Boost E-Commerce Sales by Understanding How Customers Think
Through Neel Vithalani If you run a e-commerce business, you face many challenges. And trying to compete with the giants can be overwhelming if you don't have a solid marketing strategy. The ultimate goal of all marketing activity should be to smooth the decision-making curve and proactively shape the consumer's journey to purchase the products […]

E-commerce marketing concept

Through Neel Vithalani

If you run a e-commerce business, you face many challenges. And trying to compete with the giants can be overwhelming if you don't have a solid marketing strategy. The ultimate goal of all marketing activity should be to smooth the decision-making curve and proactively shape the consumer's journey to purchase the products you want them to buy. Putting a little science in it can only help the process.

Marketers have put a lot of science into persuasive marketing to influence consumer behavior. Among all the methods used, targeting cognitive biases is the most popular and proven strategy. In this article, I will discuss how to use cognitive biases in e-commerce marketing.

What are the cognitive biases?

We do on 35,000 decisions every day, and this is only possible with the help of a few shortcuts. For example, the social media mogul Mark Zuckerberg never has to decide what to wear each day as he always wears the same gray t-shirt and blue jeans combo.

To avoid the stress that can come from decision making, evolution has given our minds cognitive biases. These biases shorten the time it takes to make a decision by skipping cognitive processes through memory and perception. Cognitive biases, also known as mental shortcuts, aim to make our lives more logical and involve less effort. Here's how you can use them to market your small ecommerce business.

Confirmation bias

People believe what they want to believe, and confirmation biases fuel that instinct. Our mind will process new information based on our existing set of beliefs. In e-commerce marketing, resonating with the buyer's personality and staying consistent will allow you to use confirmation bias with customers before and after the sale.

Use confirmation bias in the following areas to reassure buyers that they are in control when shopping:

  • Retargeting campaigns
  • SSL certificate (HTTPS URL) to mark your store as safe
  • Consistency between PPC ads and product landing pages
  • Privacy policy statements and security badges
  • Hassle-free return policy
  • Congratulatory messages on the final purchase confirmation screen
  • Confirmation emails with positive customer reviews

The decoy effect

Many online stores will place a third product positioned asymmetrically on their landing pages to increase bill size. While customers are required to choose the most affordable product out of two available options, putting a lure on the page will change customers' decision. Here is an example:

Suppose you are looking for table service and have the following options:

Brand A 12-piece table service @ $ 30
Brand B 20 piece dinner service @ $ 55
Brand X 18-piece dinner set at $ 95

If there was no third option, you probably would have purchased the Brand A dinner set, finding it to be the most cost effective. However, the addition of the asymmetrically positioned X brand makes the B brand appear to be the more attractive, yet affordable option, increasing its sales.

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Loss aversion

This cognitive bias is best explained by the phrase “A bird in the hand is worth two in the bush”. Consider a situation where I offer you $ 20 right away, or say I'll give you $ 80 if I flip a coin and it ends up tails. You would naturally choose the $ 20. But if I asked you to give me $ 20, as opposed to me giving you $ 80 if the coin is tails, you will go with the bet. In both cases, you will try to minimize your losses.

Letting people feel that they can use your product without any loss is a very effective conversion booster. Examples of using loss aversion in e-commerce:

  • Free trials and samples
  • Limited time discount offers
  • Buy now to get X% off
  • Countdown
  • Free expedited deliveries

You can combine loss aversion with FOMO (fear of missing out) to make your pitch more appealing for marketing purposes.

Hyperbolic discounting bias

This cognitive bias causes people to seek immediate rewards rather than delaying them. When all the results are positive, we are more likely to choose the one that is immediately available. For example, some marketers will allow customers to purchase items immediately with a credit card and allow them to make installment payments.

Other examples of hyperbolic actualization include:

  • "100% money back if you don't like it" offer
  • Loyalty programs with redemption bonus
  • Irrelevant NDE
  • Freemium subscription models

Hyperbolic Discount is a powerful tool for selling products that are not directly within the economic reach of your consumer base. Dividing payments into small installments can help people feel more confident about making purchases.

