As the age-old saying goes, everything’s fair in love and war. However, in the 21st century, you can add another item to the list: marketing. Because being able to capture the hearts and minds of consumers in an age where buyers are constantly bombarded with messages is only possible if you know how to understand your audience’s mind. And this is where behavioral science comes into play: by knowing how the most common cognitive biases in marketing work, you can align your messages with the way customers think. In other words, you can improve the effectiveness of your marketing efforts by reinforcing buyers in their decision-making.
Download the Global Customer Loyalty Report to learn what loyalty executives see as the most important trends in and around customer loyalty programs.
But before getting into the specifics, let’s ask:
What Is a Cognitive Bias?
Cognitive biases can be best described as shortcuts in our thinking. They influence our everyday decision-making through mental templates that are based on perceptions or beliefs. Though some believe that consumer cognitive biases are a bad thing, like an ‘error in their logical reasoning’, the truth is that such biases allow us to make split-second decisions, helping us to avoid danger and capitalize on opportunities.
It’s also worth highlighting that no one is exempt from cognitive biases. Actually, believing that others have such biases and that you are the only one thinking rationally all the time is a cognitive bias itself. The best we can do is to be aware of our own biases and confront them if necessary, so they won’t prompt you to make ill-informed decisions.
The Role of Cognitive Biases in Marketing and Customer Retention
Assuming that your customers always think rationally is foolish. However, believing that consumers are completely irrational and can be controlled through clever marketing tricks is equally foolish. In fact, such practices can damage your brand’s reputation. The truth is in the middle: buyers generally seek to evaluate their options on a logical basis, but due to inherent fallacies, lapses may occur.
As such, the role of cognitive biases in marketing is not to trick customers but to make them more aware of your brand and ensure that your message resonates with them. Not taking cognitive biases into account while working on your customer retention strategy can cause buyers to overlook your offers, or even worse, be seduced by a competitor.
1. The Mere Exposure Effect
Also known as the familiarity principle, this cognitive bias means that we are more likely to accept something if we see it regularly. For instance, if a weird or unusual object is placed in a classroom, students will initially be bothered by it, but as they are exposed to it on a daily basis, they’ll get used to it — and even grow fond of it.
The Mere Exposure Effect in Marketing
When it comes to marketing, the mere exposure effect involves increasing the visibility and appearance of a certain product. Customers will assume that it is prominent because it is popular. Common use cases include:
- Placing a product on shelves at eye-height
- Using a product image in the banner in newsletter marketing
- Displaying an item prominently in video materials and other content, for example in the presentation background.
The Mere Exposure Effect in Customer Retention
Working with this type of cognitive bias in customer retention is just as easy, especially for omnichannel companies, because they have plenty of touchpoints with customers.
- Use side banners on the website promoting your key product or service
- When sending emails to customers, recommend specific items or offers
- Use social media to regularly tell your audience about the various perks of being a customer, such as free shipping or extended warranty
2. The Anchoring Bias
The anchoring bias means that we tend to use certain information we hear first as a baseline for our judgment. For example, if you are looking for a second-hand car, the first deal you like will be used as a comparison point: everything below its price is a good deal, while deals that are above are overpriced.
The Anchoring Bias in Marketing
In order to make the anchoring bias work for you, you need to be the first brand that enters the consumer’s mind. Of course, this is generally easier for existing customers who already know about your brand.
- During big retail holidays like Black Friday, make sure to start advertising early
- When displaying a discount, always put the crossed-out info first in order to put the size of the discount into perspective
- In search menus, always put highlighted deals at the top
The Anchoring Bias in Customer Retention
A rewards program is an ideal tool to support the anchoring bias: if someone is a member of your loyalty program, they most likely check out your deals first, because they have unused points or coupons in their account.
- Put the main selling points at the top of the program’s landing page
- If you have a subscription program, always showcase the annual membership first, especially if the monthly price is lower
- Offer double point campaigns during the holidays to make your loyalty offerings more enticing than the competitors’
3. The Framing Effect
To put it simply, the framing effect means that we draw a different conclusion about a product or deal depending on how it is presented. For example, a new dishwasher may be better received if it’s shown functioning during the commercial, rather than just having the announcer talk about its features.
The Framing Effect in Marketing
Marketers have been using the framing effect for decades (or more) without even realizing it. Just remember: to make something sell like hotcakes, present it in an engaging, customer-centric way.
- Instead of just mentioning a feature, explain how it makes the user’s life better
- Show the product in action
- Use A/B testing to discover the best way to frame certain aspects of a product
The Framing Effect in Customer Retention
Loyalty points, perks and rewards play an important role in framing your offers. If you have a loyalty program, it means that your audience gets more bang for their buck, which increases the appeal of buying from your brand.
