For ages, people have wondered what makes other people tick. The field of psychology attempts to understand the mind, and while most people think of mental health when they hear the word ‘psychology,’ it actually has a large bearing on business.
As long as businesses try to sell the customer on their products, psychology is in play. A farmer attempting to make his crops look more valuable to get a better value in bartering negotiations and a modern day businessman relying on a detailed advertising strategy to get sales are both appealing to psychology to help their businesses.
The methods, of course, have changed over the years. In the past, advertising wasn’t so heavily present in society. Today, it’s everywhere. In the past, the economy was more focused on local businesses, and business owners mainly had to appeal to their own community. Now, large corporations have to decide on strategies to appeal to worldwide markets.
However, some of the best tricks are the simplest. The things outlined below are proven strategies to help both small local businesses and large sized corporations secure the sale and get the customer to buy their product.
1. Don’t Underestimate Social Proof
What is social proof? According to Robert Cialdini, in the book Influence, social proof is a phenomenon where people copy the actions of others.
Consider social media, for example. People are more likely to engage with a social media account that has a million followers compared to one that has five. The account with more followers may appear more credible, not because of its content but because the widespread engagement has given it social proof.
Social proof doesn’t just apply to social media. It’s also important in the world of business and is one of the most important factors in getting sales.
There was a study held on social proof when it comes to organic food. In this study, the number of likes had an effect on the reaction to a Facebook page with mixed comments.
You can leverage a similar effect for your own business. Be active on social media and build up followers – but don’t just try to gain followers. Go for engagement as well. Having interactions instead of just likes will help potential customers see that your brand is for real and that you haven’t bought fake followers.
Product reviews are another way to display social proof. According to a 2008 study, 61% of customers check reviews. Additionally, customers valued reviews from other customers more than they did for professional reviewers. Having consumer reviews may instill more trust in your customers than professional ones that may be viewed as not being genuine. Shoppers who spent $500 or more wanted to reference multiple reviews and not just one or two, according to the same study. The preferred number is four to seven.
If you had to choose just a single strategy to boost your sales, gaining social proof is a contender to be the best strategy to pick. Of course, it’s not easy. Major brands such as Apple have social proof due to their widespread popularity and longtime reputations. For smaller and newer businesses, more intentional focus must be placed into accumulating this social proof.
Social media engagement, testimonials, and product reviews are all ways to leverage social proof – but all of these methods should be done genuinely, rather than to trick the customer. Ethical concerns aside, humans are intelligent. They’re better at picking out false reviews and fake followers than you may give them credit for.
2. Make Use Of Loss Aversion
Another important term to know is prospect theory, also known as the principle of loss aversion. This term, basically, means that most people find it more appealing to avoid a loss than they do to gain something.
An example of a field where this is in play is insurance. A customer, for example, wouldn’t insure their vehicle for the sake of gaining insurance. They would do it to avoid the financial losses that could come from getting into a crash with no insurance, or being fined for doing so.
Loss aversion is one of the strongest phenomenons in business psychology. It’s also a powerful phenomenon in business in general.
When presented with a hypothetical scenario where there’s multiple possible plans to combat a new disease, respondents in a 1981 study went with the options that were sure to save a smaller number of people rather than the ones that would save more people but had a smaller chance to do so.
Another study suggests that people would rather keep something they already own than gain something else. It doesn’t matter in this case if the new object is otherwise the same as the one they already have.
You may find it useful to apply the ideas of loss aversion to your own business if you provide a product or service that can help the customer avoid losses.
Sometimes, it may benefit your business to shift your advertising and product descriptions to emphasize what losses you’ll help the customer avoid, rather than what they stand to gain.
The research shows just how powerful this method is, but leveraging it to aid your business is something you’ll have to figure out. It’s a matter personal to your kind of business, and the type of business you have will impact which tactics work.
3. Evoke A Sense Of Authority
This is similar to showing social proof, but whereas social proof can be gained from interactions with the public, authority often comes from experts. People like to feel like they’re getting a product that’s been recommended by the best, and that applies across many fields – some more than others.
It costs $185,000 to buy a sponsored tweet from basketball player LeBron James. This isn’t a case of overpricing, but rather a somewhat accurate evaluation of the value that an endorsement from such a famous celebrity athlete can add to a brand.
James makes over $50,000,000 in total through his endorsement deals with Beats by Dre, Coca Cola, McDonalds, and other powerhouse companies such as these. Clearly, all of these brands consider it worth it to pay top dollar in exchange for the support of a player like James.
Many other celebrities make a hefty sum from endorsements. This is because these endorsements give the business a sense of credibility and authority to the consumer. In addition to celebrity endorsements, getting testimonials from experts in a specific field can boost the authority of a business.
For example, a company that specializes in niche scientific equipment wouldn’t get much from a celebrity endorsement, but a good review from a highly respected scientist in the niche would likely increase sales.
If your business involves experts directly, you should make it known. Do you have decades of experience in your field? Do you have any awards or certifications to your name that show your skills? If so, you should incorporate these things into your marketing and brand. If you’re acquainted with experts in your field and you have a product relevant to them, consider asking them to try it out and give you an honest review.
All of these things can help your business stand above competitors that might not have the same kind of credibility that expert support can give you.
Psychology is hard. Humans are complicated people and if figuring out how to market things to the customer was easy and something that anyone could do, it wouldn’t be a professional field.
Despite the inherent difficulty in marketing, psychological tricks such as displaying social proof, appealing to loss aversion, and evoking authority appeal to longstanding psychological phenomena that apply inside and outside of business.
Sometimes, to get sales, you don’t need a new strategy that’s never been done before. A lot of the time, it’s the simple answers that have been in front of us for years that work.
The tips that you’ve just read are intended to do that – not to manipulate the customer and trick them, but to appeal to them using common patterns that have been around for decades.— Published on July 21, 2020
Rafi Chowdhury, Investor, Technologist, and Chess Enthusiast. I cover chess and artificial intelligence.
Rafi Chowdhury is the founder of Chowdhury’s Digital and an investor. He enjoys writing about chess, artificial intelligence, and psychology. In his free time, he plays basketball and chess, bikes, and raises homing pigeons.The Thrive Global Community welcomes voices from many spheres. We publish pieces written by outside contributors with a wide range of opinions, which don’t necessarily reflect our own. Learn more or join us as a community member!Share your comments below. Please read our commenting guidelines before posting. If you have a concern about a comment, report it here.