Psychology of Marketing: Using Behavioral Science for Effective Marketing

Behavioral psychology is a field that has fascinated me ever since reading the first Freakonomics book which shed light on the often forgotten economic decisions we make daily, and in every walk of life.

Since then I've immersed myself in this space by reading everything from Thinking, Fast and Slow by Kahneman, to Influence by Cialdini, to the various titles from Richard Thaler and Cass Sunstein.

The common thread that has always resonated with me as a digital marketer is that the learnings of behavioral psychology can explain many of the truisms of digital marketing, and in many cases be used to improve results.

This article aims to deconstruct various practices in digital marketing and ground these well-known recommended practices in the theory of behavioral economics, with the intention of explaining why certain irrational-seeming marketing decisions are perfectly valid given the irrational nature of the typical consumer.

Contents

First, we will take a look at some of the general principles of psychology that apply to digital marketing. These hold true across the digital marketing touchpoints (and even sales and marketing more broadly) that we discuss below.

Then we look at specific digital marketing and analyze recommended practices through the lens of behavioral economics and psychology, referencing real world examples to see it in action. Finally we consider other novel approaches that might help to create superior results. This is the 'lab' where testing and experimentation come to the fore.

If you are looking to learn and apply best practices for a specific channel feel free to jump straight to that section now. Or if you are already familiar with best practices, but are getting push back from senior management or clients, you can use this to explain your approach, grounded in the proven science of psychology.

This is the core of value of this article; if you believe your product or service is genuinely the best solution for your target market, you can use the tenets of libertarian paternalism to guide the buyer on the right path. Done right, it's the ultimate win-win.

Behavioral Psychology - General Principles

System 1 & System 2

This terminology is used in Thinking, Fast and Slow - the seminal work on behavioral psychology (though it predates that too) - which is why I use it here. Many authors have come up with their own terminology, but the central concept is the same - we have an emotional, irrational, automatic response part of our brain (System 1) and the intelligent, thinking, rational part which makes us human (System 2).

System 1 generates impressions, intuitions and feelings, and most of the time these direct our behavior without engaging System 2. System 2 is activated 'when an event is detected that violates the model of the world that System 1 maintains'.

What You See Is All There Is (WYSIATI) is the concept that explains that System 1 will jump to conclusions based on the limited knowledge available. Because System 2 is often lazy, it doesn't search for counter evidence that would give a more balanced perception - this can lead to errors in judgement.

Kahneman dubbed System 2 'The Lazy Controller' - it tends to endorse the easy, intuitive answer provided by System 1, even if only a small amount of effort is required to verify that it’s the correct response. People ‘are overconfident, prone to place too much faith in their intuitions.’ We humans want to avoid cognitive effort as much as possible - for example the bat and ball problem.

Cognitive Ease and Strain

Cognitive ease measures how easily we process information, and is a feature of System 1. When a person is at (mental) ease they operate in a state of autopilot and are much more suggestible. Our brains are at low alert - 'everything is fine, no need to raise attention or effort'. Our mood affects the operation of System 1 - when we are in a good mood we are more creative and rely more on intuition.

The opposite of cognitive ease, cognitive strain, makes a user more likely to judge every piece of info they perceive, making it more difficult to influence their behavior.

This has some immediate implications for persuasive marketing. Kahneman cites studies that have found that legibility, simple language, and memorable messages are much more like to be believed. The ease with which words can be pronounced has also increased the credulity of a message.

Heuristics

Heuristics are akin to mental rules of thumb that we use to provide answers to difficult questions, usually by answering an easier question. E.g. 'Am I happy? Can be answered with ‘how many dates have I had this month?’ This is a feature of System 1, and, as you can imagine, can lead to errors in judgement.

When I was visiting the Panama Canal, I asked one of the employees of the visitor center 'which was the best level to watch the ships coming through the canal?' out of the 4 choices available.

She hesitated, and had a blank look on her face as she tried to produce an answer to the difficult question I had asked. After all, 'the best' level is subjective, and there are any number of variables that could be combined to offer an objective 'best'.

