Cognitive Biases: Psychology of Decision making(Part-01)
Even people
who have knowledge of cognitive biases find it difficult to control
themselves when they are exposed to these techniques. They are extremely
powerful and even used unethically by many companies.
So, what are
the cognitive biases?
Psychology
of Human misjudgment, techniques, and principles that affect people’s subconscious
mind.
Psychology
and marketing experts like Dr. Robert Cialdini developed these biases. You may
have a question of why do we need to learn these biases?
We can use
these biases to convince people, pursue them to buy from us. We can use them in
our meetings, marketing, commercials, websites, social media ads, and basically
anywhere where we can ask people to do an action.
This list of Cognitive biases is by Charlie Munger. It has 25 of them. But, I'm only going to discuss 21 of them in this blog. You can watch the whole video where he talks about these biases:
Anyway, let’s
learn about them. The first one is,
1) 1. Deprival Super Reaction
tendency/Scarcity:
“The way to love anything is to realize that it may be lost”. - Gilbert K. Chesterton
By
nature we want those things more which we think we will lose or we might not
have access to them anymore.
An example of this tendency can be seen at Auctions. People become really
competitive on auctions because they think, they are missing the opportunity of
having the product. But, in reality, some studies show that sometimes the buyer
doesn’t even genuinely want the product at all. But, the fear of not having the
product compelled them to bid a higher price.
Any
kind of limitation will create a scarcity, thus increase sales. We will
find a piece of information more persuasive if we think that we can’t get it
anywhere else.
Exclusive information = More
persuasive
2) 2. Reward & Punishment/Super
response tendency:
The reward is what customers will receive after using your product.
But, a mistake we often make while creating ads or doing promotions that
we don’t distinguish between features and Rewards.
For example for an online marketing Course ad:
Features are:
By doing this course you
will learn Marketing planning, cognitive biases, and social media marketing
Rewards are:
By doing this course You
will be able to find a job in any company, Increase sales for your business and
make more money, start a social media marketing firm, and many more.
If we are
not having good sales, then we should try increasing the reward. We should always
ask ourselves, what the end game of using our product is, before creating an
ad.
Punishment:
Punishment is what customers will receive if they don’t use your product.
To
understand this, we need to think of a particular situation.
Imagine,
yourself sleeping soundly at 2 am at night. Suddenly I wake you up and say
there’s a 50,000 Dollar bag right outside of your door. Most people would go
right back to sleep and have a hard time believing me.
But, if I wake
you up and say there’s a fire in the house, you will undoubtedly wake up and
run for your life.
I know it might
sound stupid in your head, but, logically speaking it’s the truth.
But, a note
of advice, don’t use this tendency way too much or it might backfire.
3) 3. Liking loving/Disliking hating
tendency:
The main work of the trial attorney is to make the jury like his clients.
We prefer to say yes to people we like.
The greatest salesman, Joe Girard sold 13,001 Cars at a Chevrolet dealership.
Amazing isn’t it?
When he was asked of how he made it?
He answered graciously that, Fair price and likable attitude. He said,
you don’t need to be very smart, you just need to use the right tools.
How can we become more likable?
- Physical attractiveness,
- Similarities (Personality, look, background, experience, etc.)
- Compliments. We always have to thank our customers and constantly tell them that we love them.
4) 4.Contrast-Misreaction Tendency:
Compare two things in favor of your product.
Bad Big Element – Good small element
For example, you go to buy a car. The salesman said the price of the car
is 25,000 $. The monthly payment for the car is 300$ and if you add 30$ more, you
can get a good stereo system. In your head, you’re thinking, well, it’s not a
bad deal.
But, let’s think. You pay 30$ every month. To sum it up, you’ll pay 1800$
for the stereo. So, for a 25k car it’s quite expensive to pay 1800 for the stereo,
isn’t it?
But, the salesperson didn’t compare it like that, so you won’t think it
like that either.
This is contrasts misreaction.
5) 5. Reciprocation/Kantian Fairness
Tendency:
“Pay every debt as if God wrote the bill” - Ralph Waldo Emerson
People try to repay the kindness others have provided them.
Example:
Birthday gift – Return Gift
Party Invitation – Return Invitation
We can’t ask
people to buy our product if we haven’t done anything for them.
Reciprocation = Kantian Fairness
Kantian Fairness: Keeping the fair level in different situations
Reciprocation: It’s about giving and receiving
Rejection and Retreat: Increase the expectation by offering High
6) 6. Inconsistency – Avoidance Tendency :
“It is easier to resist at the beginning then at the end”-Leonardo da Vinci
According to research, people after betting on horses will be surer they
are going to win.
So, for marketing, Start at a lower price. Then increase it as process
starts.
7) 7. Doubt – Avoidance Tendency:
Remove doubt from the customer’s mind.
Firstly, we should remove doubts from our minds. If the customer feels the
doubt in us, then we can’t sell.
Secondly, we need to put ourselves in the customer’s shoes and find what their
doubts about buying our product are.
“A confused mind doesn’t buy”
Example: 5000 People bought this product. 30
days money-back guarantee.
To be continued...........
Thank You For Reading this blog about Cognitive Biases. Please check out the second part of the blog to know more about cognitive biases and the psychology of decision making, especially for marketing.
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MD MAHADI HASAN
Project Manager @http://instawebworks.com.au
B.Sc Computer Science and Technology
Henan Polytechnic University
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