This is how you can use a “nudge” i.e. a push to steer people in the right direction by making the favourable choice the default and allowing them the freedom to “opt-out,” which most of them will never use anyway.
Make the best choice the easiest one.
In the US, government bodies have used the same mechanism to increase the amount of contributions that salaried employees make to their Provident Saving Funds (401k).
As you can guess, they raised the default amount to a certain percentage and made contributing to the PF scheme the default option, with “opt-out” features that most people are too lazy to apply for.
Core Insight: Placing a middle option near the biggest upgrade can make the latter look more attractive.
You’re at the movies with another friend. And although you know the popcorn is too expensive, your stomach is growling.
So you give in & head to the snacks bar where the server gives you a choice.
Regular = ₹500
Large = ₹700
Extra-Large = ₹720
Between the two of you, you know that a large tub would suffice.
But the extra-large upgrade is just 20 bucks away – you get 40% more popcorn for such a small amount!
On the surface, it looks like a bargain but you’ve just been duped by the “Decoy Effect.”
The large popcorn is acting as a distraction in the middle to skew your decision towards the extra-large option, earning the theatre an extra 20 bucks from your wallet.
Imagine if the large one didn’t exist. You would think twice before going for the extra-large one because the gap between a regular & XXL tub is too high (₹220 to be precise).
You’ll see this trick often implemented by Starbucks/cafes, e-commerce stores, or SaaS businesses with subscription packages to sell.
Gary Mortimer says in The Conversation, “The decoy effect is a phenomenon whereby consumers change their preference between two options when presented with a third option – the ‘decoy’ – that is ‘asymmetrically dominated’.”
“It is also referred to as the ‘attraction effect’ or ‘asymmetric dominance effect.’ What asymmetric domination means is the decoy is priced to make one of the other options much more attractive. It is “dominated” in terms of perceived value (quantity, quality, extra features and so on).”
Gary explains, “The decoy is not intended to sell, just to nudge consumers away from the “competitor” and towards the “target” – usually the more expensive or profitable option.”
The effect was first described by academics Joel Huber, John Payne and Christopher Puto in a paper presented to a conference in 1981 (and later published in the Journal of Consumer Research in 1982).
Core Insight: People’s decisions or perceptions about something are heavily influenced by the information they receive first.
The “Decoy Effect”we studied above sprouts from a more fundamental concept in psychology called as “anchoring.”
Anchoring bias occurs when decisions are highly influenced by the first piece of information received to make that decision.
In the context of marketing, it means that customers evaluate the product’s value based on the information they received first.
Say a customer is looking for a winter jacket, and discovers a price tag of $200. But that is followed up by a seasonal discount tag of $100, which makes it look like a steal.
This is how Amazon’s festive sales get people to buy items that they don’t really need – once you see 60% off on a product, it feels foolish not to click the “Buy Now” button.
But if the discounted price was its original price, you wouldn’t consider it a good deal.
Instead, you’re using the original price as a reference point or anchor, making the product seem like a much better deal than if you were shown the low price by itself.
Core Insight: People like the finished product more when they can contribute to its design process.
In the 1930s, Pillsbury launched their instant cake-baking flour.
They discovered that moms felt like they were cheating on their duties towards the family because it was suddenly “too easy” to serve dessert.
To counter the frustration, the brand deliberately stopped adding eggs in their mix and transferred that step onto the end user.
This gave women the impression that they were contributing something valuable to the whole process.
The insight was that people enjoy the flavor of the food more when they know they’re putting in effort into cooking it. So leaving out an ingredient & allowing them to participate in the process attended to that psychological need.
Today, we call this phenomenon “The IKEA Effect,” named after the popular furniture brand that insists its customers take home their purchases & build the stuff on their own by referring to their manuals.
In fact, IKEA also uses the principle in two more ways. First, it sets the location of its stores in the city’s outskirts and in markets like India, it encourages pre-booking your visit.
When you’re travelling so far just to visit a store, you feel obligated to buy something just to validate the time and effort spent in reaching the destination.
Secondly, IKEA’s stores are laid out like a maze. You can’t just waltz through them in 15 minutes. You have to go through their entire inventory to reach the restaurant/cafe at the end.
The goal is to make you spend more time, giving you ample opportunities to intimately interact with the products. This leads to higher recall & also impulse purchase behaviours.
The theory suggests that we endow inanimate objects with more value and meaning if we assemble them ourselves or spend a lot of time interacting with them.