- If you are discounting a price, make sure to display both the original and the discount price side-by-side, so that people are aware of the size of the markdown
- If you offer coupons or loyalty rewards, make sure they are presented in a visually pleasing manner — using more than text and charts
- Always use images when showcasing products, because images help people to make decisions
Salience stems from our habit: when presented with a choice, we pick the option that stands out the most. The reasoning behind it is that we think that if something is unique, it most likely has other positive traits as well.
Salience in Marketing
Salience has always been a golden rule for marketers. Ensuring that your product has the most appealing packaging, the best tagline, and the cutest mascot, increases the chances that it will fly off the shelves.
- Make sure to advertise your product with a feature that the competition lacks
- If a product or service is exclusive, or available only for a small group, it will also increase its desirability
- Design your hottest new products in a way that is visually distinct — even from your existing products
Salience in Customer Retention
In order to achieve salience with your customer retention, you have to put a lot of effort into presentation and UX. Also, having some form of referral or rewards program also helps you stand out.
- Create a colorful, themed membership page
- Use badges and unique icons that symbolize certain actions or themes in the shopping journey
- Consider utilizing experiential rewards in your loyalty program because they are much more exciting than simple coupons
5. The Zeigarnik Effect
The Zeigarnik effect is a bias that makes us more likely to remember unfinished tasks than those that are finished. This kind of bias show many similarities with the sunk-cost fallacy, which prompts us to stick to something if we have already spent a lot of time, energy or money on it.
The Zeigarnik Effect in Marketing
Knowing how to use the Zeigarnik effect in your marketing strategy can increase your retention rate, because you won’t let shoppers leave with an unfinished business.
- Send a reminder email to customers that they have abandoned their shopping cart or have an unfinished booking
- Offer product recommendations or joint offers that complement the original purchase
- Use personalization in emails to make your reminders friendlier and motivational
The Zeigarnik Effect in Customer Retention
If your business offers any kind of benefits — be it limited-time coupons, free shipping or even loyalty rewards — reminding customers about the pending status of these benefits to create the Zeigarnik Effect.
- Put a strict expiration date on coupons and discounts
- Create multi-step challenges for customers, where they have to perform various activities in order to gain some form of benefit
- Remind loyalty program members that they are halfway to a reward or new tier
6. Fear of Missing Out (FOMO)
The Fear of Missing Out is a cognitive bias that nags the mind of many of us, telling that if we don’t act now, we might miss out on a great deal or experience. It’s a double-edged sword that has helped many opportunists score the deal of their lives, but FOMO has also been the source of many rushed decisions.
FOMO in Marketing
The FOMO effect hardly requires any introduction in marketing. Sales executives have used it instinctively to create scarcity and drum up interest for their products. Some of these tactics include:
- Putting a live countdown on a limited time offer
- Sending a reminder email to customers telling them that the current sales event is almost over
- Displaying the number of items left in stock on product pages
FOMO in Customer Retention
Practicing FOMO in customer retention is quite self-explanatory, and can be effectively utilized simply by putting a timer on certain offers and rewards or restricting people’s access to them.
- Limited-time double point campaigns in a loyalty program are always popular, especially during the holiday seasons
- Customers often go crazy for early access to upcoming products or sales
- Offer a limited number of high-end rewards, like experiential rewards, to drive interest
It has been observed that we are more likely to purchase products when they have been purchased by a large number of other people. In this sense, it’s similar to the mere exposure effect, except that the product is ‘displayed’ not by the brand, but by our peers. And, because consumers tend to trust friends and family over corporate ads, the effect is much stronger.
Bandwagoning in Marketing
The aim of bandwagoning in marketing is to get as many people on board. And once you get the ball rolling, more people will soon follow.
- Encourage customers to upload their photos to Instagram wearing your products
- Use influencer marketing
- Display certain offers with the tagline ‘popular choice’
Bandwagoning in Customer Retention
Bandwagoning can be a key aspect of your customer retention strategy if your strategy is focused on community building and influencer marketing.
- Organize comment or photo contests on social media and give the winner a prize
- Invite popular social media influencers whose image and interests align with your brand message
- Show how many members have joined your loyalty program – after all, tens of thousands of members can’t be wrong
8. Zero-Risk Bias
The zero-risk bias is all about certainty. Some of us are inherently risk-averse, and we rationalize this by thinking that if there are no downsides involved (even if the gains are small), then in the end, it’s a net positive.