Sunk cost bias

Sunk cost bias or falsehood refers to our tendency to stick to our decisions because of the time, money, or energy we have already invested. Consider a scenario where you have tickets to a concert, but you have a severe headache on the night of the concert. Are you still going? Despite the headache, you probably will because you've already paid for the tickets and don't want your money to be wasted.

Here are ways to make the sunk cost error work for an ecommerce site:

  • Many online shoppers will leave a website when the site asks for their financial information. You can avoid this by adding a progress bar to the web page (90% complete, for example) showing customers the progress and how long they have already committed to the buying process.
  • Encourage customers to stay by providing them with a personalized experience that cannot be replicated on another site. IKEA, for example, allows online customers to design their own personalized furniture; customers risk losing their designs if they abandon the site.
  • A customer loyalty program that rewards customers for making consecutive purchases from your site will ultimately inspire them to keep buying from you.

Yours

Here I have specifically focused on cognitive biases that can be easily used by small online retailers. But know that your bigger counterparts are already putting them to good use, and any online business can benefit from these time-tested tactics.

RELATED: 4 steps to start your online business

About the Author

Post by: Neel Vithalani

Neel is a designer who is always ready to get his hands on anything innovative and captivates the masses. He is currently working with Orderhive. He is passionate about technology, economics and psychology.

Company: Orderhive
Website: www.orderhive.com
Connect with me on Facebook, Twitter, and LinkedIn.


The biggest problem founders and small business owners have is that they’re experts in their field and novices in what it really takes to effectively run a . That’s what usually trips them up, sooner or later.

Don’t let that happen to you. Admit that you don’t know what you don’t know about business, starting with these 15 tips guaranteed to help keep you and your company out of hot water. Some are straightforward, others are counterintuitive, but they’re all true. And some day they’ll save your butt.

Always make sure there is and will be enough cash in the bank. Period. The most common business-failure mode, hands down, is course out of cash. If you know you’ve got a cash flow or liquidity problem coming up, fix it now. You can’t fire bad employees fast enough. You just can’t. Just make sure you know they’re the problem, not you ( see next tip ).

The problem is probably you. When I was a young directeur, my company sent us all to a week of quality training where the most important concept we learned was that 90 percent of all problems are management problems. When things aren’t going well, the first place to look for answers is in the mirror.

Take care of your stars. This goes for every company, big and small. The cost of losing a vedette employee is enormous, yet précurseurs rarely take the time to ensure their top performers are properly motivated, challenged, and compensated. Your people are not your kids, your personal assistants, or your shrink. If you use and abuse them that way, you will come to regret it. Capiche ?

Learn to say ' yes ' and ' no ' a lot. The two most important words business owners and founders have at their disposal are “yes” and “no. ” Learn to say them a lot. And that means being decisive. The most important reason to focus – to be clear on what your company does – is to be clear on all the things it doesn’t do.

It boggles my mind how little most entrepreneurs value their customers when, not only are their feedback and input among the most critical information they will ever learn, but their repeat is the easiest to get. Learn two words : meritocracy and nepotism. The first is how you run an organization – by recognizing, rewarding, and compensating based solely on ability and achievement. The deuxième is how you don’t run an organization – by playing préférés and being biased.

Know when and when not to be translucide. Transparency is as detrimental at some times as it is beneficial at others. There are times to share openly and times to zip it. You need to know when and with whom to do one versus the other. It comes with experience.

Trust your gut. This phrase is often repeated but rarely understood. It means that your own instincts are an extremely valuable decision-making tool. Too often we end up saying in retrospect and with regret, “Damn, I knew that was a bad idea. ” But the key is to know how to access your instincts. Just sit, be quiet, and listen to yourself.

Protect and defend your intellectual property. Most of you don’t know the difference between a copyright, trademark, trade secret, and patent. That’s not acceptable. If you don’t protect and defend your IP, you will lose your only competitive advantage.

