May 11, 2023
Consumers probably think that they know exactly why they buy what they buy. The reality of how purchase decisions are made is more complicated, and research points to the idea that most decisions that humans make are the result of subconscious urges.
Consumers are creatures of habit and instinct, making decisions on gut feelings, not so much employing rational considerations. This intersection of human nature and economics is where behavioral economics comes into play.
What is behavioral economics?
Behavioral economics studies psychological factors’ effect on consumers’ economic decision-making. The goal of behavioral economics is to more clearly understand consumers’ decision-making and to try ad predict human behavior in different situations.
Consumer behavior can be influenced by things big and small, such as the political climate, or the amount of options someone has as they are deciding which product to buy.
How is behavioral economics used in marketing?
Behavioral economics studies how consumers’ purchasing decisions are influenced by factors that are seemingly unrelated to the product itself. These factors can be social, psychological, cognitive, or emotional.
Pair this with B2C marketing, whose core principle is to ensure that a consumer chooses one brand over another, and it becomes clear that behavioral economics aids B2C marketing strategies by understanding more about how consumer decisions can be influenced. As a result, making small changes to a product, the branding, and what choices a brand offers can have a huge influence on consumer behavior. Here are 5 examples of behavioral economics being used in B2C marketing:
Everyone Loves Free
There is probably no word in B2C marketing more powerful than ‘free’. It is for that reason that we often see ‘Buy one, get one free’, and not “Buy one, get one 50% off’. Consumers know that logically they are the same thing, but nothing beats the thrill of seeing the word ‘free’. A sandwich shop offering a ‘buy one, get one’ special on National Sandwich Day is an oft-used example of behavioral economics.
The Power of Social Proof
A more academic form of peer pressure, social proof is one of the most impactful tools in behavioral economics. It is defined as the tendency to be swayed by other people’s choices, especially in ambiguous circumstances.
Consumers are more likely to buy products that are popular to gain social standing with their peers, which explains why consumers read online reviews to gauge how trustworthy a company is. Most consumers trust a B2C brand with lots of positive reviews.
The Scarcity Illusion
Limited-edition products are a solid example of the power of scarcity in behavioral economics. Consumers will tend to place more value on a product if they think that there is only a limited amount available, or if there is a limited window of time available for them to buy the product before it becomes unavailable.
The grocery chain Trader Joe’s collection of seasonal, limited-availability products has a near cult following, with products often quickly selling out, with help from social media buzz.
Consumers are more afraid to lose something they have than gain something they didn’t have. It basically means that consumers will feel the regret of losing $20 more acutely than they feel the enjoyment of finding a $20 bill on the sidewalk.
The loss aversion principle sets out to describe what a consumer will lose by not making a purchase. ‘Lightning deals’ are an example of behavioral economics being employed in B2C marketing. These are discounted offers that last only for a very short period of time, encouraging consumers to make purchase decisions quickly, to avoid missing out.
Read more about consumer behavior on the Eyes4Research blog. Eyes4Research also has everything you need to collect high-quality insights from consumers. Our panels are comprised of B2B, B2C, and specialty audiences ready to participate in your next research project. Learn more about our specialty panels here.