Understanding the mental shortcuts that dictate buying behaviour
Which is the best credit card option for me? When people make this decision, they are presented with a dizzying array of products to choose from (known in Behavioral Economics as the Paradox of Choice). To navigate this plethora of choices, people rely on a range of mentals short cuts and heuristics to simplify the decision-making process. This is no different to how we navigate and make decisions in other areas of our lives. By identifying and understanding these mental shortcuts, brands can harness the potential to greatly influence consumer behaviour.
In today’s society most of us face an overwhelming array of decisions, particularly when it comes to which products and services we buy. We have neither the bandwidth nor mental capacity to assess each option or feature in great detail or on purely rational considerations. If we had to cognitively process everything and optimise every decision we made, we would not move forward in our lives – we’d have too many decisions to make. So, we take mental shortcuts.
Most of our decisions and choices are based on something more akin to instinct rather than reason (I know this is a hard pill to swallow). To manage our day-to-day lives and to survive making a choice of say your credit card without feeling incapacitated by choice, we use mental shortcuts. Behavioural scientists refer to these mental shortcuts as cognitive biases or heuristics. For example, we choose what our friends or peer group are doing (social norms heuristic); we follow a recommendation from the Bare foot Investor (authority bias – kudos ING); we chose a credit card from the bank we already have a relationship (sunk cost). These human judgements (or cognitive biases) strongly influence which credit card we end up swiping when we go shopping. Many of the times these choices are not optimal (purely rational decisions of the best credit card would involve weighing all alternatives such as potential costs against possible benefits, ignoring the human psychological factors).
How many heuristic/ biases are there?
There is no conclusive agreement between behavioural scientists about how many cognitive biases there are. Some sources say there are around 50, others say there are over a 150. Wikipedia lists nearly 200 different cognitive biases. They are often grouped into different categories depending on what type of decisions they impact, and the type of constraints or limitations placed on our decision-making processes. And in fact, new biases are being identified and labeled, as we get to understand the science more.
There are a range of codices and ways of classifying them. At Sprout, based on our own ethnographic and behavioural research, we’ve developed our own system of classifying cognitive biases:
- Biases based on how we handle time – We don’t always have the time or resources to compare all the options for every purchasing decision. These shortcuts allow us to make quick decisions.
- Biases based on how we handle money – These heuristics typically centre around assessment of risk vs potential reward or gain.
- Biases based on how we handle the future – These shortcuts are frequently connected to our core motivations and emotional drivers.
Identifying which bias is driving your behaviour
Depending on the context, different and multiple biases can come into play to explain a certain behaviour pattern. It’s the job of the market researcher or insights professional to identify what is the bias at play for a particular group of consumers or target audience. To be honest, it’s not an easy job.
Extensive ethnographic skills and research techniques are required. People are typically unaware of their biases and they don’t want to or can’t articulate them. If you ask a group of people what is influencing their decision behaviour around choice of credit card, you will probably be told something like: the costs, the interest rates, card benefits etc. However, as we explained earlier there are many more heuristics that actually impact our decision. Experienced researchers identify these human psychological factors by observing or listening to the language people are using in the context of doing qualitative research (preferably immersion or deep ethnography). Nobody in a survey is going to say, “I’ve got confirmation bias, or I have social proof bias.”
In a survey, if you ask someone to explain why they chose a product over a competitor’s they will rationalise their response, “it was the best price or it had the most features”. In fact, the ‘social proof’ bias may have been the main driver for the purchasing decision – it’s the brand that all of their friends and family use.
Some of the most common biases typically identified as impacting consumer buying decision include:
- Confirmation bias: People search for and evaluate information that confirms their existing ideas
- Social proof: Where people copy the actions of others. If everybody else we know is doing it, it must be the right choice.
- Anchoring: People may latch onto the first thing they hear, see or read about a product or service (the anchor) and base their entire purchasing decision on that piece of information, regardless of whether it’s accurate or not.
- Sunk cost bias: People will continue to invest time, money and effort into something in attempt to justify the investment they have already made.
- Availability bias: Examples or scenarios that immediately come to mind when making a decision.
- Framing: how something is framed, positively or negatively, has an enormous impact on how the information is processed
There are of course many more biases that can impact our behaviours.
So, what is the value of understanding these cognitive biases?
While it is all well and good to be able to label all the human psychological factors impacting our behaviour, the real value is in applying this knowledge to changing behaviours. Behaviour change is at the heart of nearly everything we do. For example: we want people to choose our brand over another; we want non-customers to become customers; we want people to buy this product instead of that product; we want people to put their bin out on time; we want people to self-serve via the website rather than call the call-center. Most things in business require a behavioral change.
The secrets to applying this knowledge and driving changes is in the process of behavioral design and interventions. Stay tuned, we will take you on the journey of behavioual design for business change in our next installment.
Understanding cognitive biases and how they impact consumer and customer behaviour is critical to the work we do at Sprout Strategy. We help our clients unlock ALL the drivers of decision making, both the rational and the human psychological factors. Please email me at firstname.lastname@example.org.