It is essential to understand how people make decisions while buying a particular product or service or why they buy, this being the secret ingredient for success, especially when it comes to e-commerce business. The fundamental reasoning behind buying is to bring pleasure or migrate further from pain. So, when you are selling a product or offering a service, try to understand why your customer will buy what you are selling. Insights from Behavioural Economics can be one turning point solution to help you read your customers’ mind and serve them appropriately.
Traditional theories stated that people think rationally. However, with the evolution of the thinking process, people have become complicated with big beautiful brains — the studies in Behavioural Economics state that they take decisions irrationally. Emotions play a significant role in the buying process. Therefore, to earn success, the psychology of your selling must go much more profound and build an emotional connection with the buyer. Behavioural Economics is becoming an effective approach to understanding people’s decision making over the last few years. It seems to be close to impossible to think of meeting success in business without implementing the theory of Behavioural Economics. Let’s take a look at how Behavioural Economics plays a vital role in the e-commerce business.
Read the customers’ mind
It is crucial for a businessperson to possess the ability to read people’s minds and interpret their thoughts. Customers tend to think logically but most of the time they take their decisions emotionally. Behavioural Economics states that we are not rational beings. We tend to break the rules and behave irrationally, but in an anticipated and predictable way.
Therefore, you need to read the customer’s mind and understand his/her thoughts so that you can sell your products to them. The whole aim is to build an emotional connect with the customer and make them feel that they are important. However, you need to ensure that you do not provide incorrect information as it could damage your business. Emotion plays a significant role in the buying behaviour of a person – take it as an advantage. Skip the idea of just selling and try to be as persuasive as possible!
Highlight the loss more than the profit
The standard economics theory always identified gains as one of the primary focus in businesses. But with extensive research in the field of Behaviour Economics, we have concluded that the situation is no longer the same. It states that the fear of loss is the most potent trigger for human behaviour over the urge for gains.
People always tend to have a fear of losing something but might not be affected as much with gains. So how can you use this fear of loss? The answer to this question is simple- focus on losses rather than the gains. Utilise this concept in your favour. Tell your potential customers what they are losing if they do no invest in your product. Always remember one thing – sharing the benefits of your product to your customers is important, however, it does not bring the same outcome as compared to explaining the losses, but in a positive tone.
Make use of the Nudge Theory
We are humans and we tend to make mistakes but in a predictable manner. It is the duty, as a businessperson to help people avoid such mistakes and make better choices. This can be accomplished by changing their decision-making process, the way they think by giving them a nudge. Nudge should not be misinterpreted as driving a customer into a financial loss for not acting rationally or inducing them to purchase by giving heavy discounts. A nudge purely helps in making it simpler for people to take a particular decision.
As written by Richard Thaler and Cass Sunstein in their book Nudge – “By knowing how people think, we can make it easier for them to choose what is best for them, their families and society“, it is defined as an aid for quick decision making. If you do not wish to show benefits or focusing on fears all the times, use the nudge theory. It is one of the best options for you in terms of e-commerce business to increase sales and to build a list of loyal customers.
Modify the architecture and framing
Depending upon their behaviour, people follow a set of rules to make decisions in their everyday life. As an e-commerce entrepreneur, you need to understand and observe their behaviour very minutely. Once you start to understand how a user responds to the market, behaviour study and his/her decision-making patterns, it will be easy for you. As an entrepreneur, it is important to understand how your customers react to situations and take their decisions. Behavioural economics can play a significant role in this process.
Moreover, you cannot change your products or services, but you can change its framing. It is basically a method of helping customers to make a better decision or changing their choice architecture. In this way, you can help your e-commerce customer to purchase your product or service by easily applying this framing or choice architecture approach. Different customers have a different preference. Keeping all this in mind, design your online store. Always present your products to your customers with a positive approach. This will help boost your sales.
Pricing strategy plays a significant role in business. Behavioural pricing builds on a totally different set of insights. Price acceptance is independent of the value as it is assumed in value-based pricing. This would mean that people only pay for the product features, irrespective of the price value. You should always consider that people pay for much more than product features. Utilizing smart pricing when selling products and services is a must if you wish to succeed in an ever-competitive marketplace, and to do so you must understand how customers make their decisions, and the role played by price. Try to understand and interpret the emotions and feelings of your customers while fixing a pricing your product. A right pricing strategy could yield great results.