Five behavioural biases that challenger brands must know for success in 2021
As Australia readies itself for a post-COVID recovery, the fight for consumer confidence and dollars will be primarily fought in the advertising and marketing spheres.
For most challenger brands, the option of blowing established competitors out of the water with a big-budget ad campaign and a thumping media plan just doesn’t exist.
Yet, if you cast your eye to the opposite end of the marketing equation, you’ll find something that’s far more powerful, incredibly accessible and free to use if you can unlock it: the reason customers buy the things that they do.
While it’s easy to funnel energy into ideas about how you’ll disrupt the market and all the ways to unseat existing players, it’s also profoundly important to consider just what it will take for a customer to take a chance on you.
Studies from behavioural economics have consistently demonstrated that we don’t have the mental energy to meticulously weigh up the thousands of choices we’re faced with each day. Instead, we rely on instincts, are led by biases and favour the familiar.
As we move through a period of immense societal change and all of the stress that goes with it, consumers are more likely than ever to feel overwhelmed. As a challenger brand, it’s on you to reduce the cognitive load, and ultimately, make yourself easier to choose.
Here are the five behavioural biases that every entrepreneur should look to for turbocharging growth in 2021.
As humans, we love the idea of choosing but are quickly overwhelmed by choice. Studies have demonstrated that adding too many options to the mix can quickly lead to customers making the simplest choice of all: nothing.
Having too many choices to weigh up forces us to engage the ‘slow thinking’ part of our brain, rather than relying on the ‘fast thinking’ part that ushers us through most of our day.
Slow thinking can involve making long-term projections, weighing up risks against benefits, or calculating if an item’s price matches the promise. More often than not, these thoughts drive us towards the safe, the proven and the familiar.
If you’re a challenger brand, this is probably bad news. It’s also why less is usually more.
Offering fewer, better options is a surefire way to reduce your customers’ cognitive load and a proven technique to increase conversion rates. You can minimise choice by rationalising your product suite, highlighting recommended options or allowing customers to filter their way down to a manageable number of options.
Following the year we’ve just had, it’s not surprising that people are looking for ways to feel safe. As our world and the central business districts, transport systems, and community spaces within it start to open up again, this need for safety will only continue.
One of the most primal ways we can feel safe is to be part of a larger crowd that’s all doing the same thing that we are. For instance, take the current situation as companies hesitantly return to their offices. It will only feel ‘safe’ and normal when we see everybody else doing it too.
When considering a new product or service, our primitive brains need convincing that it’s a good, safe and popular choice to make. Therefore, challenger brands must find interesting and creative ways to leverage social proof, which describes how we adapt our behaviour according to what we witness other people doing.
It is social proof that causes us to wait outside full restaurants and bars while empty ones across the street futilely beckon us.
In a commercial sense, this means demonstrating to potential customers that people who are just like them — or better yet, people who are just like their aspirational selves — have already made the choice we’re asking them to make. Social proof can be demonstrated through reviews, testimonials, and online prompts like, ‘X number of other people have already bought/are currently viewing this’.
Each of these techniques will help reduce perceived risk, increase perceived safety and edge you closer to closing the deal.
Over the last 12 months, we’ve lost a lot: jobs or job security, holidays, social liberties, and contact with friends and family. Hence, we cling tighter to things we already feel ownership of.
This comes down to a cognitive bias known as loss aversion, which describes why the pain of losing something causes a more extreme emotional response than the pleasure of gaining something new.
Loss aversion is why we hate to see other people sitting in ‘our seat’ in the meeting room and why we never get the price we want for our secondhand cars or bikes. The mere fact of owning something, no matter how fleetingly, makes it feel like it’s worth more than it is.
Challenger brands can lean into loss aversion by making it easy for customers to feel like they own your product before they really do. This can be achieved through a generous free returns and exchanges policy, letting people ‘try before they buy’, through co-creation, such as allowing people to spec up the product themselves, or making onboarding quick and frictionless.
If you let them feel like they own it, they probably will.
Mere exposure effect
Like loss aversion, the mere exposure effect taps into the comfort we all feel from familiarity.
From an evolutionary perspective, human beings had to be on guard for potential hazards, and anything new, understandably, was perceived to be a danger. While there are far fewer actual hazards today, this fear-based mentality still drives many of our decisions.
Introduced in 1968 by Polish-born American psychologist Robert Zajonc, the mere exposure effect describes our tendency to prefer things when we’ve been exposed to them repeatedly. When it comes to marketing and advertising, it is repetition that brings familiarity. In turn, this familiarity brings recognition, a sense of safety and trust.
For challenger brands, this means being clever about your messaging. While established brands can focus on reach, challenger brands must prioritise frequency, even if this means talking to a smaller audience. One hundred people seeing your brand one hundred times is likely to create far more preference than 10,000 people seeing it once.
With 2021 comes a heightened appreciation for the human input that goes into goods and services.
Studies have proven that people will value your product or service more if they see just how much effort has gone into creating it. This ‘effort bias’ goes a long way to explaining why we’re happy to pay more for small-batch whisky, or why we enjoy sitting at the chef’s table in a trendy restaurant. The meteoric rise of craft and artisanal products through 2020 is further evidence that this trend is steadily on the up.
For lesser-known brands, the effort bias should be all the encouragement you need to surface and celebrate the complexity behind whatever you do.
Shining a light on the process, the ingredients, the intricate supply chain or the blood, sweat and tears you’ve put in can help customers justify a price far beyond what they otherwise would have considered.
Don't miss the opportunity to learn from Dan in the ADMA Behavioural Economics Masterclass. Learn how to build better brands and boost your career with behavioural economics, a fascinating discipline demystifying our irrational decisions about brands, buying and pricing.