Learn to read and write effective agreements. You know the expression “good fences make good neighbors ? ” It’s the same in business. The more effective your agreements are, the better your business relationships will be.

Far too many créateurs d'entreprise run their business like an extension of their personal finances. Bad idea. Very bad idea. Construct the right business entity and keep it separate from your personal life. Know your finances inside and out. If you don’t know your revenues, expenses, capital requirements, profits ( gross and net ), debt, cash flow, and effective tax rate – among other things – you’re asking for trouble. Big dysfonctionnement.

You don’t know what you don’t know. Humility is a powerful trait for précurseurs, and that goes for new business owners, veteran CEOs of Fortune 500 companies, and everyone in between. More times than not, you will come to regret thinking you knew all the answers. Behind every failed company are dysfunctional, delusional, or incompetent précurseurs. The irony is, none of them had the slightest idea that was true at the time. Even sadder, most of them still don’t. Don’t end up like one of them.

For every success you have in growing your market share, another business or other businesses will inevitably lose ground. Here are 11 quick and easy business tips to gain a competitive advantage over your rivals and insulate yourself from the threat of new entrants in the market.

Of course, we all want to spark business growth and increase revenue. But the way you do this in a sustainable way is to focus instead on the building of a loyal database of avid fans. Content digital, paired with optimized website forms and éclairé courier automation follow-up is critical to business success. This approach builds trust by giving away free value before asking for someone’s hard-earned money. Not an spécialiste in creating optimized lead generation pages on a website ? No worries, use a trusted tool like Leadpages to make it happen.

Like it or not, folks out there aren’t searching for your brand, they’re just looking to solve a problem or find a particular type of product ( unless you run Starbucks or Adidas ! ) Don’t list all the benefits your product brings. Focus on the solutions. Explain to the customer in simple, straightforward terms how or why your product can help them or assist in the attainment of their goals. Consider FedEx’s iconic slogan : When it absolutely, positively has to be there overnight. This was a clear example of addressing widely-spread anxiety about the reliability of delivery services. Run through some market research to profile your target customer. How does your product or service – and your delivery and and price point – solve other people’s problems and make their lives easier or more pleasurable ?

Dropping prices doesn’t necessarily raise sales, for instance ( though it will definitely squeeze margins ). If you place yourself as a de haute gamme brand, then your customers aren’t necessarily value-driven in the first place, and cutting prices could even tarnish your brand. Consider this case study from Robert Cialdini’s seminal book ‘Influence : The Psychology of Persuasion’ : a jeweller sold out of turquoise jewelry after accidentally doubling, instead of halving, the price. The inflated price tag lent the product an unwarranted cachet ! If you are a de haute gamme brand, there are ways to optimize your pricing without lowering prices. For example, offer the quality-conscious customer an ‘exclusive’ benefit that your rivals do not or cannot provide. If you are at the value-driven end of the market, on the other hand, don’t assume slashing prices means incurring a loss. Low pricing can help you rapidly onboard a heap of new customers who may also buy other items in your site and return again. Context also counts for a lot with pricing. The best way to sell a $5, 000 watch, for instance, could be by putting it next to a $10, 000 watch. Think strategically when it comes to deciding any price point.

Yes, it sounds obvious, but it’s so very important ! Whether consciously or not, people are more likely to buy a product if they like the sales assistant who’s attending to them. While the employee’s personality obviously has no bearing on the price or your product’s ability to serve their needs is irrelevant. Friendly customer-facing équipe will always attract more sales. Be rigorous in hiring people who are genuinely cheerful, friendly and outgoing. Make sure your training program teaches them to adopt a consistently friendly approach that puts customers at ease and feel like a priority.

Say you’re a bricks-and-mortar store and you’re getting a rush of customers as closing time approaches… why not close up an hour later ? While this may cause disgruntlement among équipe, solve this venant by getting creative with rosters. Monitor customer footfall throughout the day and week to identify your busiest periods, and équipe people accordingly. You can also reduce headcount during quieter periods to offset the higher costs and longer sérieux hours created by your extended opening hours. It’s a win-win !

