The 3 Golden Rules To Optimise The Path To Purchase
‘Why Do People Buy?’ Series — Episode 2
This article is an extract from my talk “Why do people buy?” that I will be giving across the country this year, about the science behind advertising and marketing, and what drives purchase behaviour.
In the previous episode, we learnt that we buy things to fulfil our goals, and that purchase behaviour is governed by the simple equation:
Net value = reward — pain
The more the consumer believes the product will help achieve his goal (i.e. expecting a high reward) the higher the net value, and the more he is willing to pay for it. Someone starving will be willing to pay more for a burger because ‘eating’ is a more important goal than for the person who just finished diner!
As marketers, we then have two levers to play with: increasing expected reward or decreasing pain — or both at the same time.
There are 3 Golden Rules to respect to make this happen, as described by Phil Barden in his excellent book ‘Decoded’.
Golden Rule 1: tangibility
The more customers can see, touch and feel your product, the higher will be their intention to buy. Reward expectation is higher when you get to touch and feel the product rather that simply seeing a picture or even seeing it through a display window. This is simply because when you have the product for yourself even for a little while, your brain starts to process that you own it. We call this endowment effect. The product becomes tangible. You then associate a higher value to it: in our mind, an emotional value is added on top of the financial value.
It’s not always easy to implement, especially for online retailers, but this is why video has been increasingly important for them and VR and AR will play a large role in retail in the future.
On the contrary, a simple experiment shows that people were more likely to order from Menu A than Menu B below. Can you see the difference? In the first menu, the currency symbol is not displayed. Removing the currency in front of the price makes it a simple number.
As a result, price becomes less tangible and people are more likely to buy. The difference isn’t breathtaking, but it has been confirmed with by several experiments.
Lego is doing a great job with their augmented reality box — you can see the final product before you buy it which makes it a lot more tangible.
To remember: Make the reward tangible, the cost less tangible
Golden Rule 2: immediacy
In the second set of experiment, people were asked to choose between
a) getting £1,000 now, or
b) getting £1,200 next month.
Most picked the short-term reward over the long term. The more immediate the reward the better, because we don’t want to wait to fulfil our goals. We want instant gratification.
Conversely, if they had to pick between
c) paying an £1,000 fee now, or
d) paying a £1,200 fee next month
Majority would pick option b. The further away in time, the smaller the perceived cost.
Behavioural economists refer to this as hyperbolic discounting. We have a very high discount rate for the future compared to now. This is why people owning a credit card end up spending more than with a debit card.
Amazon 1h delivery is a great example of using immediacy to increase reward expectation.
To remember: Make the reward immediate, and delay the cost as much as possible.
Golden Rule 3: certainty
In the last set of experiments, we ask users to pick between the 2 options.
a) win £900 for sure
b) 90% chance to win £1100, 10% chance win nothing
A majority always picks option a), guaranteed outcome. Why take the risk to win nothing? Humans are inherently risk adverse, it is wired to our brains since pre-historic time. Back then, if you could eat a little, you would eat, you wouldn’t pass on it for a chance to eat more later, because later you could be dead.
Now consider the following choices:
c) lose £900 for sure (I take it off you)
d) 90% chance to lose £1,100, 10% chance lose nothing
Interestingly, most people now pick option d), which is risk seeking: on average you will lose more money (£990 vs £900).
By selecting a) and d), which is most people’s choice, we do not aim to maximize our potential gain — but minimize our potential loss. We hate losing more than we like winning. Applied to purchase behavior, that means we are more fearful of missing our goals, than being excited to reach them.
As a result, the more certainty we get about the value, the better. Certainty is the perceived chance of obtaining the value and preventing the cost.
Certainty comes after tangibility and immediacy, as a ‘double check’. The more you perceive the product to be tangible and available immediately, the higher your buying appetite.
Adding certainty in the mix, means asking how much of that is true? What is the probability of you actually getting this reward? Is this a scam? Will the product deliver as expected?
Having a strong brand is obviously a key to build certainty, such as testimonials, and word of mouth, through referrals or social influencers. People are more likely to trust 3rd parties talking about the product, than the brand itself.
Brands can also enforce certainty by building scarcity. Products about to get sold out are seen as more valuable, because we assume they were popular.
To remember: Make the reward and cost certain. No bad surprises.
By optimising your website or shop design according to these 3 Golden Rules, you will significantly contribute to increase the net value of your offering, and as a result, sell more.
In the next episode we will look at how the human perception system works, and how we can leverage it, to control the perception of our brand.
I am the founder of Kout.io, the first gamified e-commerce platform. Come see me speak at industry events for the full story! Schedule to be announced soon. To stay in touch with me, follow me on Twitter @samhuber.
