Best Behavioral Economics Marketing Strategies and Presentation Ideas

Similarly, some people might have a behavioral bias that might lead to an economic decision, which might be embedded in social, cultural, or cognitive factors. Understanding clearly all aspects of behavioral economics will help option traders to make correct decisions and make a profit from investments.

Behavioral Economics and Marketing Strategies

A lot of consumers’ buying choices can be understood with various concepts associated with behavioral science. One of the widely read books on the topic is titled ‘Thinking, Fast and Slow’ by psychologist and economist Daniel Kahneman. The book covers decades of research by the author regarding cognitive biases, prospect theory, and happiness. The book also covers loss aversion, which is the tendency of people to avoid losses rather than to acquire equivalent gains. For example, a person might prefer not to lose $10 instead of finding $10. Some of the reasons the strategies mentioned below work are due to similar cognitive biases.

In order to better understand the implications of behavioral economics for businesses, let’s take a look at a few marketing strategies which make use of factors which psychologically affect consumers to lure them towards a product.

Psychological Pricing

We have all seen prices where instead of stating something like $3, a business chooses to price an item at $2.99. This positively affects the buyer, luring them into believing that the price is low, although it is merely a cent less than what one might have to pay otherwise. Some brands raise the prices artificially and then present the standard prices as some ‘sale’ or reduced price.

The Power of Free

Let’s assume that a fast food is selling $8 pizza at 50% off at $4. This might not get as many sales as offering a buy 1 get 1 free offer with a price tag of $8. In both cases the consumer spends $8 to get two pizzas, however, the ‘free’ connotation might create a bias towards the second deal.

Decoy Options

Businesses often make use of decoy pricing options to lure customers. If a magazine subscription is $10 online and $20 online and print, people might prefer the first one. But since the magazine might want more people to choose option two, they might introduce a decoy price such as $20 print only. In this case, the second option now might appear more attractive. Furthermore, the magazine might add a line such as limited time offer, making it harder for consumers to understand the actual value of their purchase, even if that so-called limited-time offer almost always seems available.

Irrational Value Assessment

Consumers are often duped into buying something more expensive, although it might be as good as the cheaper version of the product. Research has shown that if people are given the same product with different price tags, they are likely to value the higher price tag more, even though it might be the same product. So, if you invite people to taste five different types of carbonated drinks in five bottles, with there being only three types of drinks in five bottles, it is likely that they will rate the more expensive one higher. Although bottle one and bottle five might have the same drink, with one labeled at $5 and the other at $40, the latter might get better reviews.

Car manufacturer Suzuki in South Asian markets has been accused on duping consumers with higher products for same car models by changing the model name and increasing the price. For many years its second-generation model of Suzuki Alto was sold with higher price tags each year, claiming it’s a new model by changing the name of the year (e.g. Model 2009), while selling the same product at higher prices with little to no upgrades to its model. Moreover, the car had stopped production in other parts of the world around 1988, as better safer models were available, but the car continued to sell until 2019 in some South Asian markets.