Introduction to Cognitive Biases
For all of the unique and creative personalities in the world, our brains are fairly similar and, in many ways, predictable. While the thousands of decisions we make each day are a combination of experience, emotion, and opportunity, the way in which we apply logic and rationalise our decision-making is susceptible to flaws. Cognitive bias, broadly defined as systematic deviation from objective decision making or interpretation of information. It is a pattern of assumptions inherent in our thought processes which can unconsciously influence behaviours.
Sometimes, these cognitive biases work in our favour. When we need to make quick decisions or choices when we don't have all of the available information, we can apply certain assumptions to help us make the best decision, even if they are far from perfect. But these biases can also be harnessed to connect with others or to grab the attention of customers we might not otherwise reach. Naturally, cognitive biases can be exploited, and, indeed they are by companies with less than altruistic motivations. But, by understanding how cognitive bias works, we can leverage them with good and transparent intentions, attracting customers and focusing their attention on the details we believe are most valuable for them, can allow us to connect with our customers on a more personal level, and improve our sales and marketing process.
Understanding Key Cognitive Biases
Depending on who you ask, there are between 35-60 different cognitive biases inherent in human behaviour, and while each one may not be crucial for your sales and marketing goals, there are a number of them which are frequently used in sales techniques and have proven particularly effective.
Anchoring bias occurs when we make judgements using the first piece of information we see, rather than a balanced and logical overview of all available information. An example would be when customers are sent to a websites’ landing page or promotional section with an impressive statement or statistic about a products performance. It's much easier to like the product, because he hold that first impression in such high regard.
Confirmation bias is the tendency to search for and use favourable information to validate your prior belief. We see this bias often when people cite one data point from a single, obscure research study to support a generalised claim (podcasts such as the Joe Rogan experience are particularly heinous repeat offenders of this, but it’s typical in online media where quick soundbites replace rigorous thought processes). In sales, we lean into our own confirmation bias by seeking out positive reviews and recommendations, which also lends itself to social proof bias.
Social proof bias is common in sales and marketing, and therefore, it is important to be able to identify and use it for your own strategies. Humans are social beings, we often unconsciously look to others for guidance on how to behave or interpret situations. Typical uses of social proof bias include testimonials and reviews, celebrity endorsements, and referrals.
Loss aversion bias is another common bias where we tend to put greater emphasis on what we have to lose rather than what we might gain. In broad terms, we focus on the negatives rather than the positives and leanmore towards preventing those negatives. We are essentially in a default, low-risk mode. You may already be aware of one subtype of loss aversion bias; the sunk cost fallacy, where a person continues to invest time, money, or effort because of prior investments. In sales, this can be observed when someone has taken the time to learn and understand the product or service and feel that they have already invested time and effort, and so buying that product can feel like the invested time was worth it.
Scarcity bias is a fairly standard one that we are probably aware of in some capacity. It is the concept where we believe that something is more valuable if it is rare or difficult to obtain. An example would be limited pre-orders of a new car or luxury watch. It’s also why supply of items such as diamonds is kept artificially low so as to create the illusion of scarcity and increase their value.
The last example we are going to mention is the hyperbolic discounting bias, where individuals tend to place a disproportionately high value on immediate gratification compared to future rewards, even if the future rewards are objectively greater. An example would be when we are enticed by deferred payment strategies (buy now, pay later) or free trials where we are granted immediate access to what we want.
Utilising Cognitive Biases in Marketing Strategies
Ok, so now we are aware of some of the most common cognitive biases, how can we leverage them to create clearer sales and marketing campaigns? The first thing to remember is that we always want to act with honesty and transparency, and so we should use cognitive biases as a way to improve customer discovery and initiate a relationship. One way to do that, is to begin by thinking about the customer journey.
