Core truths to help you breakthrough in marketing, customer experience, and design
Understanding and applying behavioral economics are quickly becoming core skills in marketing and design.
In the past, we’ve to rely on best practice and gut feeling for much of the decisions that made it to market, but the availability of research has made it easier than ever to incorporate research findings in our work.
Here are five of the most critical principles that can help you improve experiences right away:
1. People prefer simplicity over complexity
The underlying psychology of why simplicity is so appealing is called Simplicity Theory.
This rule states that people have a bias toward simplicity, and are predisposed to choose products and experiences that minimize their cognitive load.
The Simplicity Index is a yearly ranking of brands with the least complicated experiences. According to the research:
- Simplicity drives love: 64% of consumers are more likely to recommend a brand because of a simple experience.
- Simplicity drives growth: Since 2009, the “simplest brands” have outperformed the stock market by 686%.
- Simplicity drives sales: 55% of consumers are willing to pay more for uncomplicated experiences.
Make your customer experience as simple as possible, and people will prefer it (even if they don’t realize why).
2. People love choice — but not too much
In a study conducted at Columbia University, a team set up a booth of jam samples. Every few hours they would switch from a selection of 24 jams to only six jams.
When there were 24 jams, 60% of customers would stop to get a sample, and 3% of these customers would buy a jar. When there were six jams on display, only 40% stopped. But here’s the interesting part — 30% of these people bought jam.
The takeaway? Lots of options attracted customers to browse, but fewer choices got them to buy.
The negative effects of choice can be more severe than a missed sale. Research shows that when there are too many options, customers feel anxious, will disengage, and can even become depressed.
It’s down to a behavioral science principle known as Choice Overload. It’s the idea that while some choice can be good, too much choice will overwhelm customers.
Understand the balance between too much choice and just enough. Don’t overcomplicate your experience because you’re worried customers will think there isn’t enough choice.
3. People only remember an experience based on its peak and its end-point.
Economist Daniel Kahneman discovered that our brains can’t remember everything, so they use mental shortcuts (called heuristics) to pick out what’s important.
One of the most important heuristics is emotion — the more intense and more recent the feelings, the more memorable the experience.
These findings are the foundation of the psychology principle known as the Peak-end Rule.
The Peak-end Rule says that people judge an experience based on how they felt at its peak and its end, not the average of every moment of the experience. And that’s true whether the experience was good or bad.
The takeaway? If there’s a pain in your experience, get it over with early, and make sure you finish strong.
4. People prefer relevant, personalized messages
It seems like every brand is chasing personalization. In fact, 70% of brands in a recent Everstring report called it a “top priority” because it compels customers to act.
The answer lies in a psychological principle known as the Cocktail Party Effect.
The Cocktail Party Effect was discovered in the 1950s by scientist Colin Cherry. It states that people focus on the information most relevant to them.
In their 2019 Personalization Development Study, Monetate shared the ROI of personalized marketing:
- Personalized marketing drives growth: 93% of companies with an “advanced personalization strategy” saw revenue growth.
- The higher the investment, the better the returns: Companies with ROI of 2x or more said personalization made up at least 20% of their marketing budget.
- Personalization drives long-term customer value: Brands that had the highest personalization ROI (3x or more) focused on loyalty as their top KPI.
The message is clear: if you want to get people to act, create as personalized an experience as you can.
5. People are scared to try new things — unless everyone else is doing it too.
When asked to try something new, people feel anxious and unsure. This fear is deeply embedded in our psychology and needs a strong persuasion tactic to overcome.
The key is in a psychological principle known as Social Proof.
Coined by Robert Cialdini in his book, Influence, Social Proof describes the tendency of people to look to the actions of others to gain permission to try something new.
Here are a few ways to use Social Proof when designing experiences:
- Ask customers to be more like the crowd: People like to follow social norms, especially when they identify with the group. Describe behaviors as valued in the community. Make them feel like “everyone’s doing this, except you.”
- Enable customers to put their trust in the crowd: One of the most effective ways you can use Social Proof is by including product reviews and testimonials. According to Mintel research, more than 70% of Americans ask others for their opinions before making a purchase.
- Get an expert to recommend your product: When experts suggest a product, customers are more likely to believe it will work.
The bottom line
Psychology and behavioral economics principles can seem overwhelming to apply — there are dozens of core research truths that marketers and designers need to understand.
If you’ve never used a research-baked study to guide your strategy, the five principles outlined here are a great starting place. Design A/B tests, and put your faith in experiments.
As Jeff Bezos says:
“If you double the number of experiments you do per year you’re going to double your inventiveness.”