/Boost E-Commerce Sales by Understanding How Customers Think

Boost E-Commerce Sales by Understanding How Customers Think

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By Neel Vithalani

If you run an e-commerce business, you face many challenges. And trying to compete with the giants can be overwhelming if you don’t have a robust marketing strategy. The ultimate aim of all marketing activities should be to smooth the decision-making curve and shape the consumer journey proactively towards buying products you want them to purchase. Putting some science into it can only help the process.

Marketers have put a lot of science into persuasive marketing for influencing consumer behavior. Among all the methods used, targeting cognitive biases is the most popular and time-tested strategy. In this post, I will discuss how to use cognitive biases in e-commerce marketing.

What are cognitive biases?

We make about 35,000 decisions every day, and that’s only possible with the help of some shortcuts. For example, social media mogul Mark Zuckerberg never has to decide what to wear each day since he always wears the same grey t-shirt and blue jeans combo.

To avoid the stress which can come from decision-making, evolution has bestowed our minds with cognitive biases. These biases shorten the time necessary to make a decision by skipping cognitive processes through memory and perception. Cognitive biases, also known as mental shortcuts, are oriented towards making our lives more logical and involving less effort. Here’s how you can use them for marketing your small e-commerce business.

Confirmation bias

People believe what they want to believe and confirmation bias drives this instinct. Our minds will process new information based on our existing set of beliefs. In e-commerce marketing, resonating with the buyer persona and staying consistent will allow you to use confirmation bias with customers before and after making a sale.

Use the confirmation bias in the following areas to reassure buyers they are in control while making purchases:

  • Retargeting campaigns
  • SSL certificate (HTTPS URL) to mark your store as safe
  • Consistency between PPC ads and product landing pages
  • Privacy policy statements and security badges
  • A hassle-free return policy
  • Congratulatory messages on the final purchase confirmation screen
  • Confirmation emails with positive customer reviews

The decoy effect

Many online stores will place a third asymmetrically positioned product on their landing pages to increase billing size. While customers are bound to choose the more affordable product among two available options, putting a decoy on the page will alter the customers’ decision. Here’s an example:

Suppose you are looking for a dinner set and you have the following options:

12-piece dinner set from Brand A @ $30
20-piece dinner set from Brand B @ $55
18-piece dinner set from Brand X @ $95

If there wasn’t a third option, you likely would have purchased the dinner set from Brand A, finding it to be the most cost-effective. However, adding the asymmetrically positioned Brand X makes Brand B appear to be the most attractive, yet affordable option, ultimately increasing its sales.

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Loss aversion

This cognitive bias is best explained by the phrase “A bird in the hand is worth two in the bush.” Consider a situation in which I offer you $20 right away, or say I will give you $80 if I toss a coin and it comes up tails. You would naturally choose the $20. But if I asked you to give me $20, versus me giving you $80 if the coin comes up tails, you would go with the gamble. In both situations, you will try to minimize your losses.

Making people feel they will be able to use your product without any loss is a very effective conversion booster. Examples of using loss aversion in e-commerce:

  • Free trials and samples
  • Limited period discount offers
  • Buy now to get X% off
  • Countdown timers
  • Free expedited deliveries

You can combine loss aversion with FOMO (fear of missing out) to make your pitch appear more appealing for marketing purposes.

Hyperbolic discounting bias

This cognitive bias makes people seek immediate rewards rather than delaying them. When all outcomes are positive, we are more likely to choose the one that is immediately available. For example, some marketers will allow customers to purchase items immediately with a credit card and allow them to make payments in installments.

Other examples of hyperbolic discounting include:

  • “100% money-back if you don’t like it” offers
  • Loyalty programs with exchange bonuses
  • Zero-interest EMIs
  • Freemium subscription models

Hyperbolic discounting is a powerful tool for selling products that aren’t in direct economic reach of your consumer base. Dividing payments into small installments can help people feel more confident about making purchases.

Sunk cost bias

The sunk cost bias or fallacy refers to our tendency to stick to our decisions because of the time, money, or energy we have already invested. Consider a scenario where you have tickets to a concert, but you have a severe headache on the night of the concert. Will you still go? Despite the headache, you probably will because you already paid for the tickets and don’t want your money to go to waste.
Here are ways to make sunk cost fallacy work for an e-commerce site:
  • Many online shoppers will leave a website when the site asks for their financial information. You can help prevent this by adding a progress bar to the web page (90% complete, for example) showing customers the progress and time they’ve already committed to the buying process.
  • Encourage customers to stay by offering them a personalized experience that can’t be replicated on another site. IKEA, for example, allows online customers to design their own custom furniture; customers risk losing their creations if they abandon the site.
  • A customer loyalty program which rewards customers for making consecutive purchases on your site will ultimately incentivize them to continue buying from you.

Over to you

Here I have specifically focused on the cognitive biases that can be easily used by small online retailers. But know that your bigger counterparts are already using them to great effect, and any online business can benefit from these time-tested tactics.

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About the Author

Post by: Neel Vithalani

Neel is a creative who’s always ready to lay his hands on anything that is innovative and captures masses. He is currently working with Orderhive. He is passionate about tech, economics, and psychology.

Company: Orderhive
Website: www.orderhive.com
Connect with me on Facebook, Twitter, and LinkedIn.

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