DIAL LOG

Cyber Week: How Retailers Use Behavioral Science (to Influence Your Spending Decisions)

Cyber week retail store shopping mall

Black Friday. Cyber Monday. That’s right, holiday shopping season is upon us.

Retailers have one objective this cyber week—to get you to spend as much money in their retail/online stores as possible.  To achieve this objective, retailers use behavioral science, or the study of human behavior, to influence your spending decisions. How are retailers able to do this?

Create a sense of urgency

People are looking for good deals and the limited-time nature of retailers’ discounts creates a sense of urgency for them. We may be told that the big sale is ending soon. Or that there is a limited supply of an item that we are interested in.  This works because nobody likes to miss out on an opportunity to save money—and that’s why time-limited discounts work. It is human nature to seek pleasure (discounts) and avoid pain (missing out on discounts).

“Holiday Shopping Ads Are Geared Toward the Brain’s Reward Center.”  -Camelia Kuhnen

Elicit positive feelings of excitement

Cyber Monday retail store shopping mall

“Holiday Shopping Ads Are Geared Toward Brain’s Reward Center,”  says Camelia Kuhnen, a behavioral economist at the University of North Carolina. These offers appeal to both the “fear anxiety center” and the “reward center”—the part that’s a trigger when we’re happy, says

Kuhnen.  She argues that our “happy-frenzied” state drives us to strongly prefer immediate rewards and take on more financial risk. Sales

, coupons, and markdowns—valid only for a short period of time—help to build excitement in our “reward center”. And thus, retail sales soar.

“FREE!” Effectively to frame the “gains” for consumers

Daniel Kahneman, the Nobel Prize-winning author of Thinking, Fast and Slow, has written about the psychology of gains and losses. This subject directly applies to how retailers are using behavioral science. Aron Ezra, the CEO of OfferCraft gives a very simple example to demonstrate.

Scenario 1: Sales associate #1 is selling $60 pants and then attempts to up-sell the customer on a $15 belt.

Scenario 2: Sales associate #2 sells the pants at $75 and presents the belt as a free gift.

Not surprisingly, the “free gift with purchase” will help enterprising sales associate #2 move a lot more belts than his counterpart. Why? Kahneman says that psychologically, we feel losses twice as acutely as we feel gains. A free thank-you gift would be viewed as a gain for the consumer; passing up a free gift will feel like a loss. We like receiving gifts. It feels good—and retailers know this.

This is just a brief list of all the ways we can be influenced–even when we are looking for it. Before you hit that ‘Buy’ button during cyber week, ask yourself how they nabbed you.

In the next installment, we will look at examples of pricing strategies that work, some that don’t, and why.

Guest Blogger Rich Thau is the Founder of Presentation Testing. His firm helps its clients become more successful by applying the power of behavioral science and social psychology to the process of dial testing and in-depth interviewing.

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