The Psychology of buying: 6 Factors that influence customer behavior

Why do we buy? Understanding the psychology of buying is crucial for a marketer.

It’s also important for us, the consumer, to understand marketing tricks companies use to make us buy more.

Logic vs Intuition

A baseball bat and a ball cost $1.10 together.

The bat costs $1 more than the ball. How much does the ball cost?

The answer is simple, isn’t it?

Most of the people to whom this question is presented, their answer was that the ball costs 10 cents.

This intuitive response was also true of most students at the elite universities of Princeton and Harvard.

But this answer is incorrect.

The ball costs $0.05 ($1.05 the bat plus $0.05 the ball equals $1.10).

Something in our brain led to us intuitively, to give an incorrect answer to this apparently simple calculation.

Instead of doing mathematics we resort to our gut feeling.

Doing the actual calculation is much harder for our brain, and most of us don’t bother because of the 10 cent answer feels just right.

Daniel Kahneman the author of the best-selling book “Think, Fast and Slow”, refers to two systems of the mind.

System 1 integrates perception and intuition.

Kahneman says “it never sleeps, it’s quick, processes all the information in parallel, and is effortless, associative and slow-learning. It is made for fast, automatic, intuitive actions without thinking”.

In contrast, system 2 is slow, works step by step, takes up a lot of energy because it is effortful, but has the benefit of being flexible.

A useful metaphor for how these two systems work together is to see system 1 as an autopilot and system 2 as a pilot.

the psychology of buying, why we buy

The pilot handles the tasks that require flexible decision makings, such as the take-off and landing while the autopilot handles an action that can be done automatically.

For marketers, understanding these two systems is crucial.

1. The framing effect

It’s a tendency of individuals to make different choices based on how a decision problem is presented or interpreted.

Daniel Kahneman and Amos Tversky made an interesting experiment.[1]

They asked the participants how would they reacted in a hypothetical situation where a virus has spread.

The researchers asked the participants [152] which is the best option if a virus would spread in the U.S and that was expected to kill 600 people.

They had to choose between A and B to combat the disease.

FramingTreatment ATreatment B
PositiveSaves 200 livesA 1/3 chance of saving all 600 people, 2/3 of saving no one
Negative400 will dieA 1/3 chance that no one will die, 2/3 probability that 600 will die

In the first case where the situation is presented with a positive frame, 72% of the participants choose option A. Only 28% of people chose treatment B.

When it comes to benefits people want to be certain. This is the benefit of this program: 200 people will live. 

The second group of participants [155] was given the cover story of problem 1 but it was presented with a negative frame.

In this case, program B was more popular as 78% choose it.

When it comes to losses, people will take risks to avoid losses.

This experiment shows how we frame choices. Thinking about the benefits or the losses influences our decisions.

For example, medications focus more on benefits.

They tell you that the medication has 70% effectiveness rather than tell you they have a 30% failure.

The background indirectly affects everything we do without us being aware of it.

the framing effect

If we look at the two small squares in the center, it seems as if they are lying in front of larger ones.

The small squares seem to have different shades of grey.

But they don’t.

Objectively, they are identical but subjectively there is a clear difference.

The frames in the background change the perception.

The autopilot provides the frame, and the pilot focuses on the figure.

Together they create how we experience the world and build the basis for our decision making.

The framing effect is crucial in marketing.

For example, how a brand influences the product experience?

Brands operate as the background, framing the perception and with it, the experience of the products.

This framing effect of brands is not marketing hype; it increases the perceived value and the willingness to pay a premium price–even for objectively identical products.

2. Social proof

You’re waiting at the red light and you see a group of people staring at a tree.

You turn your head to see the cause of the excitement.

A stranded cat, maybe? Or perhaps the tree is about to fell? Before you find out, the lights change and you go on.

You’ve been influenced by social proof, becoming engaged in a situation because others are.

Robert Cialdini conducted an experiment to demonstrate how we are influenced by what others are doing:

He persuaded a hotel chain to change the messages they left in guests rooms trying to encourage towel re-use. [2]

He created three different messages.

The first stated the environmental benefits. And it was successful among 35% of visitors.

