the supposedly expensive wine reported that it tasted better. We can conclude from this experiment and our own experience that we expect an expensive product better than a cheap product. Other studies revealed that taste is not the only element where the item's price affects our experience with it, but depending on the purpose of the product, it also impacts its effectiveness. For instance, participants who drank an energy drink that was priced at regular price felt less fatigue and performed better in solving word puzzles than those who got it with a discounted price. The same conclusion was reached when participants were given expensive medicine. The expensive pill produced far better results for patients than the cheap one. Even though the pills were in fact the same in both cases. This is what we call the placebo effect. In other words, the phenomenon of receiving a drug with no beneficial properties whatsoever and reporting improvement in health. Since the drug couldn't cause this outcome. The improvement was due to the patient's beliefs and expectations about it. It is therefore obvious that what we expect to happen influences our perception for what actually happens. Consequently, when pricing products, we need to keep in mind that customers that buy expensive products enjoy the experience more than those who buy them cheaper. In other words, the perception of increased value generates positive effects. This is especially true for luxury items. Customers when conducting a purchase besides the pleasure they expect to get by buying the item. Also take into account if this is the best way to spend their money. Thus, they consider a few alternatives and come to a conclusion. For example, they might think, should I buy new furniture or take a trip? At the same time, they evaluate how good the deal is. And they feel positive emotions or negative ones, depending on what they expected and what they actually get out of the deal. This is called transaction utility and was developed by Richard Thaler. Put differently, it is the difference between the actual price and the price you expect to pay, the reference price. Suppose you go shopping with the expectation of buying a pair of pants that cost about $40. You arrive, you notice that there is a 50% discount and now your pants from 40 cost $20. You would probably be thrilled with the price reduction. You save $20 that you would otherwise spend on the pants, thus you gained transaction utility. The opposite is also true. If their price was higher than you expected it to be, you would gain low transaction utility from the purchase accompanied with negative emotions. The pleasure we feel when we encounter an item with a lower price than the reference one, makes the item appear more desirable and it can trick us into buying items we don't really need. And on the other hand, if the price is higher than the one we expected, it might prevent us from buying useful ones. To take advantage of this phenomenon, you can create a high reference price and then offer a discount for the item. You may even choose to always have an ongoing sale. This strategy works best for items that customers buy infrequently and whose quality is difficult to assess, such as rugs and furniture. You could also offer a discounted price to a target audience. These authors are profitable because consumers will feel transaction utility and loss aversion at the same time. This happens because those who are entitled to any advantage will go a long way not to lose that advantage. For instance, price sensitivity can be applied to discount for students. Let's review the key points of this lecture. What we expect to happen when buying and using a product affects our experience with it. We generally believe that expensive products deliver better experiences. When consumers consider buying a product, take into account alternative ways to spend their money. And they also evaluate how good a deal is. If they expected to pay more for an item, they feel happiness if it is discounted. As a result, sales have a powerful effect on consumers and can be very profitable. But keep in mind that if you are trying to improve the quality of the user's experience, a high price would be more appropriate. All in all, always take into account who is the target audience, consumer demand, and the marketplace where you are operating. 11. Decoy Effect - How to sell products at higher prices: Decoy effect. In this lecture, we will learn what is the decoy effect? Why is it so effective? And we will discuss some practical examples on how to implement. If you were looking for subscription options on your favorite magazine. And you came across these options, an online subscription for 59 US dollars, a print subscription for 125. And in online and print subscription for 125. Which one stands out is the best value for your money? Which one would you choose? These options were part of an experiment Dan Ariely performed. Overwhelmingly. Participants went for the deal that combined print and online subscription, which seems quite reasonable. But when he presented the participants with only two options after removing the print only subscription option, participants pick the online only subscription and not the combination of the two. Why was that the case? If they were previously interested in getting both an online and print subscription, why were they so fast to disregard the option that offered them both when the printable and the option was removed? To answer this question, we need to understand how our minds and in particular, the concepts of relativity works. As author Dan Ariely describes in his book, Predictably Irrational, our brains always perform comparisons. We need to look at things in relation to others, and we have a hard time judging absolute values. This applies to everything we see an experience, whether it is physical, mental, or emotional. In his experiment, potential buyers compared the three options. And notice that relative to the print subscription, the combination of the online and print offers vote for the same price. Consequently, it seems to be the best choice. He also points out that we avoid comparing things that cannot be compared easily, but we compare things that are easily comparable. For instance, when customers encountered the first option, they noticed that it was quite different from the rest in terms of price. But the last two options were quite similar. So it was easy to compare them and then pick the best one of them. Since there was no point of comparison for the online only option. And they already concluded that the best was the combo of online and print subscription between the last option, they finally decided to choose the last one. Therefore, the mere fact that we have the opportunity to compare the last option against each other encourages us to purchase one of them. In retrospect, it becomes clear that the print only subscription option was there to