Seeing her blank face as her System 2 was hard at work trying to manufacture an answer, I quickly rephrased the question - 'what is your favorite level to watch the ships passing through?' For this question she had a lightning fast response, complete with rationale behind her choice. That was exactly what I wanted.

There are many different types of Heuristics that we use daily to simplify the world around us and make quick decisions, here are some of the most common.

The Availability Heuristic

Kahneman described this as 'the ease with which instances come to mind.' We tend to overestimate the frequency of an event if many instances of that event (e.g. terrorist attacks) come to mind. The number of instances that come to mind depends on a number of factors including recency, and how personal the event is.

We also tend to overestimate based on the fluency with which occurrences come to mind. For example subjects that quickly thought of 6 examples of their assertive behavior believe themselves to be more assertive than those who struggle to name 12 examples.

The availability heuristic is particularly relevant for articulating the value proposition in industries that mitigate risk such as health, insurance, security.

‘The ease with which instances come to mind is a System 1 heuristic, which is replaced by a focus on content when System 2 is more engaged’

The Affect Heuristic

We tend to subconsciously exaggerate the benefits and underestimate the negatives or risks of something when we are already favorably disposed to a stimulus - and vice versa.This is a case of substitution - we answer the easier question of 'How do I feel about it?', instead of the more effortful question of 'What do I think about it?'.

Messaging has been shown to be effective at altering how we feel about something - which is one of the reasons why the role of content and copywriting in marketing is very important, as we will see below. If we can improve a visitors feelings about our product or service, we can encourage them to focus on the benefits of it instead of the drawbacks.

The Halo Effect

The Halo Effect (or, if you want to sound intelligent; 'exaggerated emotional coherence') is 'the tendency to like or dislike everything, including what you have not yet observed, based on initial perception.' This is one of the ways that the representation of the world that System 1 generates is simpler and more coherent than the real thing - and explains why first impressions are so important.

Users will reflect their experience with your online presence onto your product or service. ‘If you have a great site, then your product must be great too.‘ Good content gives an overall positive view of your business, users extrapolate from one good experience to fill in what they don't know about you.

Confirmation Bias is particularly relevant here. This is where we conduct a deliberate search for evidence to support a belief that we already hold. So if our initial perception is positive, then future engagement with a product or service will aim to confirm this positive experience. This is even more powerful if a person publicly supports an idea/product/service - their future opinions will tend to be consistent with their initial judgment.

The Representativeness Heuristic

We tend to value similarity over probability when making a judgment. For example 'Tom W’s Specialty', where participants heavily weighted Tom's likelihood of studying a niche specialty instead of much more common topics, based only an (untrustworthy) profile of Tom. We see this in daily life through comments such as ‘she’s going to win the election because she looks like a winner’. Judging probability by representativeness has virtue, but can lead to serious errors of judgement when the base rate is neglected.

Anchoring

This is the tendency for us to use an initial, even irrelevant value, as the basis for judging a second value. It’s the result of operations in both System 1 and System 2 and is particularly relevant for questions of pricing.

System 2 focuses on adjusting away from the anchor, but often not enough. We tend to adjust less when our mental capacity is depleted, which is relevant for negotiations - e.g. give a buyer different options to choose from, additional extras, or more than one pricing model and they will focus more on that than questioning and negotiating from a high price. System 1 is primed by the anchor, and then generates ideas and therefore answers based on the initial suggestion. This explains why premium pricing is associated with quality for example.

This effect can be measured through the anchoring index, which will tell you the effect that a high or low anchor has on a price, and studies have shown that it can have a significant effect anywhere between 30 and 50% or more. This demonstrates the power of anchoring in pricing, but pricing in most cases should be based on competitive/industry factors, and brand strategy primarily, not anchoring.

A common example of anchoring is when businesses place an upper limit on how many items you can buy. This suggests that that number or close to it is a good amount or the 'right' amount. This is a mix of anchoring, creating false urgency and social cues.

