How emotions influence our purchasing decisions: Discover the hidden power behind your choices
For buyers and entrepreneurs!
Today, the science of behavioral economics provides the key to understanding the hidden motives that drive our choices. Nobel Prize laureate Daniel Kahneman, in his iconic book "Thinking, Fast and Slow," exposes the dualism of our thinking: a fast and intuitive reaction and a slow and deliberate analysis. This concept has become the basis for future research in behavioral economics, expanding our understanding of how emotions affect economic decisions.
Scientists like Richard Thaler have explored how biases and heuristics shape our financial decisions, highlighting the importance of emotions beyond pure economic calculation. Thaler, known for his contribution to the theory of "nudging," demonstrated that even minimal nudges in the right direction can significantly change our economic behaviors for the better.
In this article, I briefly outline the framework for understanding how emotions shape our purchasing decisions, based on the principles of behavioral economics. I have written eight key principles that show why people often buy not based on cold calculation but under the influence of powerful emotional impulses. From the fear of loss to the thirst for social approval, these principles will help you understand yourself to avoid these traps or set them for others.
8 principles of behavioral economics:
Fear of Losing
People find it difficult to let go of something. Studies show that losing a gain already obtained is perceived as much more painful than the joy of acquiring it. Therefore, models like "We will refund your money if you don't like it" or "Free period" (after which it is a shame to lose the acquired function or you forget to extend the subscription and the money is withdrawn) eliminate the fear of losing money and help make a purchasing decision faster.
People value what is lost more than what is potentially acquired. An example could be the situation of booking a hotel when the website says: "Only 1 room left at a special price!" This creates a sense of urgency and the fear of missing a good deal, prompting the user to act immediately.
Social Approval
It is important for a person to trust the opinion of an expert or the majority when making a decision. Examples: "Cosmetics - approved by dermatologists," "Most users choose this product," "Popular brand No. 1."
Or people often look at the actions and choices of others to make their own decisions. A small family restaurant that is always full of visitors is perceived as a better option compared to an empty establishment nearby. Opinions and recommendations on social networks are a powerful tool of social proof and influence purchasing decisions.
Sense of Scarcity
Humans aspire to possess what is scarce and what they do not have. The limited supply of something automatically increases its value in the eyes of consumers. An example could be a bookstore offering a limited edition of signed copies by the author. The desire to own a unique item motivates people to buy even when they did not plan to.
The queue for the new iPhone, the limited collection of cars, or the passion for collecting everything rare, from baseball cards to Van Gogh paintings.
Personal Contribution
Products and services that require a personal contribution or effort to obtain or improve are valued more. If we consider products, an example could be the customization of clothing (individualization of items with tools at hand: threads, markers, paints, etc.).
An example is DIY home gardening kits that allow you to grow your own vegetables or herbs. The efforts invested in caring for the plants increase the value and satisfaction of their consumption.
In the case of software, your personal contribution can be the process of learning to use the application, the so-called onboarding.
Difficulty of Choice
People find it difficult to make a decision when there are many options. One reason for this is FOMO, or "fear of missing out." The person feels sadness for not having acquired everything. Michelin-starred restaurants often limit the choice of dishes. For example, at Gordon Ramsay's restaurant in London, the special menu only has three dishes.
The more options there are, the harder it is to make a decision, which can lead to a total abandonment of the purchase. A local market, where vendors offer a limited amount of fresh products, makes the choice easier and more enjoyable, unlike a giant supermarket with endless rows of products.
Anchor for the Buyer
The essence of the anchoring effect is to make the buyer think that your offer is the most advantageous among others. Example: you enter a store, choose a jacket for 500 euros, and hesitate in your choice. A consultant approaches you and offers this jacket at half the price. In this case, you are left with the feeling that you made the right decision.
The first price that the buyer sees becomes the "anchor" to which all subsequent offers are referred. A wine shop that first shows expensive wines and then offers more affordable options can make the latter seem like especially good deals.
Easier and Better
In complex services, such as banking products or air transport, it is easier for a person to move towards a goal when the large and complex tasks are divided into several simple stages. For example, a mobile banking application that divides the process of opening a new account into simple steps: choosing the type of account, completing personal information, confirming documents, etc.
An airline's website that divides the process of booking a ticket into separate stages: choosing the route, choosing the dates, choosing the seats on the plane, entering passenger data, payment.
Services that divide a complex process into simple steps, like language learning apps that offer short daily lessons, are perceived as more accessible and effective.
Public Responsibility
Some people motivate themselves with public statements about giving up coffee or starting to exercise. Announcing your goals on social networks or to friends increases the chances of achieving them. People who declare their intention to lose weight and regularly post about their successes tend to follow their plans thanks to community support and a sense of responsibility toward it.
Each of these principles illustrates how everyday situations and decisions can be subject to the surprisingly powerful influence of emotions and psychology, demonstrating that behind often irrational behavior are predictable and studied mechanisms.
Conclusion
Behavioral economics offers a rich arsenal of strategies for marketers and businesses seeking to improve their sales and deepen their understanding of consumer behavior.
At the same time, it provides tools for consumers to make more conscious and rational choices, resistant to manipulation. Here are some key strategies and solutions for both sides.
Strategies for Businesses
- Use the principle of fear of loss: Limited offers and reminders of the imminent end of promotions intensify the sense of urgency and motivate quick purchases.
- Create social proof: Use customer reviews, influencers, and experts to strengthen trust in your product or service.
- Limit choice: By offering a curated selection or simplifying the product menu, you help buyers make decisions more easily, reducing information overload.
- Offer customization: Let customers contribute personally to the product, increasing its value in their eyes.
- Use price anchors: Present more expensive products before cheaper alternatives to make the latter seem more attractive.
Consumer Protection: How to Make a Conscious Choice
- Set a "cooling-off" period: Give yourself time to reflect before making a purchase, especially under the influence of urgent offers. This will help assess if you really need the product.
- Seek independent sources: Before buying, look for reviews and recommendations on independent platforms or forums.
- Limit exposure to advertising: Use ad blockers and limit the time spent on social media to reduce exposure to marketing messages.
- Practice gratitude for what you already have: This helps reduce the sense of scarcity and decrease impulsive purchases.
- Ask yourself questions: "Why do I want to buy this?", "How often will I use it?" — asking these questions helps make a more conscious choice.
By applying these strategies, businesses can increase sales and build long-term relationships with consumers based on trust and mutual understanding. Consumers, in turn, will become more resistant to marketing tricks, making purchases that bring true satisfaction and value to their lives.
Let's be green!
As always, I invite you to share your opinion in the comments
With love 😽 🤗 😘
K