Zero-Risk Bias in Marketing
When it comes to marketing, the zero-risk bias simply means that some customers are more likely to make a purchase if there is no risk involved. Therefore the safer the deal is, the more likely these types of buyers will come to you.
- Emphasize the durability and safety of products
- Highlight the long warranty or the ability to exchange products
- Offer concierge services in the shop to put the customer’s mind at ease
Zero-Risk Bias in Customer Retention
If you wish to give existing customers peace of mind, make sure to highlight that the perks and rewards you are offering are complimentary, or come with no strings attached.
- Offer a small welcome reward for those who enroll
- Emphasize that it’s free to join your loyalty program
- Grant loyalty points for writing product reviews and referring friends, which helps customers feel comfortable in their decision to buy
9. Money’s Worth
In a sense, the money’s worth bias is the opposite of the zero-risk bias. It’s the belief that if something costs a large amount of money, then it must be of higher quality — especially if it’s from an established brand.
Money’s Worth in Marketing
In order to apply this kind of cognitive bias in marketing, you need to have confidence in your product or service. Don’t be afraid to show off the price, just make sure that the item is presented in the best possible light and has its benefits emphasized in order to justify the price tag.
- Even if the price is high, you can still present it in a way that buying it is a great deal
- Put high-quality products next to weaker ones
- Use FOMO tactics to convince uncertain buyers
Money’s Worth in Customer Retention
In customer retention, the money’s worth principle is used to generate exclusivity and make members feel privileged by offering rewards that are hard to obtain but have a high inherent value.
- Offer higher-value coupons, discounts or rewards like free express shipping that are limited in quantity
- Allow members to join the early access club by paying some form of entry fee
- Include an invitation-only tier in your loyalty program
10. The Ikea Effect
Based on research in which participants had to put together Ikea furniture and rate their own performance, the Ikea effect says that we were more attached to a process or activity if we have contributed to it — even if in small parts.
The Ikea Effect in Marketing
This kind of cognitive bias can really help build an emotional connection with customers. Just let them participate somehow in your development. Even if this participation is rather superficial, customers will love the experience and grow closer to your brand nonetheless.
- Let customers share their design ideas or artwork for future products
- Allow them to test certain products or features before launch
- Encourage them to leave product reviews on your site
The Ikea Effect in Customer Retention
To make the most out of the Ikea effect, be read to involve customers not just on a financial level, but also on an emotional one.
- Invite top spenders to test upcoming new product drops
- Encourage customers to send feedback or design ideas
- Before the launch of your loyalty program, soft test it with your brand advocate segment
11. The Reciprocity Bias
The reciprocity bias is one of those biases that make the world more wholesome. It means that if we receive a favor, we feel the need to return it in some form. The reciprocity bias is the basis for maintaining our long-term relationships.
The Reciprocity Bias in Marketing
One of the best ways to build an emotional relationship with customers and create brand evangelists is to make the first step, and be the first one to give something special.
- Personalized marketing messages always find a way to people’s heart
- Offer special articles written by your experts, educational videos, or other content to create a bond with your audience
- Align with your customer’s values by promoting charity, sustainability and other noble causes
The Reciprocity Bias in Customer Retention
Next-gen loyalty programs that focus on building an emotional connection offer multiple ways to make customers feel appreciated and recognized.
- A perks program is not only free to join, but also has no points and tiers, therefore all rewards are accessible from the get-go
- Giving freshly enrolled members a welcome gift ensures that your relationship starts off on the right foot
- Lifestyle loyalty programs are all about rewarding customers for having an active lifestyle or caring for social causes
Achieve Loyalty Through a Shared Bond
In marketing and in loyalty programs, there’s no such thing as a single, consistent cognitive bias. Sometimes customers exhibit them and sometimes they don’t. Biases are also linked, such as how FOMO can contribute to the money’s worth bias, or how framing may strengthen the salience effect.
Nevertheless, your goal should not be to use consumers’ cognitive biases to exploit them, but rather to build a relationship with them that feels natural and comforting. Because loyalty achieved through emotional bonds is always stronger than any financial incentive.
Interested in putting the theory into practice? Antavo’s next-gen, cloud-based loyalty technology provides the platform to test your ideas and build amazing customer engagement opportunities. Learn more about it through one of our demo sessions, or send us an RFP for detailed answers.
For an educational read on what to expect from the customer loyalty market in the next three years, be sure to check out our Global Customer Loyalty Report.
Tamas is a Senior Loyalty Program Specialist at Antavo and a Certified Loyalty Marketing Professional - CLMP. Tamas is known for having a keen eye for loyalty and customer retention research and trends. Tamas is also a true gamer at heart and has an impressive collection of cyberpunk books.