Psychology of Marketing

Inbound marketing, as extolled by Hubspot et al, works so well because we position ourselves as a friend that is here to help, allowing us to leverage System 1. Traditional selling makes the buyer and seller compete, therefore putting the buyer on high alert and engaging their System 2 to critically evaluate everything as they feel they are in a threatening scenario.

Content Marketing

Content marketing, and specifically copywriting, is both a skill that should be in most marketers toolbox, and at the same time it is an art form of it's own with full-time practitioners. Assuming you fall in to the former category, there are some principles of behavioral psychology that will help to maximize the effectiveness of the marketing content you produce. After all, your content is just one part of a broader goal - to sell.

Framing

This concept has made it into the mainstream but is in need of a definition here. Framing is a cognitive bias where judgment of a given stimulus is based on whether it has been presented in a positive or negative way. If you have ever doubted the real impact of frames, studies have time and again shown them to have huge influence on decision-making and perception.

For example, one study showed that a 90% survival rate was viewed much more positively than a 10% mortality rate. Or for an every day example check out your local supermarket where the meat products will be labelled '90% fat-free' as opposed to '10% fat' (which, even as I write this in full knowledge that it is simply an illusion, sounds a lot less appealing).

Priming

System 1 is also dubbed 'the associative machine'. One idea can trigger many other ideas, in a cascade of activity in your brain. As a copywriter, you should choose words and phrasing to set the dominoes off in the direction that is most beneficial to your value proposition.

Good copywriting can prime both thoughts and behaviors - the Ideomotor Effect. Reminding people of their power and autonomy increases their trust in their intuition - and this effect works both ways. So if you are primed to think about old age, you tend to act old, and acting old reinforces thoughts of old age. Applied to marketing, your copy should aim to prime thoughts of the types of characteristics that your buyer aspires to (leverage your buyer persona research here), and your product/service solves.

The implication of System 2 as 'The Lazy Controller' is that prospects are not likely to critically analyze your claims about your product. For example, if you sell a toilet cleaning product and claim that it kills 99% of all bacteria, System 1 is impressed by the high figure and doesn't engage System 2. The important question; 'Is 1% bacteria still a lot, and potentially harmful?', doesn't even get raised, never mind answered.

Consistency

It is the consistency of information that makes for a coherent and compelling story, not its completeness. This is why we should not offer any info about a product that can be construed as negative, or qualify our claims with doubt and conditions. Our tendency may be to offer all known info in an effort of honesty and transparency, but this makes it more difficult for the receiver to build a coherent story, raises their doubts and suspicion, the level of effort required to decode the meaning, and ultimately reduce the effectiveness of our message.

Causality

System 1 always looks for a coherent causal story to link events/knowledge together - or as Kahneman puts it; causes trump statistics. Use this to tell a story about your brand. For example, ‘After implementing cutting edge software and processes in their businesses, executives have improved efficiency by 10%’. Without explicitly crediting your product, it is implied as the cause. This is almost like algebra; buyer + y = desirable outcome, where y is your product.

Unfortunately even compelling causal statistics will not change long-held beliefs or beliefs rooted in personal experience. That's why persuasive marketing copy also disrupts our perceived view of the world - or what we see as norms.

Norms

System 1 automatically detects if external stimuli appear normal. If so, it continues on in a state of ease. However if it detects an incongruity it must be resolved and embedded into a causal story. This is how we can get attention as marketers.

We want to disrupt the cognitive flow of a reader with unexpected stimuli (a surprising claim or unexpected humor), otherwise we may not be noticed. This is why we don’t want to keep our audience at total ease, or max effort. In effect, sometimes we want to engage System 2 - but intermittently and only to a small degree.

If you can place the reader at the center of the surprising stimulus, even better. 'You are more likely to learn something by finding surprises in your own behavior than by hearing surprising facts about people in general.'

Content and the Availability Heuristic

We can leverage this heuristic when we discern a clear value proposition, and question your prospects thoughts on it. For example, a cyber security company may challenge their prospects to name 3 cyber attacks. A number of examples will likely readily come to mind, and the ease of remembering will promote the prevalence of cyber-crime.

