Psychology and Its Role in Marketing
Ever wondered why people do what they do. How our actions are influenced by various factors. How our thoughts play out. How do advertisements encourage us to buy products even if we don’t need them. We know that advertisements are thee to sell the products still, we get played, the psychology of psychology, remember Inception? The human mind is intriguing and complex. Let us understand how psychology and marketing are interrelated.
First, let’s get to the basics.
“The scientific study of the way the human mind works and how it influences behaviour, or the influence of a particular person’s character on their behaviour.” Cambridge Dictionary
Let’s play a game to understand psychology.
Think of a seven-letter word containing “n” as the sixth letter. Difficult?
Now think of a seven-letter word containing “ing” at the end. Easy?
Most people, when answering quickly, will say that “ing” words are more common than the other when in fact, seven letter words with “n” as the sixth letter would include all “ing” words as well. Since our mind struggles to come up with easy examples for the first question, we then perceive the second question to be more likely. When evaluating a specific topic, concept, method or decision, we favour options that bring to mind immediate examples and this is called Availability Heuristic which is used in marketing as well.
“Marketing is the social process by which individuals and organizations obtain what they need and want through creating and exchanging value with others.” Kotler and Armstrong
The Reciprocity Principle
We feel obliged to give back to people who have given to us.
In 2002, a team of researchers found that tips went up 3 percent when diners were given an after-dinner mint. Tips went up 20 percent if, while delivering the mint, the server paused, looked the customers in the eye, and then gave them a second mint while telling them the mint was specifically for them
Marketing Gist: Giving out something in free, making the customer feel special, helping the customers, building relationships with them makes them feel indebted towards you, and they would be more likely to return the favour.
Redbull gives out free drinks in its events. (Source: Pexels)
The Decoy Effect
Consumers tend to change their preference between two options when a third, less attractive option is presented.
An old subscription page at the Economist stated:
Web Subscription — $59
Print Subscription — $125
Web and Print Subscription — $125
Professor Dan Ariely tested this model with students at MIT, asking them to choose a subscription option among the three choices listed by the Economist. The results:
Web Subscription — $59 (16 students)
Print Subscription — $125 (0 students)
Web and Print Subscription — $125 (84 students) Total revenue: $11,444
When the print subscription was removed, the results looked like this:
Web Subscription — $59 (68 students)
Web and Print Subscription — $125 (32 students) Total revenue: $8,012
That’s a 30 percent difference in sales for the Economist by using a decoy price of a print subscription.
Marketing Gist: When consumers are faced with many alternatives, they often experience choice overload, in an attempt to reduce this anxiety, consumers tend to simplify the process by selecting only a couple of criteria (say price and quantity) to determine the best value for money which is harnessed for benefit.
The Framing Effect
We tend to react differently to a situation depending on whether we perceive the situation to be a loss or a gain.
Researchers Amos Tversky and Daniel Kahneman polled two different groups of participants on which of two treatments they would choose for people infected with a deadly disease.
Treatment A: “200 people will be saved.”
Treatment B: “a one-third probability of saving all 600 lives, and a two-thirds probability of saving no one.”
The majority of participants picked Treatment A because of the clear and simple gain in saving lives.
In Group 2, participants were told the following:
Treatment A: “400 people will die.”
Treatment B: “a one-third probability that no one will die, and a two-thirds probability that 600 people will die.”
The majority of participants picked Treatment B because of the clear negative effect of Treatment A.
Marketing Gist: The way you spread information and engage your consumers plays out in marketing. So companies tend to display their products in such a way that consumers see a certain gain.
Sensodyne used a positive frame of 9 out of 10 dentists would recommend it instead of saying 1 out of 10 dentists does not recommend it. (Source: Amazon)
Losses are intimidating and we feel the effect of loss more than gain.
Chicago Heights teachers received bonus payments as part of a loss aversion research study. One group of teachers received bonuses based on the performance of their students on standardized testing. Another group received their bonus at the beginning of the year and kept it or lost it based on the results of their students’ tests. The prepaid bonus which could be lost had a bigger impact and the students of these teachers performed better.
Marketing Gist: People like what they have and don’t want to lose it which can is used by free trials, some free features, discounts, coupons for a limited time.
Spotify gives 3 months of Premium free.
Normative Social Influence
We change our behaviour to be liked and be part of a social group.
Solomon Asch found that people gave wrong answers even if it was wrong just because everyone else was giving it in a study he performed in the 1950s. He hired a group of actors to participate along with students in answering quiz questions. The actors were told to give the wrong answer. The majority of students followed suit, even though the correct answer was obvious.
Informative Social Influence
We tend to follow other people when we don’t know what to do.
Alex Lasky of Opower ran an experiment to see which type of messaging would best encourage others to save energy:
You can save $54 this month
You can save the planet
You can be a good citizen
Your neighbours are doing better than you
The first three led to no increase in energy saving. The fourth message worked, leading to a 2 percent reduction in household energy usage.