make the last option looked like a better deal and therefore more appealing. It was, in other words, used as a decoys. Therefore, to increase the conversion rate of any of your products, you can offer an inferior product at the same price or almost at the same price as a better one. Another way to make use of the decoy effect is by offering a product priced higher than the one you actually want to sell. This strategy is often employed in restaurants were on the menu, you will see very expensive items that are rarely purchased. When the customers see those items and decide what to buy. A second best or mid-range priced item compared to them, appears to be relatively cheaper. As a result, picking those items happens as a compromise. If the decoy didn't exist, and therefore the higher price references weren't there. They would compare the prices of the existing ones and they would probably get the cheapest of them, leading to loss of revenue for the restaurant. Let's summarize what we learned in this lecture. We tend to estimate an item's value and at the same time, guide our decisions based on how an item appears in comparison to others. We also grouped items that are easily comparable with each other and disregard items that we can't compare and therefore assess their value. In a nutshell, comparisons are a very important part of the buyers process. Marketers can influence the decision making process of our customers and steer them towards one decision by using decoys products. Dq way products are those that are used to make other items look like a better deal. These products can be used in a variety of ways. Some of them include a decoy that is inferior, but as the same price as a product we want to sell. Or a DIY coil that is priced higher than them in order to boost their sales. 12. Anchoring - How to make your product prices look like a bargain: Anchoring. In this lecture, we will discuss what is anchoring, where in how it manifests, and how to utilize it in your marketing strategy. When we're in the process of deciding whether to buy a product or not, we always take into account its price. Most of the time, we are willing to accept a range of prices, but they have to be within some limits. How are these limits set? If we've encountered products similar to this one before, we have a value stored in our mind on how much the item should cost. Value is what we call an anchor. Therefore, if for example, we are used to buying our coffee for $2, the $2 price will be the anchor price, and we will use it to compare and evaluate coffee prices on future purchases. An anchor price is affected by the prices we encounter for a product, but it is defined based on what we are willing to pay for it. So in the previous example, even though coffee usually costs $2, if we buy or consider buying copy that cost $3, the new price becomes our anchor point for our next coffee purchases. But what happens when we come across an unfamiliar product and we don't have a reference to compare it with, which is the anchor point in that case. In that instance, the price of that item that we first encounter becomes the anchor point we use from now on for similar products. Anchors after they are set, don't always remain the same. For prices that change constantly, like gas, our anchor is redefined. But for products that we buy rarely are angers change more sporadically. As Dan Ariely describes in his book, Predictably Irrational. A research by Uri Simon's revealed that people after moving to a new city, if they decide to buy a house immediately, they tend to buy it in the same price range that they were comfortable with when buying and their previous location at the same time. Because of this, they tend to disregard other aspects of the real estate, such as its size. But those that don't buy real estate after about a year after moving to the new location, are accustomed to the prices of the new market. And as a result, able to change their anchors and by the houses that suit their needs. Until we have examined how anchors are formed and how they affect us when evaluating prices. The process so far was based on logic, but at times, our angers are based on unrelated and seemingly irrational factors. To elaborate, let's do an experiment. Suppose you are asked if you would be willing to give $5 on a charity cause and then asked to donate any amount of money. How much would you donate? Would your donation be close to $5 or would it be a far greater or smaller number? Chances are the $5 price point operated as your anchor, and you chose a number close to it. If this is the case, then the random number five effectively informed your decision about the amount of your donation. Why did this happen? Part of the reason for this effect is due to primate. As soon as we see the initial price or we are given a number, our minds automatically and without our awareness to generate ideas similar and coherent with each other. Therefore, as Daniel Kahneman states in his book, Thinking Fast and Slow, we construct a world where the anchors the true number. In other words, since we decided that that is the initial price, everything else has to be coherent with that decision. This is called associative coherence. And it explains why we chose a number close to five for our donation. The effects of anchors don't stop there. Since we always strive to create a coherent perception of what we see in experience, anchors play a part in this process. As Dan Ariely suggests, when we are presented with prices, we use them to evaluate future purchases and at the same time to judge the fairness of prices of other products in the same product category. But as he points out, the initial prices are largely arbitrary and can be influenced by queues or questions asked before being presented with a price. As a result, an arbitrary coherence is created and it will affect our decisions in the future. Since the anchoring is such a strong cognitive bias, marketers employer, when deciding on their pricing strategies, when pricing a product that is different from the rest and customers haven't established an anchor price for it yet, it is best to strive towards a high anchor price. This allows you to make offers for lower prices later. But since they anchor price is high, the lower prices will be perceived as a bargain and it will entice more consumers. If you're pricing a product similar to existing products, the best practice would be to differentiate your product from those that your competitors are offering. This can be achieved by clearly stating its benefits compared to the other competing products, or by making the experience of getting it feel unique. In other words, you need to create the perception that no other similar product exists and as a result, be in a position to set the initial anchor, the price you desire. A more practical and effective way to use anchors is by offering products that display the original price and close to it the discounted one crosstown. You may also specify the percentage of the price reduction. Let's summarize what we discussed in this lecture. Whenever we are faced with the decision to buy a product, we compare its price with an anchor price that we are used to paying for this product category. If this product is unique, it's price will be set as the anchor point. Anchors at times change and for some products more than others. Some anchors are set based on arbitrary factors, but they have the same effect on us as if they were justified. Anchors exist because our brains create coherence in what we experience. In your pricing strategy, you can utilize the effects of priming by setting high initial prices for unique products or by differentiating your product and then setting the desired price. 