So you can make the process more interactive by allowing consumers to gamify, build, design, and personalize the product to their liking.
BTW, this also works on people – the more time you spend with someone, the better you’ll empathize with or support them.
Core Insight: Brands admitting to mistakes or flaws & issues, whilst taking cautious steps to improve, leads to an increase in consumer trust.
In 2018, KFC decided to change its food supplier to DHL to reduce costs, which couldn’t deliver on its promise, leaving up to customers in 900 locations hungry.
A chicken fast-food chain without chicken items – as you can expect, it was a disaster. The stores had to temporarily close, and customers were up in flames because their favourite brand was no longer serving their favourite chicken buckets.
What followed in the coming week, however, quickly turned the tide in the brand’s favour.
In partnership with their agency Mother, KFC took out a full-page print ad in one of the leading newspapers, issuing a cheeky apology.
The headline made witty use of the brand name, turning KFC into “FCK,” as in “We fucked up.” The body copy coyly assured their hungry customers that they would be back to serving hot chicken wings soon.
This won the people’s hearts, giving us a live demonstration of the “Pratfall Effect.”
When authoritative figures & big companies make minor mistakes or own up to their flaws & issues, curiously their attractiveness actually increases, making them more relatable.
Mistakes & inconsistencies humanize organizations and if they’re tackled authentically, you’ll be rewarded with goodwill for being upfront about it.
Technically, the chicken shortage wasn’t entirely KFC’s either. It was a normal supply chain issue. But KFC took onus of the issue and their customers applauded them for it.
In a world where every company is trying to blemish & touch up their image, use your social channels to quickly acknowledge any brand imperfections, especially when mistakes are made.
See if you can get a headstart on the conversation before it blows up beyond your control.
Even if there’s no glaring issue, there is a certain power in being inherently honest with your customers.
So don’t be afraid to show all your cards, even the less glamorous ones. Just like you, your brand is most beautiful when its real.
Core Insight: People hate losing what they already have.
Imagine I gave you $5.
Now take another scenario in which I give you $10 but at the end of the day, ask for $5 back because I need it.
In both situations, you’re left with $5 at the end of the day, which you could use to buy a Coke or cookies.
But the latter feels slightly less sweeter. This is “Loss Aversion” at work.
We hate to lose what we have more than we love to gain something.
The psychology of losing something weighs more on a person’s subconscious than when something is won. Humans will do anything they can to avoid loss.
We hate losing our place in the queue, and backing out on investments we’ve made (even when we know some of them are irrecoverable sunk costs).
When websites announce “Don’t Miss This” deals, they’re basically playing on your FOMO (Fear of Missing Out) … on a limited-time offer.
In the copy below, the e-commerce company is urging their customers to grab the live offer before it goes away.
Similarly, many SaaS companies will offer their tools & software for free 1-month trial periods to get you comfortable with using it.
Once your work is integrated with the tool, it becomes uncomfortable to stop using it or switch to an alternative. Doing so would mean losing your data & progress so far.
This is when the SaaS company will go in on the kill & ask you to buy/upgrade to its paid package if you want to continue using the service.
As such, leveraging this mindset in your copy from re-targeting campaigns to banner images will prove highly effective (eg. Last Offer before you lose the chance to get this e-book for $9.99).
Loss aversion is triggered by a deeper cognitive bias called the “Endowment Effect.”
This theory postulates that consumers place more weight on things in their possession (which can be as insignificant as just holding it). So they will not want to easily give up on what they have in their hands, quite literally.
In principle, you can leverage the Endowment Effect by:
Offering free trials & samples
Creating interactive experiences of your product (e.g., concept stores, so people can touch & feel the products)
Allowing customers to visualize the product belonging to them already (VR/AR headset experiences)
Core Insight: Customers need constant reassurance that they’ve made the right choice by choosing your brand.
How many times have you decided on what to order, watch, or wear … only to regret your choice later because you saw something else that seems like it’s the better option?
This is cognitive dissonance at work – when our actions don’t match our latest views or perceptions so there’s a feeling of uneasiness that creeps in because of the disconnect.
To reduce dissonance, we turn towards “confirmation bias,” deliberately seeking out information that aligns with what we want to believe.
For example, if we think a particular food is good for us, we’ll Google “benefits of ____” & be drawn toward articles that shine a positive light on the food item. In doing so, we may deliberately skip articles that warn us of the risks or downsides of consuming it.
