Digital marketing and human biases

Beginning of this term, I took a course called Behavioral Economics. Behavioral Economics is a field of study that focuses on how people actually make decisions (i.e., human biases) as opposed to how the classic economic models say they should make. This field has many practical applications, one being how consumers make buying decisions and how as marketers we can "influence" their buying decisions to some extent. There is a lot being studied and written on behavioral economics and how it can complement the digital marketing efforts. I want to just highlight a couple of examples here that I think goes with what we are learning in the class.

One of the things covered by the field of behavioral economics that is relevant for us digital marketers is what is called a choice architecture. Choice architecture simply refers to the context in which one makes a choice,  and by controlling that context, we can help people make better choices. One of the insights from choice architecture is the significance of choosing default choices. For instance, studies have shown that if you are sending a e-newsletter, you can achieve a higher subscription rate if the default is set to "opt-in" rather than "opt-out". For further proof on default choices, search for "Defaults and Donation Decisions" by CBS Prof. Johnson related to organ donations in various European countries. Of course, choice architecture goes beyond default choices. For instance, we can apply the concepts to better design a landing page with the right number of links, to better present the choices, and so on in order to increase the conversion rate.

Another example that I found online that is relevant for us is related to Anchoring bias. Anchoring is a cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered (the "anchor") when making decisions. For example, the initial price offered for a used car sets the standard for the rest of the negotiations, so that prices lower than the initial price seem more reasonable even if they are still higher than what the car is really worth. This article talks about the importance of anchor bias in search marketing. For instance, promoting your low-carb whole-wheat pasta alongside search results for the carb count of white pasta induces people to compare your healthier pasta to the full-figured version. However, consider what might happen when advertising your pasta alongside carb-free search results; now, its not going to compare favorably.

Another human biases that we marketers need to be aware of is called Representativeness. Representativeness bias is the tendency of people to assign the common characteristics of a group to individuals that they infer as being part of that group. What it means is that search engine marketing that places air purifier product ads amongst other allergy abatement products might convert better than placing it amongst the results for the allergens. The thing that we then need to watch out for then is whether our search marketing positions our product within spaces that give us a positive association.

Obviously, the number of human biases are many, and as I mentioned earlier, I wanted to only highlight a couple of examples here. I personally believe that understanding behavioral economics will increasingly provide greater insight that will drive the future digital marketing efforts.