Even in the web age, some customers will always prefer to contact you by phone rather than fax or Facebook. While many online companies with tight margins eschew manned phone lines altogether, it’s worth giving customers the option of having a voice-to-voice conversation with your brand. By all means, slash the time and cost spent responding to queries by funnelling customers to standardized, pre-existing responses on your webpage ( i. e., FAQs ). But if their query isn’t listed in the drop-down menu of FAQs, then don’t make them click more than once more to find your phone number. Put it front and center on your digitale page, particularly if you’re a retail offering. ‘Live chat’ bots are an inexpensive way of offering real-time communication, too.

Why not give your happy customers a voucher with their purchase to redeem on your products and services ? If they love what you do already, they’re only going to love you more for this. It’s good for you because : It guarantees they will return to your store again. People hate to waste freebies ! When they return to your store to redeem their voucher, they may buy other items, too. If your operates online, then the freebie could be strategically timed to coincide with a special sale. Oh, and guess what ? Chances are customers who have received vouchers or freebies won’t stay quiet about it either, so you could enjoy some positive buzz on social media.

Local businesses can arguably connect with their unique communities with much greater authority than any global chain. A local retailer, hair salon or gardening company can sponsor a kid’s sports team and offer deep discounts for OAPs at the same time. Some cinemas feature special ‘sensory’ screenings where parents can bring kids with autism ( who would normally be overwhelmed by busy, noisy environments ) to enjoy a movie in a relaxed, stress-free atmosphere. This reflects well on them and also guarantees them a loyal customer niche. Whatever you choose to do to support your community, make sure it authentically fits with your brand offering and journey to date.

Social media is a great medium through which to build a solid relationship with customers – just don’t forget what ‘social’ actually means ! Soul-less corporate shop-talk won’t work on Twitter. Try to give your brand some ‘personality’ when you write updates or posts. This can bring its own risks, évidemment. But if you get it right, the benefits can be immense. Develop a tone of voice that aligns well with your brand identity. Seek to inform, help, entertain or amuse. And most importantly – given the dire PR consequences – don’t patronize, try too to be funny, or tweet after a few alcoholic drinks !

Sometimes it’s better to be a master of one discipline than a jack of all trades. Admittedly, multiple revenue streams do spread your risk : if one falters, others can take up the slack. Nevertheless, consumers often associate ‘specialists’ with higher quality products or services than generalists. And with good reason, too : specialists typically invest all their resources into perfecting a single product or service. So what should you specialize in ? to state the obvious, it should be something in which you excel. You could also pick something with rising or recession-proof demand which is resilient to technological change in which you possess a competitive advantage over your rivals or where there’s an obvious gap in your local market. Own it, whatever you do.

Don’t ever get too satisfied with your . You can always improve – and improve you must ! Don’t get me wrong : without the odd moment of smug satisfaction, what’s the point ? Do relish in the successful launch of a game-changing product or take pleasure in positive customer feedback. But don’t let your customers hear you banging on about it time after time ! Be alert to the common element that has led to the downfall of countless hitherto thriving brands : complacency. Imaginative, nimble and innovative start-ups often do better than big market précurseurs that just got lazy. You may be the disruptive innovator today, but tomorrow you could be the complacent market leader with a tired model. So try to be humble and always strive to improve. Seek inspiration from other fondateurs, from books and from seminars. The moment you think ‘mission accomplished’ is the same moment you become vulnerable to being usurped.

There are lots of ways in which you can improve your business, and not all of them are complicated ! Try out the above tips or integrate them with your existing strategies, and let me know how you go in the comments below. Guest Author : Faye Ferris is responsible for the day-to-day management of the Dynamis APAC Pty Ltd offices in Sydney. She develops the DYNAMIS durable of brands and their expansion into the Asia Pacific region as well as BusinessesForSale. com, FranchiseSales. com and PropertySales. com. If you have an interest in partnering up with Faye or advertising on any of these websites in the APAC territories, please do not hesitate to contact her on faye@businessesforsale. com.

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