How Cognitive Bias Drives eCommerce Sales

While we as human beings have agency over every choice we make, the journey we take to land on each and every decision is often spurred by some form of cognitive bias.

You may or may not have heard the term “cognitive bias” in passing conversation. You’ve certainly heard of it if you majored in psychology or behavioural studies. Yet here we are, a digital agency, telling you that understanding cognitive biases is integral to the way you think about your eCommerce business.

We’re talking the power of psychology up a big game. Ultimately, we believe it pays to take the time to understand how your customers think and act on a high level.

First of all, you may be wondering: What exactly is a cognitive bias?

In a nutshell, a cognitive bias is why we think the way we do; it’s simultaneously the way we perceive the world around us and how these perceptions affect our judgments and decision-making process, whether it’s rational or not.

We’re all affected by multiple cognitive biases, often at the same time. By taking the time to understand the undeniably complex workings of the human brain, you can gain insight into the why behind every sale you’ve ever made and every sale you’ve ever lost.

At the end of the day, the goal of eCommerce is to drive sales. And understanding the way your potential customers think will enable you to better market your products to them, and better persuade them to make that leap, hit the “add to cart” button and place the order.

5 Cognitive Biases You Should Know

There are many cognitive biases out there, but let’s start with five that I believe to be the most relevant to eCommerce.

These are biases that influence the formation of beliefs, impact user decisions, buying decisions, and ultimately give us a look into human behaviour.

1) Social Proof

Social proof is a psychological and social phenomenon that involves a tendency to copy the actions of others in an attempt to seek validation from others. In short, people tend to view behaviour as more “correct” when others are engaging in the same behaviour.

What’s funny about this bias is how readily we’ve incorporated it into our daily language. “Show me the social proof, Johnny,” you may joke with your buddy.

Truth is, social proof is a powerful cognitive bias so deeply ingrained in our psyche. It deals with our trust in those around us, our trust in the masses. When those around us start raving about a new product, it sparks our interest.

Social proof is thinking to yourself: “If all my friends love the new Netflix show, maybe I should check it out too.”

This bias is the tendency to rely on the behaviour of others and allow it to influence our own behaviour. It’s the precise reason why word-of-mouth marketing is as effective as it is.

It also inadvertently explains why the bandwagon effect – the tendency to follow a style, behaviour, or attitude simply because everyone else is doing it – is still so powerful.

As marketers, there are various ways to leverage social proof in the form of reviews, celebrity endorsements, influencer marketing, and friend discount codes.

2) Scarcity

Scarcity is the tendency to evaluate something as high value due to the belief that the object or service in question is rare or limited while subconsciously assigning a lower value on something that is available in abundance.

Remember when Kim Kardashian’s shapewear line Skims sold out during the first couple of minutes of going live back in 2019? Since every restock sees customers return with the same ferocity as they rush to get their hands on a new drop or finally restocked item before everyone else does. In this case, the knowledge that the items will likely sell out – and fast – drives customers to act. 

The anxiety associated with the fear of missing out is a driving force behind this tendency. FOMO – aka the fear of missing out – is characterized by the fear of regret or the fear of missing out on a worthwhile opportunity.

When we perceive an item as hard to obtain due to scarcity, we attach value to it. We want it more and are willing to either work harder to get it or pay more to own it. And when we do obtain the item, we feel powerful and important.

Scarcity drives desirability.

This bias can be utilized in marketing through time constraints and purchase countdowns (“get 75% off for the next 24 hours!”), online exclusives, seasonal offers, limited availability, and leveraging real-time activity on your eCommerce site.

3) Loss Aversion

Loss aversion is a cognitive bias that explains why – for most individuals – the pain of losing is psychologically twice as powerful as the pleasure from gaining.

The stock market can be addictive for many reasons, and one of those reasons is loss aversion bias.

Loss aversion will result in the tendency to avoid loss in comparison to acquiring equivalent gains. Essentially, the act of not losing $10 is more satisfying than gaining $10.

This tendency is why investors are more sensitive to losses than gains; in marketing, understanding the motivations behind loss aversion can have a huge impact on the tactics you choose to employ.

A few marketing methods that utilize loss aversion are discounts and coupons, free trials, pre-order options, and exclusive mailing lists. Furthermore, loss aversion frequently intersects with biases involving social proof and the fear of missing out, as we outlined above.

4) Nudge Theory

A nudge spurs an individual to make a particular choice, or behave in a particular way, by altering the environment so that automatic cognition processes are triggered to align with the desired result.

Nudge theory is aptly named; it refers to the actions we take to influence the choices an individual makes without actually taking away their agency to choose. In marketing, it suggests that consumer behaviour can be affected by positive reinforcement and indirect suggestions to sway the decision-making process.

The concept is subtle, with the potential to create a staggering impact.

We as human beings respond to the idea of choice. We value our freedom to make decisions. This is why adding a sneaky dash of incentive or motivation – with minimal intervention – helps your customers along their journey through the marketing funnel.

Choosing to highlight a specific product characteristic (“made with BPA-free plastic”) is an example of a “nudge.”

Seeing a book with the all-important “Oprah’s book club” label is another example of a “nudge” at work.

In eCommerce, nudge theory can be utilized in a variety of ways. Thinking about user experience, nudge theory can be seen at work through visual cues used to direct a consumer’s attention to particular elements or details on a page, like a discount. Product labels highlighting functional benefits or discounts is another way we can employ nudge theory effectively.

These small additional details help customers make decisions more efficiently and confidently. It “nudges” them in the right direction.

5) Anchoring (or Focalism)

Anchoring is a cognitive bias that explains why an individual depends too heavily on an initial piece of information gleaned from the first interaction in the decision-making process.

Every great story has a great hook. Something that grabs you, sparks your curiosity and makes you crave more.

Anchoring as a cognitive bias is similar in concept. It involves a piece of information that instigates that first move towards a decision. This piece of information, or “anchor,” then becomes the driving force behind the entirety of the decision-making process. The other pieces of the puzzle may aid or deter in this process, but this initial anchor is the proverbial “hook.”

Frequently, price anchoring is used to draw customers and increase sales. When you click on a product and see that it’s on sale for $49.99 from its regular price of $79.99, our cognitive bias presents this as an amazing deal we can’t possibly miss out on.

And although $49.99 may actually be an accurate representation of the item’s market value, you as a consumer can’t help but attach a perceived value to the discount. The drop in price is the anchor.

Our brain often seeks mental shortcuts, referred to as heuristics. This is why price anchoring is an effective way to progress the decision-making process, and potentially even create the opportunity for impulse buys.

Price anchoring makes us feel good about making a snap purchase. A lower price is a more attractive price.

This strategy can be utilized by showing market list prices, raising the price of your previous product version, and sorting prices from highest to lowest.

Share Insights: