Understanding and Leveraging Consumer Psychology to Drive Sales

One of the fiercest fights in modern retail is for grocery shelf space. Almost no tactics are out of bounds, because companies know where a product is placed has a massive effect on its sales. Your favorite cereal might depend on what shelf you found it on.

These are the insights from consumer psychology. Food manufactures know people are more likely to buy products at eye level, or ones at the ends of aisles. With this knowledge, they can compete and create better marketing strategies.

Understanding consumer psychology can help your business too. None of us is as rational as we like to think. You must understand how people actually make purchasing decisions.

 

Vance Packard and the Depth Approach

All the way back in 1957, Vance Packard explained the importance of understanding consumer psychology in his classic book on advertising strategy, The Hidden Persuaders.

In his book, he describes how advertising people tried to channel our unthinking habits, thought patterns, and subconscious needs to influence purchasing decisions. They incorporated insights from psychology, sociology, and other social sciences. Psychological marketers do the same today.

Packard referred to it as the depth approach. It was born from the insight that often what people told marketers they wanted, and what they bought, were wildly different. In other words, you can’t expect people to buy rationally.

This insight combined with another trend, the increased standardization of goods. With large-scale industrial production, one product was basically the same as another. Marketers needed a way other than physical characteristics to differentiate products.

The solution was image marketing. Advertisers created an image or brand, which was hard for competitors to copy, and linked that image to subconscious needs. Customers didn’t buy products. They bought confidence, safety, or security.

Packard and other marketers at the time exaggerated the effectiveness of psychological marketing. This also led to the unfounded excitement or, depending on your position, trepidation about subliminal advertising at the time.

However, Packard was right about its role in future brand management. It isn’t a silver bullet, but it is essential.

The Depth Approach in Action: Marketing Deodorant

The early marketing campaigns around antiperspirant are a good example of this approach in action. This example shows that psychological marketing is much older than even Packard suggested. The difference now is how sophisticated our understanding is.

In the 1910s, deodorants and antiperspirants were new inventions. People had to be convinced they needed them. So, advertising campaigns presented excessive sweat as a serious social embarrassment, and one that no one would mention to you.

In other words, you could smell and not even know it. Deodorant advertisers created a psychological issue (embarrassment, low confidence, social anxiety) and then positioned deodorant as the solution. They created an emotional appeal instead of a rational one.

Creating Specific Customer Personas

The above example is a bit nefarious but using consumer psychology to drive sales does not need to be. The point is that understanding why customers really buy your products is one of the keys to marketing to them.

The first step then is to understand your customers. The best way to do that is to create customer personas. You are basically creating pictures of your ideal customers. Who are they? Where do they live? What is important to them?

Think of it like creating a character for a story. You can give your personas names if that helps, but really dive into their beliefs and values. Then, connect those beliefs and values to your products. How do their features relate to those psychological needs?

Ideally, you would create a unique persona for each segment of your customer base. Finding under-served personas is a great way to expand your market through both digital and traditional marketing.

How Customers Think: The Central Versus The Peripheral Route

Of course, understanding customer needs isn’t the only way to use psychological marketing. You can also improve your ad copy by understanding how customers think. As Packard showed, not everyone thinks rationally when they buy something.

There are two ways customers can evaluate your pitches, the central route and the peripheral route. The most effective marketing approach depends on which route they pick.

The central route is what we would consider logical thinking. Under central processing, customers take their time and evaluate the arguments. They consider pros and cons and come to a rational decision.

The problem is, using the central route takes a lot of time and cognitive energy. It’s more difficult to evaluate a situation completely. Our brains try to minimize the amount of cognitive work we need to do to get through the day.

So, people will often default to the peripheral route. Under peripheral processing, we apply heuristics, or rules-of-thumb, to make our decisions. It’s faster, easier, and works well in most cases.

You can probably see how the best approach depends on how a customer processes the ad.

If they use central processing, you want to present a rational appeal. Your job is to present the best facts and figures so they can make an informed choice for your product.

If they use peripheral processing, you’ll need to consider which heuristic they’re using (more on that below) and shape your appeal to fit it. Facts are probably less important than feelings.

How Consumers Choose Their Route

For the most part, the type of processing people pick depends on personal involvement. The more personally relevant a topic or decision is for them, the more likely they are to use the central route.

For instance, suppose you presented students with a proposal to change the science curriculum. If you told them the change was set to take place this year, they would use the central route since the decision affects them. If you told them it would only take place after they graduated, they would use the peripheral route.

In that sense, you can have some influence over the route your customers pick. If your selling points are very strong, you want to make your pitch as relevant for them as possible. Then, customers will consider the argument.