This is good for engaging your prospects at the top of the funnel, where they may not yet realize there is a need. Your content can plant the seeds for your value proposition by challenging the difficulty or ease with which a feeling comes to mind. The availability bias can also be leveraged through media - e.g. if there are many stories of cyber attacks, your prospects will be more receptive to IT security risks, and the services your firm provides to combat against them. This is one of the reasons why market expansion strategies can be effective - consumers or organizations who originally were not aware of their need, start to see themselves as potential buyers.

Buyer Personas

If you have a clear insight into your buyer personas and what they value, then you can design marketing touchpoints to place your product or service into their consideration set (for that particular need). Particularly relevant for consumer markets; individuals do things, and buy things, that fit with their own self-image in an effort to maintain consistency over time (as mentioned above).

In Summary on Content Marketing

The underpinning principle of content marketing that makes it so effective can be summed up in one quote - ‘Nothing is as important as you think it is when you are thinking about it’.

By focusing the conversation in a way that suits the business, we can (over) emphasize the importance of positive characteristics that align with our goals. Isolated instances of great content are not enough, this needs to be part of long-term, sustained messaging that reinforces the key value proposition of your offering in a way that is brand-agnostic (or non-promotional).

Branding

When a marketing activity doesn't generate the desired lead generation, the default response from the marketer might be 'well it was good for brand awareness'. While this is often a cop out, research has shown that repeated exposure to a stimulus is likely to generate a favorable impression over time - even if the subject isn't conscious of it. This is known as the Mere Exposure Effect.

Kahneman goes into more detail on the effect of familiarity on System 1. He points out that a reliable way to get people to believe something is repetition because familiarity is not easily distinguished from truth. A recent prominent example of this is 'The Big Lie' - that the 2020 US Presidential Election was fraudulent. A sizeable portion of the US electorate bought into this falsehood simply because how regularly and consistently the claim was repeated.

Further, creating multiple brand touchpoints with prospects in your segment leverages the Availability Heuristic. When they have a need for the product you sell, yours will be the one that readily comes to mind. This is particularly useful in B2B markets where buyers buy only when they have a need and it's difficult to predict when that will be. HubSpot does this very well in the realm of marketing automation software. The HubSpot brand is intrinsically linked with the inbound marketing methodology, and supported by a strong content marketing strategy. The result is that when a marketer is 'in the market' to purchase marketing software for their company, HubSpot makes it into the consideration set at the very least.

A strong brand message can also leverage the Representativeness Heuristic. If your brand conforms to the criteria set out by a prospect as to what's important when making a purchase decision, then they may overlook stats and facts, because your brand is representative of what they feel they need.

So there may be some value in those branding campaigns after all!

Customer Lifecycle Management

Post-purchase (or post-conversion) evidence that contradicts a belief that a buyer had about your product or service (which may have convinced them to convert in the first place), can lead them to experience cognitive dissonance. This is essentially an inconsistency between their initial, positive perception and the evidence they have gathered since converting.

Why does this matter? Well, if you are in a subscription based business, maintaining stable monthly revenue is crucial to planning and growing your business. Or if you sell products, you likely want to build your number of repeat customers. In either case, if your buyer experiences post-purchase cognitive dissonance it can limit future revenue opportunities.

This is why it is important to 'delight' (as Hubspot puts it) customers throughout their lifecycle with you. Doing so maximizes the repeat business you can do, and increases the referrals you will get - one of the most effective forms of lead generation.

Pricing

Prospect Theory is hugely relevant to discussions of pricing. While in most organizations pricing is a decision beyond the remit of the marketing department alone, it is a core element of the marketing mix (product, promotion and place create value - but pricing captures that value) and as such, marketing influence is crucial.

