How to improve conversion rates through behaviour science

Have you ever picked the larger popcorn at your movie, thinking it was really economical? Are you curious about how businesses use psychology and economics to influence your decisions? 

Behavioural science is a field that studies how humans make decisions and how businesses can use this knowledge to enhance customer engagement and conversion rates. 

If you are wondering how you were nudged into buying the larger popcorn, it is because of the medium popcorn. The medium popcorn is actually a decoy to make the large popcorn seem like a better deal. Let us now understand a few behavioural science insights to apply to our marketing strategies and achieve more conversions.

🧐 Scarcity

Scarcity happens when something is made to seem more appealing because it's not widely available. This makes people think it's better quality or exclusive, and they might feel like they'll miss out if they don't get it. 

People are more afraid of losing something than they are excited about gaining something of the same value. This is called "loss aversion". Marketers can use scarcity to push people into buying something or booking a flight.

Booking.com does this well. They show how many people are looking at a particular hotel right now and how many times it has been booked in the last few hours. It is the ideal trigger for people on the fence to book a room quickly. 

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😌 Simplicity

Humans prefer simple choices over complex ones. So try to make it extremely easy for the customers and, more importantly, give them limited options. Giving too many choices can cause “analysis paralysis”, and the customer would not be willing to take an option fast.

If there is a sign-up form, try to ask only 1-3 questions. (Once the initial interest is registered, you can ask further questions.) From 3 questions to 6 questions, the response rate can dip by 10%, according to research.

If you are making a subscription plan, give only 1-3 options. When you are providing product recommendations, provide at the maximum 6 options.

If at all you have multiple options, break through the analysis paralysis by giving an option without friction and offering a way out. For example, let your customers experience your product without giving their credit card.

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 🤝 Reciprocity

People always feel a sense of obligation to give back when they receive something. So always provide value upfront, and then you can nudge the users to give you something in return.

For reciprocity to work, you have to give something that users really want. Talk to potential users about what they want before designing the offer. Make it personalized and memorable.

Moz provides free learning resources and tools to educate a novice on SEO. When the novice becomes trained, they would subconsciously navigate to Moz due to reciprocity. 

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💡 The Endowed Progress Effect

This means that if you provide customers with an artificial advancement towards a particular goal, then customers are more likely to complete the goal.

An excellent example of this is the Starbucks rewards program. Once you purchase a coffee, they tell you that you have earned x points. With y points, you can claim a free coffee. Now since you accidentally earned points without effort, you try to earn the remaining points by drinking more coffee. At this juncture, you don’t think about the gains and losses. You want to complete your goal.

This also works well in product setup and nudging the users to the aha moment. You show that the onboarding is 20% complete as soon as they sign up. Then tell the users to do the steps needed to experience the aha moment - like finishing the 1st lesson or completing a user survey. 

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 💵 Pricing Perception

In an experiment, a group of people tasted wine right from $5 price to $90 price. As the price of the wine increased, people felt the wine had a better taste. Also, the pleasure centres in the brain show increased activity as the price kept increasing. Actually, all of them were served the same wine.

In a similar experiment, for a fake painkiller costing $2.50, ~90% of the subjects expressed relief while when they were told the price was $0.10, only 10% of the subjects expressed relief.

It is important to raise prices to increase brand perception. For example, Tesla and Uber launched with premium pricing before they launched more economical alternatives to widen the market. Pricing is an art (and the subject of a future newsletter edition.) 

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Tips from behaviour science to help you

1. People are more agreeable after eating. When hungry, people can’t think properly. Ikea puts this strategy to good use - have a low price restaurant in premises and retain the users. Post food, they are more likely to buy furniture.

2. Auxiliary free items or services influence users a lot. For example, 120 + Free shipping is more appealing that 100 + 20 for shipping.

3. People obey individuals whom they deem as authorities. Establish authority for your product - customers from brands or an influencer reviewing and discussing your product. Don’t put fake names, be genuine here. (Also known as Milgram principle)

4. Humanizing a landing page with real pictures of real people smiling can boost your conversion rate.

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Did you know?

Showing some of your products as sold-out can make people think they are high quality and increase sales by ~30%. However, if you show too many sold-out products, it can have the opposite effect. Keep the number of sold-out products at a range of 10-20% of your original products.

Source: Tian, J., Chen, R., & Xu, X. (April 2021). A good way to boost sales? Effects of the proportion of sold-out options on purchase behavior. International Journal of Research in Marketing.

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