5 Cognitive Biases That Shape Your Buying Practices

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“Money back guarantee!” “Not available in stores!” “Limited time only!” “Call now!” “Only 3 items left!”

Do these cheesy gimmicky slogans actual work?

There’s a lot of psychology behind how we buy. Often irrational, we are wired to respond to stimuli that cause us to act in strange ways. These quirks, or cognitive biases have become the subject of social research from behavioral psychologists such as Daniel Kahaneman, Dan Gilbert, Dan Ariely, and others, who have devised clever studies to uncover some of our strangest buying behaviors.

“But wait…there’s more!”

To unearth the most impactful cognitive biases that affect our buying patterns, I recently interviewed web psychologist Dr. Liraz Margalit, Director of Behavioral Analytics at Clicktale, a company that provides a website optimization platform to online retailers. Based on years of experience with some of the largest online retail brands, Margalit highlighted the following five:

  • Embodied Cognition — conventional wisdom suggests we collect and process details about a product before make a buying decision. In reality, our five senses impact our decisions “as we go along.” Williams and Bargh demonstrated how this works in a clever lab experiment. Research subjects were invited to participate a study in which they received a written description of individuals and were then asked to complete personality questionnaires rating their impressions of the people based on the written description. But the experiment had an unusual twist. To reach the lab, subjects had to take a short elevator ride. Upon entering the elevator, the subjects were asked by a confederate to hold a cup of coffee. Sometimes the coffee was hot and sometimes the coffee was cold. When reaching the lab, the subjects were given the personality descriptions and questionnaires. The experiment found that people who held the hot cup of coffee rated people as being warmer than those who held the cold cup of coffee, despite being given identical descriptions. Stores make use of this bias. For example, stores like Abercrombie & Fitch and Hollister employ unique sensuous combinations that include low lighting, loud music, and strong fragrances to influence the shopping experience.

In the online world, this bias can be triggered using color; for example, by leveraging the ‘power of red.’ Studies have shown that when playing online games, selecting an avatar with a red jersey increases your chances of winning. Psychology suggests that red represents a threat (the proverbial ‘red flag’), and seeing it makes you feel stronger about yourself. Margalit points out that a red ‘call to action’ button on a web site often produces a more positive effect when you want to signal urgency.

· Situational bias is a tendency to attribute a decision to external causes and underestimate the influence of a person’s nature. Examples of this include the use of scarcity and time pressure. Ever notice how travel sites tell you how many other people are looking at the hotel you are exploring, or how Amazon points out how few items are left when you are looking at an item? These sites are using scarcity and time pressure to get you to respond quickly, even if your inclination is not to buy… at least not yet. This is the classic ‘fear of missing out’ phenomenon applied to shopping.

· Bandwagon effect — this bias uses social pressure to motivate people to act. It can be traced back to Solomon Asch’s research in the 1950s that demonstrated how people conform to peer pressure even when they know their decision is incorrect. In Asch’s experiments, subjects were given cards with lines on them and asked to say which line on the card was the longest. Unbeknownst to the subjects, confederates were given identical cards but were told to provide incorrect answers. Asch found that a large number of subjects gave the wrong answers simply to comply with their peers. In the online world, Black Friday and Cyber Monday are textbook illustrations of how the bandwagon bias can be used. Leading up to these days, retailers and the media hype the shopping frenzy. The average shopper thinks, “If everyone is buying now, there must be something good going on, and I want to be part of it.” The reality is of course much different… I mean, do you really need another Big Mouth Billy Bass or that set of miniature garden gnomes?

· Framing and anchoring — this bias uses that fact that people draw contradictory conclusions from the same information, when the information is presented differently. This effect was originally demonstrated by Kahneman and Twersky back in the 1980s and has since become a mainstay of many companies’ sales strategy. Behavioral Economist Dan Ariely describes this effect in his book, “Predictably Irrational” using the example of how The Economist offered three alternative subscription plans. One offered access to web content for $59, another offered access to the print edition for $125, and one offered a combined print and web subscription for $125. Of course, nobody picked the ‘print only’ option; the majority of subscribers picked the combined offer. Surprisingly, when the print-only subscription option was removed from the site, the vast majority of subscribers now opted for the web-only option. In this case, the presence of an irrelevant choice was instrumental in framing the subscribers’ mindset to purchase a more expensive option. Margalit points out that retailers often use this bias to drive consumers to a particular ‘middle item’ by offering three products; one product that is cheap but provides little value, a second product that offers the most value, and a third product that is significantly more expensive than the middle option but provides similar value to the middle option.

· Two Systems — Behavioral psychologist Daniel Kahaneman advanced the idea that people have two systems for making decisions, a fast, automatic, emotional system and a slow, thoughtful, calculating system. The first is used when making snap, impulse purchases like clothes and music and the second is used when considering more rational buying situations such as office equipment or tools. Margalit points out that online commerce sites employ this bias by matching the presentation of a product to the type of purchase. For example, buying clothes is an emotional experience, so the presentation of clothes targets ‘System 1’ emotional thinking by focusing on how the purchaser will look and feel when wearing the clothes. On the other hand, functional products like a light bulb, target ‘System 2’ rational thinking, by providing technical details and specifications. Correctly connecting the item for the sale to the appropriate thinking system can have an enormous impact on sales numbers.

Do These Biases Really Work?

The five biases detailed here have been well-established using laboratory experiments and years of A/B testing on retail websites. But it’s important to note that these biases do not always have the same impact. Under certain circumstances, cognitive biases can be particularly powerful in swaying a consumer’s decision, such as when you are unsure about a purchase or when you are under time pressure. At these opportunities, retailers really turn up the heat.

Margalit calls these situations “moments of maximum influence.” Examples include when you miss a flight and you need to find a hotel room fast, or when a faucet breaks at home and you need to find a plumber. During these moments of pressure, you don’t make buying decisions the same way you would ‘when you have all the time in the world.’

Another example of a moment of maximum influence is related to the time of day. Margalit points out that online, people buy more later in the day. Why is this? She hypothesizes that by the end of the day, we tend to be worn down, so we don’t have as much cognitive energy to process information. At this point, we become more susceptible to subconscious stimuli and we end up buying based on internal heuristics. This effect has also been demonstrated in studies of moral behavior and prisoner parole hearings.

Caveat Emptor

Being aware of the biases employed by retailers does not guarantee that you won’t be affected by them, especially when you are standing in a foot of water in your kitchen on Christmas Day while you look for a plumber. But being an informed consumer can help you make better buying decisions…. Especially if you act now! Operators standing by.

Accomplished technology product and marketing expert, information overload researcher, award-winning technology and business writer.

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