In simple terms, we prefer to act in ways that support our beliefs (and vice-versa).
As marketers, we need to reduce cognitive dissonance in customers by providing constant reassurance that our product is the best for them, both before and after the purchase.
This can be done in various ways:
For e-commerce brands, include specific bullet points for “Reasons Why You’ll Love This…”
Call out your target customers by sharing info on who exactly this product is meant for
Use analogies to explain new or complicated products/concepts – people don’t like stuff they’re unfamiliar with
For SaaS brands, host ROI calculators on your website to show the benefits/returns of using your tool
Use statistics & data to prove the progress your customers are making because of the product
Build trust via testimonials & endorsements (social proof)
Write informative blogs & “how-to” guides that help customers achieve maximum results with the product
Follow up with “How to Get Started” emails immediately after purchase so that customers use & like the product
Simply put, when you’re developing marketing communications, always ensure you explain how your brand can fit well into the customers’ current lifestyles & worldviews.
Customers buy what they believe.
Core Insight: Customers are more motivated to complete actions when they can see their progress.
The Gymshark website shows how far you’ve come in the checkout process, and how many steps you’re yet to complete.
This is a “Goal Gradient,” which is a visual representation created to motivate people to push through until the end in order to validate all the efforts they’ve put into completing the steps so far.
Studies suggest that people are more motivated to keep going when they can see how far they’ve come and how close they are to a goal.
For loyalty programs, offer visible progress of reward points that the customer has gained in the past, along with how far they need to go to unlock/redeem the next set of prizes, coupons, or rewards.
An extension of this theory suggests that giving an initial free push to your customers is a good motivating factor, too.
In my university, we had a sandwich shop that gave out loyalty cards to students. They’d punch it on every visit, and after 8 purchases, you could exchange the fully stamped card for a free sandwich.
Then they experimented with a card of 10 punch holes, with 2 already punched for you, giving the illusion that you’ve made a headstart in the pursuit of a glorious free sandwich.
It still required 8 visits, but the mere illusion of getting a free headstart pushed more students to complete the track, increasing their revenues.
Core Insight: Customers like to shop for bundles & sets with items that complete each other.
We have a tendency to like stuff that compliments each other to serve a singular purpose.
Take the pants & shirt combos in fashion stores that give you a complete look for a particular event (eg. party outfit, traditional wear).
Or consider wine & cheese pairings, or the entrees – main course – dessert format followed in fine dining restaurants.
The same principle applies for many gifting products, such as Shaving Kits or Bath boxes with soap, moisturizer, shampoo, etc.
This is called as the “Set Completion Tendency.”
This is why Amazon has a dedicated widget labelled “Customers Also Bought” below its products. So when you shop for a pencil, you’ll be recommended to buy an eraser, too, thus increasing your cart value.
When you’re launching, try to have:
Buy In Bulk Offers
Gifting Package Service
This stationery store promotes a Starter Kit, prompting people to pair their notebooks with a pen stand, back pack, and pen refills.
Additionally, people like to finish a task so they can move on to the next, so notifications like “Buy x to complete your look!” will also tap have the same effect.
Core Insight: People prefer products that follow moral codes & are good for society as a whole.
There are some behaviours & moral principles that everybody agrees on in society.
In fact, not following them would usually attract the mob’s ire instantly.
Donald Trump is one exception to this rule, making for a brilliant case study of how being “brutally candid & offensive” can actually make you attractive if you’re addressing certain target demographics that don’t fall in the liberal spectrum.
If you’re doing something that’s well in line of society’s “injunctive norms,” you might as well use that to elevate your brand image by calling out those features in your product description.
As we discussed above, people love to buy products that are in line with their positive worldviews.
In the below example, Adidas focuses on communicating the fact that their products are made from recycled ocean plastic, a fact that their customers can proudly show off to their friends.
Some more examples of injunctive norms that you can highlight in your marketing are:
Fairtrade (ethical sourcing)
Green product (no pollution, recyclable material)
LGTBQIA+ friendly store (safe space)
Safe for kids
Supporting social causes by donating part of the proceeds
When Steve Jobs introduced the world to the first iPhone in 2007, he knew it would be a ground-breaking product.
But that could be a double-edged sword if marketed incorrectly – barring some early adopters, most people are sceptical of buying something that’s too novel or original.