Customer journey
One part of the customer journey, where they reach your website, can send them to your landing page. Here, another cognitive bias called the framing effect can be helpful. It describes how we perceive information differently depending on how that information is presented, or framed. For example, highlighting a particular aspect of a product in a very positive light, such asan impressive camera on a phone to create better memories of our child's birthday, can lead us to elevate the importance of that feature, even if the true value is limited. Marketing campaigns for popular technology do this often but we can also see the framing effect when items are labeled as luxury or platinum level. Be a little cautious here, because these labels are overused and may have been diluted in their effect. Having moved to the US recently, I must admit, it was a little intense to see almost everything presented on a tiered level, with silver, gold, and platinum. Presumably
marketing teams ran out of precious metals because I also noticed VIP, exclusive, and luxury.
While I would recommend coming up with more creative adjectives than mentioned above, that terminology is used for a good reason. Framing bias can support your own sales and marketing campaigns particularly when you direct customers to a websites landing page which immediately highlights certain features that are distinct or superior than those of your competitors. Additionally, by pairing the framing effect with other strategies, we can further drive engagement and customer conversion. For example, leveraging scarcity bias within the same landing page, to display a limited run of a unique version of your product or a fixed number of pre-orders as a discounted rate, could provide additional incentives for a customer to make a purchase. This pairing strategy can yield a greater return of investment while providing additional value to the customer.
Sales presentations
Social proof bias is a tried and testing method that fits nicely into sales presentations or websites. For example, leaning heavily on testimonials from satisfied customers will provide credibility and trust. Endorsements such as these reflect the bias that customers are more likely to be influenced by opinions and experiences that align with their own. It may be commonplace to use endorsements, but prioritising them early in a sales pitch and reiterating them towards the end can maximise the effect social proof bias.
Furthermore, loss aversion bias can be effective for sales presentations where you can highlight potential missed opportunities if the sale doesn’t through. What do customers stand to lose if they don’t make the sale with you today? Make sure to emphasise this point, but more importantly, look to identify the customer needs and how this sale will solve a problem for them. If the sale isn’t completed, they will lose the opportunity to solve that problem.
Negotiations
Sales negotiations can be a key area in which cognitive bias creep in. For example, anchoring bias, where we make judgments from the first piece of information, can be crucial when setting the initial offer. As the seller, you could strategically set the initial offer or price as an anchor point for the negotiation. By starting with a high anchor, you can potentially influence the other party's perception of what is reasonable and increase the likelihood of reaching a favourable outcome closer to your desired terms. Reinforcing the anchor throughout the negotiation by referencing it to keep it at the forefront of everyone's mind can help maintain the perceived value of your offer and make subsequent concessions appear more significant in comparison. As with any sales situation, it is always important to enter every negotiation with as much empathy and transparency as possible, and a genuine effort to find a win-win. There is a large body of research with neuroscience and psychology as to why empathy is a winning strategy, and you can read more about that from my article on the neuroscience of negotiation on this website.
Ethical Considerations
We should note here that understanding our susceptibility to cognitive biases shouldn’t be thought of as an invitation for deception. Instead, we can use these notes as a way to better understand and connect with the customer’s perspective.
Customer perceptions of you and your company are important and can be veery difficult to change once that impression is made. A reputation of integrity and transparency will outweigh any short-term profits. Keep in mind the hyperbolic discounting bias mentioned earlier where short-term gains are prioritised over long-term benefits, which, in this scenario, may not be a good thing.
By fostering an environment where a customer benefits from the value of the sale, they can essentially become a brand ambassador not only for the product but also for the company and sales representative.
Conclusions and takeaways
1. Think through your goals and find a real fit. Think about the customer journey and which cognitive biases are most prevalent in each step.
2. Compound biases by looking to pair complimentary techniques for better outcomes.
3. Foster an environment of emotional intelligence and empathy. Using sales techniques can help get the conversation moving and overcome stumbling blocks, but we all respond more positively to personalities that are welcoming and understanding.Cognitive biases are inherent in human behaviour. By understanding which biases are common in your customer base we can learn to apply them to new sales and marketing.
In the end, a combination of cognitive bias, empathy, and value, will create an environment where everybody comes away happy, a win-win!