The social proof message which simply stated that most people re-used the towels raised the numbers to 44%.

He ran a third message asking people to re-use their towels because most people in their room had done so. This increased the rates to 49%.

Then Cialdini chose a group of students and asked which towel re-use messages would be more persuasive.

Most of them chose the environmental message. The opposite of how the people actually behaved.

The illusion of popularity

Most brands aren’t market leaders.

So, how can they stand out?

Well, they aren’t the number one in one category but they might be in sub-categories.

They can say: “X number of products sold weekly”, ” We’re the fastest growing company, “8 out of ten people love this”. 

The goal is to create the illusion of popularity.

On October 23, 2001, the Apple launched iPod. [3]

The competitors all had bland, black earphones.

The Apple’s problem was that their logo wasn’t visible. And no one could tell you were listening to an iPod just by seeing your black headphones.

So what did Apple do?

Well, this

ipad ad, ipad presentation 2003

White earbuds not only made the iPod stand out but also may have helped create a perception that more individuals owned iPod than actually did.

When social proof backfires

We saw how consumers are influenced by the behavior of others. 

Negative social proof it’s when is used in such a way it has the opposite effect to that intended.

The evidence for this tendency comes from an experiment conducted in 2003 by Cialdini and his colleagues.[4]

The experiment took place in Arizona’s Petrified Forest National Park. Back then, a ton of petrified wood was being stolen each month.

The park rangers reacted by placing signs that declared:

“Your heritage is being vandalized every day by theft losses of petrified wood of 14 tons a year, mostly a small piece at a time”.

But were these signs effective? Since they emphasized the number of thieves, the psychologists worried they encouraged more stealing.

The researchers created two signs and secretly placed marked pieces of petrified wood along visitor pathways.

The first sign which warned of the impact of stealing stated:

“Please don’t remove the petrified wood from the park, changing the natural state of the Petrified Forest”. And was accompanied by a picture of a visitor stealing a piece of wood, with a red circle over his head.

The second sign that showed how widespread this improper behavior was, stated:

“Many past visitors have removed the petrified wood from the park, changing the natural state of the Petrified Forest”, and was accompanied by a photo of people stealing pieces of wood.

The theft rate in the control situation with no sign was 2.92%.

The second sign resulted in 7.92% more theft while the first sign resulted in less theft (1.67%) than the control condition.

That means a sign designed to reduced crime, boosted it.

In Cialdini’s words, “This wasn’t a crime prevention strategy; it was a crime promotion strategy.”

3. Flowery descriptions

In a study by Brian Wansink of Cornell University, they presented menus either with descriptive labels or with labels with just the name on it (e.g. ‘red beans with rice’).

The question was whether the descriptive modifications would impact the perceived taste of the food.

The result was that the descriptive labels not only resulted in more orders but also led participants to rate those foods as tasting better than the identical foods with a generic name.

People perceive descriptions such as ‘tender grilled chicken’ to provide a higher value than just ‘grilled chicken’.

Value-oriented language can not only add perceived value but can also influence the perceived product performance.

In a test of messaging on meat packaging, the signal “75% lean” had a more positive impact than “25% fat”.

4. Anchoring

Anchoring is a cognitive bias for an individual to rely too heavily on an initial piece of information when deciding.

A perfect example of this, is again, Apple.

In 2007, Steve Jobs was introducing the iPad, and after showing his features he asked: What should we price it at?

If you listen to the pundits, we will price it at under $1000.

Then a giant $999 came upon his presentation screen.

He let there sink before saying, ‘I am thrilled to announce to you that the iPad pricing starts not at $999 but at just $499’. On screen, a falling $499 crushed the $999 price.

What Jobs did so well was not to compare the iPad price with that of a notebook – he compared it with the expectation of its own price.

This anchoring mechanism by which price perception can be influenced by contrasting with other prices, it’s very effective.

Many studies have shown that when selling products, it often makes sense to start with a higher price to set an anchor for a cheaper option.

5. The Value-cost relation

We value things based on the options available. When we are thirsty and the only thing available is a warm coke, we value that option. 

But, it automatically reduces the value of coke‘ if we also have a cold beer.