However, if you’re arguments are a bit weaker, you’ll want to encourage them to use the peripheral route.

Other factors influence the choice as well. Another big one is time. The longer people have to consider a decision. the more likely they are to pick the central route. In some cases, it’s in your best interest to force a quick decision.

The other big one is emotion. Strong emotions often drive people down the peripheral route. We’ve all had experience making a snap decision when tensions are running high.

Exploiting Heuristics of Consumer Psychology

Approaches for the central route are simple, present a logical argument full of facts and figures that show why your product is the best.

Approaches for the peripheral route are a bit more varied. As the above section describes, it depends on which heuristic you want to focus on. Below are some of the most common heuristics and how they can be leveraged.

The Scarcity Principle

For the most part, people assume that rare things are also valuable. That’s probably why they are rare, so many people want them.

You can exploit this heuristic by creating artificial scarcity. We’ve all seen advertisements that blare “While supplies last” or “Limited Quantities.” Deadlines work the same way by suggesting a deal won’t stick around for long.

Scarcity also drives another principle called psychological reactance. This principle holds that when people feel their freedom is threatened, they react by reasserting it.

In this case, if people feel like they cannot buy a product, they will want it even more. When a product seems unavailable, that is a threat to our freedom to buy it, and it makes the product that much more enticing.

Social Proof: Following the Crowd

It’s a cliché, but humans are social animals. We tend to go along with the crowd, and that includes our buying decisions. One of the best ways to market your product is through social proof like customer testimonials or word-of-mouth.

However, social proof is more important in some situations than others. Social proof is more important in moments of uncertainty. If we don’t know what the right decision is, we look toward other people to see how they act.

When we are more confident about what to do, we do not look at other people as much. Instead, we rely on our own judgment. In that sense, social proof is even more important for new products.

The effect of social proof also depends on who is providing the proof. This is the similarity principle. We like to listen to sources that are similar to us. So, if you want to leverage social proof, you want the sources to be as similar to your audience as possible.

Social proof and scarcity work well together. Scarcity is most effective if that new scarcity is the result of increased demand. If more and more people want your product, then it must be valuable.

Structuring Choices: The Contrast Principle

Another thing to consider is how you can structure your choices to take advantage of consumer psychology. Richard Thaler and Cass Sunstein describe how the right choice architecture can get people to make better decisions in their book, Nudge: Improving Decisions About Health, Wealth, and Happiness.

For the most part, people will accept whatever version of a choice you give them. They seldom rewrite a proposition or consider it from a completely new angle. You can use that to your advantage by framing the choice correctly.

One option is to exploit the contrast principle.

People don’t make decisions in a vacuum. Instead, they compare that choice to the available alternatives. By choosing the right alternatives, you can drive people toward your preferred choice.

Companies do this with their product lines all the time. Often, they will manufacture at least two versions of their product, a standard model, and a more expensive, deluxe version.

There are various reasons to do things this way, but one reason is that the deluxe version makes the regular one seem more reasonably priced, or depending on the features, it can make the regular version seem inadequate. Either way, you can direct the customer to the choice you want.

Anchoring: Providing the Right Defaults

Another way to structure choice is by providing appropriate anchors. These are basically the default choices you provide people with, and they influence how a customer evaluates a decision.

As an example, consider two forms for a donation. Each one lists potential amounts.

The first form includes the following choices:

– $5

– $10

– $20

– $50

The second includes the following choices:

– $20

– $50

– $100

– $150

This is a simple example, but the second form would pull more donations. It suggests that the acceptable donation is higher, and, thanks to anchoring, people are unlikely to question why these defaults were chosen.

Likewise, people generally prefer the middle option when they’re choosing between alternatives. By adding the right anchors above and below your preferred choice, you can drive them toward it.

There Are Dozens of Heuristics

The four heuristics listed above are just a small selection. There are many others, gleaned from decades of psychological research. People have studied one of the most famous, loss aversion, for decades from every angle.

As a field, behavioral economics deals with heuristics. While classical economics assumed people behave rationally, behavioral economics started looking at how we really make decisions.

There’s not enough space to discuss everything here. If you’d like more information on how people apply heuristics in their everyday decisions, Predictably Irrational: The Hidden Forces That Shape Our Decisions by Dan Ariely is an excellent primer.

You Can’t Read Minds, but You Can Get Close

It’s tempting to think people will buy your product just because it is the best in its class. However, creating a quality product isn’t enough, mostly because people don’t make decisions rationally.

Fortunately, if you understand consumer psychology, you can give your product the help it needs to survive. You can also help customers make the best decision possible with their limited cognitive energy.

For more tips on improving your marketing strategy, from boosting SEO to generating better leads, browse some of our other blog posts.