Hey All,
Time for DPC (Dhande-Panni-Charcha) again!
Ever wonder why you end up buying more during sales season than your budget allows? Why you decide to add a high-end music system at a car dealership? Or why you purchase a product that seemed overpriced yet irresistible? These are all examples of cognitive biases at work. Marketers skillfully use these biases to persuade customers to buy their products. I've experienced this firsthand, both as a seller and a buyer.
The biases I’m discussing today have been beautifully detailed by Charlie Munger in his video "The Psychology of Human Misjudgment." I have learned a lot from it and want to share these insights with all of you.
Today, I'm going to share 6 cognitive biases in a 3-part series and provide examples from the apparel, food, and consumer durables industries.
Deprival Superreaction Tendency (Scarcity)
Definition: We want things more when we believe they might become unavailable.
Example (Food & Beverage): Starbucks' Pumpkin Spice Latte, available only during fall, creates a rush as customers fear missing out on this limited-time offer.
Example (Apparel): Limited-edition sneaker releases often see customers lining up or entering lotteries, driven by the fear of missing out.
Example (Consumer Durables): Limited stock announcements for the latest smartphone model drive customers to purchase quickly.
Reward and Punishment Responses
Definition: Customers are influenced by the potential rewards they will receive after using a product.
Example (Food & Beverage): Fast food chains offering loyalty programs where customers get a free meal after a certain number of purchases.
Example (Apparel): Clothing brands offering discounts or exclusive access to new collections for members of their loyalty programs.
Example (Consumer Durables): Electronics retailers offering extended warranties or accessories for free with the purchase of major appliances.
Liking/Loving Tendency and Disliking/Hating Tendency
Definition: We prefer to say yes to people we like.
Example (Food & Beverage): A popular celebrity endorsing a new burger, making fans more inclined to try it.
Example (Apparel): A favorite influencer promoting a new clothing line, driving their followers to make purchases.
Example (Consumer Durables): A tech influencer reviewing and recommending a specific brand of headphones, increasing sales among their followers.
Contrast Misreaction Tendency
Definition: We compare two products to highlight the advantages of one over the other.
Example (Food & Beverage): A restaurant menu showing a high-priced dish next to a moderately priced one, making the latter seem like a better deal.
Example (Apparel): Displaying a high-priced designer jacket next to a similar but more affordable option, making the latter seem like a bargain.
Example (Consumer Durables): Showing a high-end TV model next to a mid-range one, making the mid-range model appear more affordable and appealing.
Reciprocation Theory
Definition: We feel compelled to repay what someone has provided us.
Example (Food & Beverage): Offering free samples in grocery stores, leading customers to feel obliged to make a purchase.
Example (Apparel): Sending free trial sizes of skincare products with a purchase, encouraging customers to buy the full-sized product.
Example (Consumer Durables): Offering free installation services for home appliances, making customers more likely to choose that store over competitors.
Inconsistency Avoidance Theory
Definition: We strive to remain consistent with our past behavior and commitments.
Example (Food & Beverage): A customer who has always bought organic products feels compelled to continue doing so, even if it's more expensive.
Example (Apparel): A shopper who has committed to a sustainable lifestyle prefers to purchase eco-friendly clothing, even if it costs more.
Example (Consumer Durables): A customer who has always bought a particular brand of home appliances is likely to continue doing so, even when other brands offer better deals.
These are just a few examples of how cognitive biases can influence our purchasing decisions. Understanding these can help us make more informed choices and also create more effective marketing strategies.
Stay tuned for more insights on cognitive biases and how they shape our buying behaviors.
Best,Lalit
Comments