The first obvious question is: What is behavioral economics? It is basically a method that provides retailers with a deeper understanding regarding how shoppers come to their purchasing decisions. Marketing can become more effective when actively using psychological insights to influence human behavior.
The ability to predict customer behavior, even when it appears to be irrational, can provide online retailers with a major edge when pushing certain products.
Here are several aspects of customer behavior to consider when setting out to boost your sales:
The Principle of Scarcity
People respond to the fear of scarcity, so you should motivate your customers to take rapid action before they miss their chance. Buyers tend to purchase something when they are afraid of loss. This principle can be used by online retailers in various ways, such as showing a clock with the time running out on certain products, or limiting the validity of items in a shopping basket to a certain number of minutes.
The Decoy Effect
Behavioral economics indicates that the way an offer is presented is no less important than what promotions are on the table. Most consumers will change their preference when choosing between two options if a third option is offered. It has been proven that if a retailer provides one product of a kind, the buyer may move on to a different manufacturer, but if it provides a more expensive model of the same product, the purchaser will often buy the less expensive one by the same manufacturer.
Let Your Customer Choose
You probably think that offering gift credit is a good way to reward loyal customers. And you would be right. But what kind of credit should you offer them? Some retailers may offer a generous coupon with credit towards a specific range of products. However, studies have shown that most repeat customers prefer a lower value prize on a product of their choice. This enables the online retailer to save money on gift coupons while gaining insights into preferred customers’ favorite products.
Customize Your Offer
It is clear that today’s buyer craves personal attention. You have at your disposal a good deal of data about your customers’ shopping habits and preferences. You also have the ability to customize your offers for each of them. For example, if you are aware that a certain customer responds well to text messages and that she or he tends to shop in the evenings, be sure to send a suitable promotional text at the appropriate time. The same principle applies if your customer responds to social media offers best in the morning hours. Analyze your data to reach out to your buyers at the optimal time and on the right channel.
Options like making special offers, rewarding loyal customers, and personalizing messages are not really new to the world of marketing promotions, but behavioral economics shows you just how to present them to achieve the maximum effect.