13. Free - Why and how to use this powerful term: Free. In this lecture, we will learn about the power of the word free. Why is it so effective? And how to include it in our marketing strategy? Suppose you're at a supermarket looking for tea, you spot your favorite brand. But you notice that another brand offers a pack of t with a free cup along with it at the same price. But the tea with the free gift isn't what you're used to drink it and might turn out to not be your cup of tea. Which one would you choose? Most people would prefer the one with the free gift, because getting something for free feels good. And they would in fact go to great lengths to get a free item and other circumstances. For example, they might wait in long lines to get a free ice cream. This inclination of ours towards free items was studied in a series of experiments. As Ariely described in his book, Predictably Irrational, participants were asked to choose between a Hershey's kiss and the Lindt chocolate truffle. The Hershey's Kiss is an inexpensive type of chocolate treat. And Lynn truffle tastes better in comparison. In the first experiment, the kiss was priced at $0.01 and the lint at $0.15. When presented with a two options, most of the students, about 73% of them chose the lint. On the second experiment, they had to choose between a kiss that was now free instead of $0.01. And the lint that was now priced at $0.14. This time around, participants overwhelmingly preferred the freak has chocolate. Why did a $0.01 difference produced so different results? Why are we so drawn to free items to the point we disregard better deals. Big part of our decision process is based on avoiding losses. Whenever we lose something, even if it is a small amount of money, we feel negative emotions. Thus, it is expected to experience happiness when we encounter something that you don't have to pay for when you normally would. At the same time, the process of estimating if buying an item is the right choice is eliminated when you get something for free. Therefore, you don't have to worry at all if you made the right choice to spend your money on this item instead of another. In other words, picking a free item is a no-brainer. All in all, taking a free item gives us a rush of excitement and positive emotions and makes it easy to blind us to its shortcomings. And at the same time makes us disregard other better deals. All of these effects make providing something for free a great marketing strategy. There are a lot of things you can offer for free to LWR customers into making a purchase. You could offer free shipping, free samples, or you could give something for free when a customer purchases an item. For example, Amazon gives shipping free of charge if you buy a second book. Let's do a synopsis of what we discussed in this lecture. We enjoy getting things for free. There are a few factors that contribute to this. Our need to avoid losses big or small. And the fact that we don't need to overthink are buying decision. Therefore, giving something for free yields far greater results than giving something in a very low price. At the same time, we are drawn to the free items to the extent that we dismiss other better deals. The term free belongs to what we call good terms. In other words, terms that are strategically used to inspire consumers and make them feel positive emotions. And it can be used in a variety of ways. Most commonly, by giving something away as part of a purchase. 14. New - Why and how to use this potent term: Novelty. In this lecture, we will learn about novelty. What are its effects and how to integrate it in your marketing strategy, you will encounter the word new in pretty much anything someone is trying to sell new products, new features, new ingredients are only a few examples. And that is no coincidence. We, as humans are magnetized by everything new. Why is this the case? Humans from the beginning of time have been searching for new food sources in an effort to get a variety of nutrients and vitamins, as well as new elements in nature that would help us survive. As a matter of fact, whenever we make the decision to eat something new or to do something novel, we get excited and our brains release dopamine as a reward mechanism. Therefore, it is hard wired within us to always be in the search for new items. To take advantage of this phenomenon in your marketing, ad tagged with the word new on your recently added products and market them as such. Furthermore, our need for novelty extends further than that. We love innovations and products with innovative features. Whether they utilize revolutionary tech or allow us to do cool new things. We are drawn towards them. At the same time, we are eager to disregard any of their flaws. This phenomenon, It's called pro innovation bias. To make use of the pro innovation bias, make an effort to communicate to your customers what innovative features your product has and how that benefits them. Finally, our passion for novelty is intertwined with our desire for regeneration. In other words, we like the idea of starting fresh. To utilize this principle, you may market your products as necessary for the new year or new season. Let's sum up what we discussed in this lecture. The term nu is everywhere. We love new items. This happens mostly because it is hard wired into our brains to always look for new resources in order to survive. We also like getting products that are innovative to the extent that we dismissed their shortcomings. Finally, we enjoy starting fresh and buying things that can help us with that. To take advantage of our need for new, you could place a new tags on your products, emphasize their innovative features, and make your products appear necessary for any period that might give to your customers a chance to start new. 15. Conclusion: Conclusion. This brings us to the end of this course. You now hopefully have enriched your understanding of marketing psychology. I am very glad to have shared my knowledge with you. I hope that you find it just as invaluable as I did. I really hope you have enjoyed this course. I have certainly enjoyed teaching you. Goodbye.