Most people don’t know what to take unless they see it in context.

We don’t know what car we want until we see what someone else has.

We don’t know which are the best set of speakers until we hear another set of speakers that sound better. Heck, we don’t even know what to do with our lives until we see a friend or relative doing the same thing we should be doing.

Dan Ariely’s in his book Predictably Irrational (2010), explained this principle by giving an example from the offer of the Economist.

Each price was for a one-year subscription:

Economist.com subscription – US $59. 00
Print Subscription – US $125
Print & Web subscription – US $125

We aren’t sure that the first option is the best deal. But we surely know the third one is better than the second.

Did the experts at the Economist make a typing mistake? Or they were trying to show you the third option is a better deal?

Dan gave these options to 100 students at MIT’s Sloan School of Management, and the results were:

1. Internet-only for $59 – 16 Students

2. Print-only for $125 – 0 students

3. Print and internet for $125 – 84 students

He made the following experiment giving only two choices:

1. Internet-only for $59

2. Print and internet for $125

Would the students react same as before? 16 for the internet only and 84 for the second option?

This time, the first option became popular as 68 students chose it, up from 16 before.

And only 32 students chose the second option, down from 84 before.

Let’s do the math: In the second scenario, the value of the subscriptions is $8012 compared with $11,444 from the first scenario.

Having three options rather than two had an increase of 43% in value.

By changing the structure of the offer, the decisions for the web-only option changed dramatically.

This works because the value is fundamentally relative.

The estate agents use this. They show you a house very similar to what you will buy but a bit more expensive, later they show you a house that is a little worse.

You are more likely to buy the first house.

6. Marketing manipulation by the Drug companies

Pharmaceutical companies using direct to consumer advertising (DTC) can persuade buyers to request drugs when they don’t even have any condition.

According to a CBS News HealthWatch, based on scholarly publications, nearly a third of adults discussed with their doctor about drugs they saw on TV.

In 1999, DTC advertising on behalf of big pharma amounted to $791 million, while in 2016 it went to $5 billion.

In a survey made by the FDA, 58% of physicians thought DTC advertising was making the drug seem better than it is. [5]

The case of Rezulin

The fact that one-third of users started a conversation with their doctor just because they looked at an ad, and that half of them received a prescription is quite alarming. It indicates that many people are getting prescriptions for diseases they may not have.

Look, if someone takes a medicine to prevent a cold might not be harmful, but what if one takes a prescription for diabetes when it doesn’t suffer from it?

Michael Kamins the author of “Marketing Manipulation” shares the case of Rezulin.

Rezulin was a prescription drug for diabetes but a considerable percentage of users were taking it without having diabetes.

The problem was that taking Rezulin, especially for those who didn’t need to, was linked to 90 liver failures and 63 deaths.

Why were so many people taking this drug if they didn’t need?

The answer lies in marketing manipulation.

Rezulin was advertised as a drug that could have the potential to prevent diabetes. And there are many people that have been categorized as “pre-diabetic”.

In a pre-launch advertisement for Rezulin, they said: “Is it possible to specifically treat or prevent the insulin resistance associated with type 2 diabetes?”

Later in a press release about the drug, they claimed:

Rezulin® is the first anti-diabetes drug designed to target insulin resistance…

Rezulin® is the first drug to work at the cellular level to improve insulin resistance directly enhancing the effects of circulating insulin…

On March 21, 2000, the FDA forced the manufacturers to pull Rezulin off the market.

But it is easy to see why Rezulin was the fastest selling drugs in history.

In just 4 months they reached $76 million in sales.[6]

Sources:

Decoded: The science behind why we buy

The Choice Factory: 25 Behavioral biases that influence what we buy

Image from Pexel

  1. Daniel Kahneman and Amos Tversky
  2. Descriptive Norms and Hotel Guests’ Towel Reuse Behavior
  3. Why Apple headphones are white- Business Insider
  4. Crafting Normative Messages to Protect the Environment
  5. The Impact of DTC Advertising
  6. Rezulin Pulled After Death Toll Mounts

3 thoughts on “The Psychology of buying: 6 Factors that influence customer behavior

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