Why do consumers buy? Marketers think they know, but the reality is different.

95% of the consumer’s decisions are based on their subconscious thoughts and urges. Because humans are creatures of habits and instincts. Thus, they make decisions based on their gut feelings and as per their psychological biases. And that’s where behavioral economics play a big role.

In the following section, we will explore what behavioral economics is and how you can apply psychological principles to optimize marketing automation. Let’s start now.

What is behavioral economics?

Behavioral economics refers to an academic principle that studies how psychological factors affect purchase decisions in consumers. The overall idea of behavioral economics is to better understand the dynamics of decision-making and predict human behavior in certain decisions.

Principles of behavioral economics

Unlike traditional economics, which believes consumers to be rational beings, behavioral economics acknowledges that humans do behave irrationally. There are plenty of factors that affect the purchase decisions. Let us have a look at them here.

• Loss aversion

As per the concept of behavioral economics, humans may buy something when not buying it may incur losses. For example, not investing in mutual funds will not give you X% of returns, and hence, you can encourage your customers to buy mutual funds.

• Anchoring

Behavior economics hinges on one more concept, which is anchoring. Anchoring refers to a method where a point of information is considered an anchor point, from where the other pieces of information will follow. For example, revealing an assumed price tag of $900 for a product at first, then later continuing the information revealing the actual price, which is 50% less.

• Social proof

Humans are always looking for social proof for all the decisions they make in their lives. We are herd animals, and we make purchase decisions based on what other people are doing around us.

• Scarcity

The scarcity of resources forms the pillar of economics, and it plays an instrumental role in behavioral economics as well. By showing the scarcity of your products, you can make your customers value your offerings more. For example, Rado launches a new chronometer watch with a limited-edition design.

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Convergence of behavioral economics with Martech

We discussed behavioral economics and what would be its implications in marketing, up to an extent. Let us tell you how you can integrate the same concepts in Martech and drive more conversions.

Identify your target audience.

Everything in marketing starts with identifying your target groups. You must understand who are your ideal buyers and why they behave the way they do. Gathering accurate data about your audience shall help understand their demographics, like income, their beliefs, and the things they care about. Additionally, you must think about why your audience fits your brand or a specific product your brand makes.

The tools will give you quantitative data, but you must add qualitative elements and find the why behind the data collected. Combining the power of martech tools and human creativity, you can define an ideal persona for your brand.

Picking the right behavioral economics principles

Behavioral economics bases its foundation on some pillars we talked about. But you may not need all of them to integrate behavioral economics into your martech strategy. You need to identify what principles will work for your target audience.

For instance, a brand like Rolex, which is not a brand that often gives discounts. The concept of anchoring will not work here. For such brands, social proof is a better principle to drive conversions.

Testing and measuring results

Irrespective of the behavioral economic principles you choose to adopt, it is essential to also experiment. As you reach this step, you will already know that human behavior and emotions are messy and highly volatile. Applying any or all of the principles may bring some negative consequences as well. So do not release behavioral changes to the actual audience until they have been tested and confirmed not to backfire.

Refine your strategy

Marketing is all about evolving and adapting to market changes and consumers’ preferences. When we talk about incorporating the principles of behavioral economics, remember that there is no pass or fail. You must continuously refine and improve your strategy because, with every new experiment, you will learn something.

Wrapping Up

Integrating behavioral economics in your martech can be a powerful strategy, but it should be used correctly to positively impact the bottom line of your business. The only trick to make the most of the behavioral principles is to understand your audience thoroughly. Furthermore, there is a moral responsibility to use these principles. Be ethical in whatever principle you choose and refrain yourself from deceiving your audience.

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