From Browsing to Buying: Unlocking Consumer Behaviour with Behavioural Economics

Consumer Behaviour

Ever wonder why we often buy more during a sale even if we don’t need anything? Or why a slightly pricier middle option on a menu seems more appealing? Welcome to the world of consumer behaviour, a field that explains the seemingly illogical decisions consumers often make. As marketers, understanding these principles can be like finding a secret playbook for influencing customer behaviour.

 

What is Behavioural Economics?

Behavioural economics combines psychology with economic theory to explain why people sometimes make irrational financial decisions, contrary to the traditional economic assumption that people always make decisions that maximise their utility.

 

Key Concepts in Consumer Behavioural Economics with Marketing Examples

  1. Anchoring: This principle suggests that people rely too heavily on the first piece of information offered when making decisions. In marketing, anchoring is used when setting prices. For example, if a luxury car dealership displays their most expensive model first, the subsequent models will seem more reasonably priced in comparison, potentially increasing sales of the higher-end models.
  2. Loss Aversion: People tend to fear losses more than they value gains. Marketers use this to their advantage by framing things in terms of what consumers will lose if they don’t make a purchase. For instance, advertisements often warn customers that “time is running out” to buy tickets at a lower price, prompting quick action to avoid missing out.
  3. Choice Overload: Too many options can overwhelm consumers, leading to choice paralysis where no decision is made. A classic example of tackling this is by offering a curated menu in restaurants or a simplified product line in electronics stores, making it easier for consumers to choose without feeling overwhelmed.

 

Applying Behavioural Economics in Marketing Strategies

Understanding these behavioural quirks allows marketers to design more effective campaigns. Here’s how:

  • Product Pricing: By setting an initial high price (anchor), subsequent discounts seem more enticing. For example, introducing a new product at a premium price before offering a seasonal discount can create a perception of greater value, encouraging purchases.
  • Promotional Tactics: Emphasising potential loss (‘limited time offer’, ‘last chance to buy’) can be more persuasive than promoting potential gains. This tactic leverages loss aversion to create a sense of urgency.
  • Simplifying Choices: Offering fewer product variations can actually enhance sales. Apple is a prime example, with its streamlined product options for gadgets, which helps consumers make quicker and more confident decisions.

 

Conclusion

In the dynamic landscape of marketing, behavioural economics offers powerful insights into consumer behaviour. By understanding the underlying psychological triggers, marketers can craft strategies that not only appeal to logical reasoning but also tap into emotional and subconscious cues. This not only improves customer engagement but also drives better sales outcomes.

 

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Shreya Narvekar

Author | Negative + Negative = Who cares?

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