Apply these 3 psychology principles to boost sales
It has been established that generating sales is one of the top challenges businesses face, and the reason for this is not far-fetched. Research has shown that, for every $92 the average business spends on attracting customers, a meager $1 is spent converting them.
There are so many factors that influence a consumer’s decision to buy from you — and the buying process is more of a psychological process than a physical process.
While website considerations such as site speed can help, the following three psychological principles are just about guaranteed to give your business a sales boost.
1. Limiting choices: The ‘Jam Study’
It is common business sense that more options equals more sales, right? Not really. In fact, if we’re to go by research, it seems that the “less is more” principle applies more to the business world than to any other. Contrary to popular assumption, Barry Schwartz argues in his book The Paradox of Choice that more options only lead to decision paralysis and unhappiness. This fact has also been well established by the famous “Jam Study.”
Psychologists Sheena Iyengar and Mark Lepper published the findings of the “Jam Study” in 2000 after observing the shopping habits of 754 shoppers at an upscale supermarket. About half of the shoppers passed through the location with a table displaying 24 varieties of jam; the other half passed through the location with a table displaying just six varieties of jam. The table with more varieties attracted the attention of 60 percent of passersby, while only 40 percent of shoppers stopped at the table with fewer varieties of jam.
That must mean the table with more options did better, right? Not a chance! The table with 24 varieties of jam attracted more visitors but only converted 3 percent to buyers. The table with six varieties of jam converted a whopping 30 percent of visitors to buyers. While the table with more variety of jam got more attention, it yielded significantly fewer sales.
How limiting choices applies to your business
The Jam Study instantly makes one thing clear: consumers might find more options alluring, but fewer choices result in higher sales.
Instead of loading your product or service pages with packages upon packages, and paralyzing people’s ability to make a decision, identify just a few core packages that can help your audience and highlight these offerings.
2. Anchoring: Justifying price by comparison
In 2006, researchers Dan Ariely, Drazen Prelec and George Loewenstein asked students at MIT to bid on auction items including a textbook and bottle of wine. The researchers instructed the students to use the last two digits of their social security numbers as the starting value, or anchor, for each item. So one student might value the textbook at $11 while another might give it a starting price of $77, for example. The students then were asked to bid accordingly.
The result? Students who wrote down low numbers were likely to bid lower while those who wrote down high numbers were likely to bid higher — up to 346 percent more than people with low social security numbers. Since the products were being compared with an already preconceived high or low number, it influenced the final amount the students were willing to offer.
How anchoring applies to your business
The anchoring principle establishes what many of us have for a very long time assumed to be true: first impression matters. If you charge $1,000 for your product and people feel it is very similar to, or even better than, a $5,000 product, they think they are getting a bargain. This has nothing to do with product quality. If a product costs $10, however, and people feel it is exactly the same as a competing $1 product, it will be difficult to get them to buy because they will view the $10 product as overpriced.
Try to create a strong first impression of your product — and, as a result, a strong perceived cost — before you reveal the price.
How? One good way to do this is by showcasing the product on a well-designed online sales page. Use high-quality images of the product from different angles; show the product in use via a video; include testimonials from satisfied customers. All of these elements can increase the consumer’s perceived value of the product. Then, when they realize it’s only $29.99 instead of the $199 they expected, it’s a bargain! That’s anchoring in effect.
3. Familiarity: The ‘large black bag’ experiment
In his renowned book Influence: The Psychology of Persuasion, Robert Cialdini highlights the fact that familiarity is one of the principles that influences likability. The more familiar you are to people, the more likely they are to like you. In psychology, this is also known as the Mere-Exposure Effect.
In 1968 Charles Goetzinger conducted an experiment at Oregon State University that helped to establish the familiarity principle. He had a student come to his class in a large black bag with only his feet visible. As Goetzinger expected, other students initially treated the “weird” student with hostility; however, continued exposure to the “large black bag” led to likability.
How familiarity applies to your business
The familiarity principle anchors the The Rule of 7, a popular marketing tenet that essentially states that your prospects have to be exposed to your marketing message at least seven times before they decide to take you up on your offer.
Don’t restrict yourself to just one channel, and make sure to always communicate your marketing messages more than a few times.
Put psychology principles to the test
When it comes to boosting sales, putting these three psychology principles into action can make a big difference to your bottom line. Conduct a split test on your website to see how limiting consumers’ choices impacts sales. Spiff up your product landing pages to increase your products’ perceived value. And repeat your marketing messages on the channels that appeal to your audience. The results might blow your mind.
Image by: thanker212 via Visualhunt / CC BY-ND