There are three cognitive features of Prospect Theory:
1. Evaluation is relative to a neutral reference point, which can be the status quo, or the expected outcome. Outcomes greater than the reference are gains, and vice versa
2. Diminishing sensitivity to both sensory dimensions and changes of wealth e.g. the subjective difference between $900 an$1000 is smaller than $100 to $200
3. Loss aversion - a $100 loss is more powerful than a $100 gain

prospect theory

When constructing pricing packages it may be useful to keep in mind the limits of rationality. Simple choices of gains and losses can be deconstructed in different ways that can lead to inconsistent and poor decision making. There is a gap between probability and the weights we assign to decisions. This can be seen through the Possibility Effect (where improbable outcomes are overweighted), and the Certainty Effect (where likely outcomes are underweighted).

Summary

The thoughts and ideas above really just scratch the surface on the implications that behavioral science theory can have on effective marketing. This blog could have been two or three times as long but I have tried to be concise to introduce many of the key concepts and their high level relationship to marketing strategy.

However, we can go deeper. In a future blog I will focus on digital marketing best practices and illustrate how those practices are rooted in behavioral psychology.

Glossary

Availability Heuristic

Where one makes a judgment based on how readily instances of the event come to mind. The logic is that if something can be easily recalled it must be important.

Base Rate Neglect

Ignoring statistical probability in favor of representativeness. E.g. without a description for Tom W, the base rate is used, but representativeness overrides this when a description is added.

Choice Architecture

Where the choice given to consumers is purposefully designed, in some cases to achieve a particular outcome. For example, systems that require you to opt out of organ donation, rather than opt in, in order to increase participation. This takes advantage of the laziness of System 2.

Confirmation Bias

We tend to search for evidence or interpret existing evidence in a way that corresponds with our existing opinions or beliefs.

Conjunction Fallacy

Adding details, particularly details that build a coherent story, to a scenario makes the scenario more persuasive, but less likely. System 1 coherence relies heavily on stereotypes.

This is illustrated by the Linda Problem - respondents thought that 'feminist bank teller' was more likely than just 'bank teller' given the description of Linda. However 'feminist bank teller' is less likely, or at most as likely as 'bank teller', given that it is a subset of the broader category. Our lazy System 2 is at fault for endorsing this automatic response.

Duration Neglect

When remembering a particular event we tend to neglect to remember the length of time that it took, in favor of particular highlights or the end of the experience (Peak-End Rule). This is why we have fond memories of our trips Disneyland, despite spending much of the day in long queues.

Endowment Effect

What assign greater value to things that we already posess, when compared to something of equal objective value.

Halo Effect (Exaggerated Cognitive Coherence)

The tendency to like or dislike everything, including what you have not yet observed, based on initial perception.

Hindsight Bias

This is our our tendency to mis-remember what our prior beliefs were, after a surprising event causes us to change our view of the world. This is related to Outcome Bias.

Intensity Matching

The ability of System 1 to match the degree with which something is true in one context to an entirely different context.

Less is More

It’s better to have less items overall with a higher average quality, than a greater sum of items / value. For products or services we should do fewer things exceptionally well to maintain the perception of quality - i.e don’t add a cheap gift.

Mental Shotgun

System 1 fires off many different operations at once, more than what is required for the task at hand. This can slow it down.

Outcome Bias

When an outcome comes to pass we have a tendency to believe that it was likely / what we believed all along. This makes it difficult to evaluate a decision properly - we don’t evaluate the decision process, only the outcome.

Peak-End Rule

We tend to remember the extreme highs or lows, and the end, of an event most effectively.

Priming

Where exposure to one stimulus kicks off the associative machine in System 1, and readies us for subsequent stimuli.

The Law of Least Effort

If there are several ways of achieving the same goal, people will eventually gravitate to the least demanding course of action.

Further Reading

CIALDINI, R., 2021. INFLUENCE. [S.l.]: HARPERBUSINESS.

Heath, D., 2007. Made to Stick. [Place of publication not identified]: Random House Publishing Group.

Kahneman, D. and Egan, P., 2011. Thinking, fast and slow. New York: Random House Audio.

Stanovich, K., 2011. Rationality and the reflective mind. Oxford [etc.]: Oxford University Press.

Sunstein, C., 2009. Nudge. [Place of publication not identified]: Penguin Publishing Group.