1.Dual-System Theory – This theory claims that we have two systems of thought. One is very quick and pulling the trigger on decisions almost instantly with minimal thought using heuristics (mental shortcuts). The Second system is slower and more calculating. There is different jargon in the field of marketing to describe this phenomenon, but the important thing to remember is that we think in those two systems and are triggered to think with one or the other based on a variety of factors. If it’s important for your potential clients to think consciously about a particular decision you can make that happen and vise versa.
2. Priming & Anchoring – Anchoring is something often done by real estate agents. They show you the house that is out of your price range, then they show you the house they intend for you to buy. They hope you’ll say something like, “Wow! This place is much cheaper and nearly just as good, must be a steal! We’ll take it.” The intention is to make you think of one number that bothers you initially, then see a number that comforts you a bit. This is not my favorite tactic as it is a bit manipulative for my taste.
3. Availability Heuristic – The heuristic (mental shortcut) here is the thought that, if a product is running out of stock, it must be good. While in some cases this holds true, your local farmers market will proclaim the opposite of this one. They will tell you shoppers are intrigued by the full basket of apples and skeptical of a few left in the bottom of the basket.
4. Choice Architecture – This is the idea that there is an ideal selection set for a customer to look at. If there are not enough choices, they may not be getting exactly what they want. If they have too many choices they may abandon the decision altogether. There are many ways the design choices and it plays closely with the concept of framing.
5. Certainty/Possibility Effects – The idea that probability is not read in a linear fashion. For example, a move from 40% to 50% chance of winning something is less powerful to us than a change of 95% to 100%.
6. Confirmation Bias – This is the bias towards seeking out information which supports what you already believe. For example, your phone contract is up and you’re a huge fan of Apple. You do your research, however, it is tainted by your desire for an iPhone to be the best choice. You may only search on parameters that you know Apple to be the strongest in rather than look for weak spots.
7. Herd Mentality – This one is simple. Everyone is buying Ford’s. Therefore I should buy a Ford. This mentality is dangerous. If everyone runs this way screaming, what do you do? Run that same way most likely. Was everyone in Hitler’s military supportive of his ideas or did they look around and see that the others were following?
8. Diversification Bias – In the future, we want to know that we have options. It is comforting to know all the capabilities, regardless of whether or not they will be used. For example, a software you consider purchasing is pricey compared to alternatives. You will be stuck with it for years, but it also does x, y, and z which the others don’t, making you consider it potentially worth the purchase.
9. Framing – Highlighting the good over the bad or vise versa can have a drastic impact on the way information is interpreted. However, this isn’t as straightforward as it sounds. I’m not just talking about highlighting this features and hiding the lack of some other features, I’m talking about exactly the way the information is presented. There is a concept called risk choice framing (e.g. risk of losing 10 out of 100 lives vs. the opportunity to save 90 out of 100 lives), attribute framing (e.g. beef that is described as 95% lean vs. 5% fat), and goal framing (e.g. motivating people by offering a $5 reward vs. imposing a $5 penalty)”. Levin, Schneider, & Gaeth, 1998
10. Elimination-by-Aspects – Much like a director might eliminate the purchase of camera’s lacking a certain frame rate capability, this is the idea that a buyer can simply reduce the choice set with a few major criteria. This is at its root a heuristic that blocks the buyer from weighing and considering all details of all options in a choice set with the notion that they are lesser alternatives.
11. Hot-Cold Empathy Gap – This concept refers to the differences in behavior or buying preferences under strenuous situations such as hunger or anger. Knowing whether a client or even a whole category of clients is under these types of circumstances may lead you to present differently.
12. Endowment Effect – Have you ever parted ways with a favorite possession, be it a car or guitar, only to find you had to sell it for drastically less than what you had imagined? The endowment effect is the principle that we tend to overvalue possession that we have an emotional or experiential connection to. That connection is part of the value in our eyes, but the buyer does not actually receive that value.
13. Gambler’s Fallacy – “I’ve been playing Craps for an hour now and have lost every round! I’m bound to win! I should put even more money on the table!” Don’t do this, it is statistically unsound.
14. Licensing Effect – Have you ever thought, “I did so much for my company today, I earned the right to slack off tomorrow.” This is the action of licensing yourself to do something perceived as bad after doing something perceived as good. While more applicable outside of the buyer’s world, it is still a relevant concept worth understanding.
15. Loss Aversion – Many people in marketing and sales abide by an old phrase, “It’s easier to sell the pain than the gain.” As humans, we are hard-wired to avoid danger, which makes this important to understand. At the same time it’s important to realize that this can be (and often is) taken too far. Don’t scare people into buying your products or services.
16. Optimism Bias – The underestimation of negative events and the overestimation of positive events. Many things contribute to this mentality. Being in a good state of mind on a sunny day may cause you to think more optimistically than a cloudy day you break you leg…
17. Over-Justification Effect – The ruining of intrinsic interests by rewarding previously unrewarded activities. For example, if you start paying charity workers a small wage, they may defect.
18. Pain of Paying – Naturally, humans avoid pain just as most living creatures do. However, humans understand how money effects them directly, and thus, understand that paying has some amount of pain associated with it. If the pain of payment is more than the gain of the purchase, there will be no transaction!
19. Partitioning – To make someone stop and think and re-evaluate what they are doing, break it into small chunks. Snack companies often put excessive packaging to slow the rate of consumption and make it appear more long-lasting and valuable. To me, I still eat everything and just wind up with an excessive pile of candy wrappers… nice try Reese’s family pack.
20. Precommitment – Humans need to be consistent. One proclaiming a goal, there is a level of expectation instilled in others that you will reach it. In certain circumstances, that expectation can become your real driving force to try and reach it rather than your own intention.
21. Reciprocity – One guy says, “Hey, I like your shirt!” The other guy will now have a hard time just continuing to walk past the first guy without saying “Thanks!” or “I like your hat!” Reciprocity can also be a negative, such as an eye for an eye.
22. Social Proof ( Normative & Informative) – A normative influence is the implication that fitting in will make one liked. An informational influence is where we are confused as to how to fit in and look to others around us for clues about how to act. Have you ever walked into a room and felt completely lost? The first thing most people will do is look to others around them as to how to act.
23. Sunk Cost Fallacy – When you poor a ton of effort into something and realize it was a bad idea, you should stop. However, because of the Sunk Cost Fallacy, you may rationalize, “Well, I’ve come this far, let’s just keeping rolling with it”. This is a very bizarre human behavior, it may even be the reason that a large number of marriages hold together.
24. Take-the-Best Heuristic – A quick decision between alternatives is often made on the basis of the first, most prominent differentiation. “They look the same, but this one also has feature X, that one doesn’t, so I’ll take this one.”
25. Present Bias – This is simply the weighting of now as more valuable than later. More weight would be associated with two different immediate pay-off opportunities than those same two as seen in the future.
Sources cited: www.behavioraleconomics.com – They pull from academic studies done in a variety of consumer-based and psychologically-based fields and reduce them down to something more easily interpreted. I’ve simply selected my favorite 25 concepts from their guide and placed my own marketing spin on them. I encourage anyone interested to check out this website.