The Secrets of Combining Data & Psychology to Grow Revenue

In the last five years, competition within ecommerce has become fiercer than ever. It’s now impossible for marketers to succeed without a deep understanding of how their customers make their buying decisions, and the journey they go on to get there. Below Graham Cooke, CEO of Qubit, provides an outlook on combining data and psychology for the purposes of revenue growth.

The mind is a ‘cognitive miser’; it likes to expend as little energy as possible on making a decision. An effective trait that helps us save energy when we need it, it does however create biases and sometimes illogical behavioural shortcuts. These are called ‘heuristics’. The approximations and assumptions that are created in these decision-making processes, when understood, can help marketers understand how best to sell to their customers in all their illogical, confusing glory.

There are a wide variety of heuristics and cognitive biases that marketers should get to know, but for the sake of brevity we’ll highlight some of the main ones that can be applied easily to ecommerce:

  • The paradox of choice: decision-making becomes harder the more choices a user is faced with
  • Bandwagon effect: we are more likely to act when we can see that others are doing the same thing
  • Von Restorff effect: an item that differs from its peers is more likely to be remembered
  • Spacing effect: learning is greater when information is spread out over time, as opposed to being delivered in a single session
  • Confirmation bias: new evidence is taken as confirmation of an existing belief
  • Self-relevance effect: more information is processed when it is perceived as personally relevant

This last cognitive bias raises a crucial point in how vital customer understanding is in any business strategy. It is impossible for the self-relevance effect to be used correctly without previously understanding who your customer is and how they engage with you.

Centring on your customer has to be the guiding principle with each strategy implemented. Without a detailed understanding of your customer and their journey with your brand, your marketing efforts will count for very little. By using heuristics, marketers can take account of visitors’ cognitive biases and enable them to make better decisions about the products and services offered. That’s what personalisation is all about, and when applied correctly, Qubit have found it can impact revenues by 6%.

Retailers, airlines and hotel chains are some of the businesses embracing this new world of data-led personalisation. By placing reviews of products or holidays, companies are using confirmation bias to encourage reticent buyers to purchase. Using alerts to show if a particular flight is running low on seats applies the bandwagon effect to encourage indecisive customers. And by using the spacing effect to not bombard a customer with all key offers in one go, deal information will be retained for longer and the negative effect of the paradox of choice will also be reduced.

This genuine understanding of how your users think and feel will be key to making sure you serve up the right experiences. Our brains like taking the fastest route, but sometimes shortcuts can turn into dead ends. By understanding this, organisations can set customers on a journey that is most relevant for them and gain a competitive edge in the process.

Leave A Reply