So Jobs started his speech by telling the audience that Apple was launching three separate new products they were slightly familiar with:
An internet browser
An advanced iPod
He kept repeating these three terms until the audience caught on and realized that they were all part of one single item – the iPhone.
In doing so, they immediately understood the huge leap it was in terms of technological & functional value because it combined the features of three different items.
This is the familiarity heuristic in action – a technique Jobs commonly used to market his innovations to the press.
When learning new concepts, we inevitably try to link them to the knowledge that we already have. For example, when we’re picking up a new language, we always translate the foreign words into English (or our mother tongue) to remember them better.
The same goes for stories, movies, or startup ideas – we try to use analogies or draw similarities to make sense of them.
For example, Slack is often touted as the “WhatsApp for work” and Canva is sold as the “PhotoShop for non-designers.”
So in your marketing communications, its best to unveil new features or products (especially in technical industries like SaaS) by making the audience comfortable with facts or concepts that they already understand.
Use metaphors or comparisons to lay a foundation & then reveal how you’re innovating on top of it to solve an inherent flaw or drawback of that foundation.
Edward Thorndike discovered in 1915 that when people rate someone on one trait it is correlated with their ratings on other traits. Put simply, people tend to see a person’s performance as all good or all bad.
So one of their traits sits at the centre of their perception and forms an extended halo that spills over into the entire personality (as perceived by others).
In marketing, the Halo Effect refers to the consumer’s favouritism toward a line of products due to positive experiences with other products by the same brand/maker.
It signals overall brand strength, and brand loyalty, and contributes to brand equity.
It is loosely related to the 80-20 rule, which assumes that 80% of your sales will be generated by 20% of your products, and the other 80 will simply benefit from/piggyback on that star product’s success and consumers come to expect the same experience with anything sold under your brand name.
Sirius Satellite Radio and Howard Stern. Sirius has 120 channels, but they promoted only the shock jock. Results were phenomenal. The day they announced the hiring of Stern in 2004, Sirius had just 660,000 subscribers. Today they have more than 3 million.
Stern is not for everybody. Probably half of the new Sirius subscribers will never listen to his channel. But the focus on Stern generated enormous PR and created a halo over the entire satellite radio system, much like the effect The Sopranos had on HBO or House of Cards had on Netflix.
Similarly, in its early days, Apple put the bulk of its marketing budget behind the iPod creating a halo effect that helped the entire Apple product line. For example, in 2005, because of the iPod’s success,
Apple Computer sales were up 68% over the previous year. Profits were up 384 percent. And the stock was up 177%. And Apple’s net profit margin increased from 3.3% to 9.6%, an astonishing jump.
Today’s Apple’s gem product is the iPhone, and you’ll see 80% of its advertising campaigns focused on selling the new model. The rest of the products in the ecosystem kind of sell themselves.
In 1930, Michael Cullen set up the first-ever supermarket chain, which he called “King Kullen.” The genius lay in his method of pricing. He decided to price 300 items at cost, another 300 items barely above cost, and the remaining 600 or so items at fairly healthy margins.
No points for guessing which items he chose to advertise. The ones he sold at no margin of course (which led to people rushing to his chain). What you advertise and what you make money on can be two different things.
As Al Ries from Branding Strategy Insider says, “To cut through the clutter in today’s over-communicated society, place your marketing dollars on your best horse. Then let that product or service serve as a ‘halo effect’ for the rest of the line.”
Information Gap Theory
Our mind hates leaving mysteries unsolved.
If you see the headline “Here’s the Secret Reason Why You’re Not Losing Weight,” you’re going to click the article’s link faster than a dog running toward a tennis ball in an open park.
Our brains are hardwired to learn end-to-end, and we crave to have a complete understanding of something.
So in your marketing communications, try to add a sense of mystery or intrigue so that your viewers or readers are compelled to find out more about the topic.
Some examples of writing that use this technique are:
What Bruce Lee can teach you about design
This little-known email formula can increase your CTR
My mom lost 15 kg. Here’s what she ate every day…
This is how you can save more money on Movies as a Student
Eating fries? Here’s why you should STOP right now
The Secret Technique Designers used to get fast Approvals
Increase open rates with this tip from Hollywood [QUIZ]
Which Indian dessert should you have this weekend?
Are you making these 7 common LinkedIn profile mistakes?
I discuss this in detail in my article on writing open loops.
So that was an exhaustive list of psychological concepts that every marketer should know.
Which ones are your favourite? Did I miss any good theories that should be on this list?