Economists at some point decided that consumers make informed product purchases: A good balance between price and quality.
For decades, however, this view is falling apart, as consumers’ decisions are not rational. In my opinion this explains the differences in conversion between online and offline stores.
Psychologists have been for decades sawing off the branch the rational economic man has been sitting on: the man who maximizes his utility over all possible choices.
Kahneman, in Thinking, Fast and Slow, shows very convincingly that we not only have a rational system that steers our decisions (System 2), but also, perhaps more importantly, evolutionary system (System 1).
This latter system ensures that we go along with the crowd, without figuring out if this is a good idea. It ensures that we listen to people with a lab coat, without checking whether they really are experts, and why we are very bad at estimating or assessing bets.
Despite the importance of psychology in our purchasing decisions, its use remains an underdeveloped element of online commerce compared to offline commerce. Offline we have good salesmen, people who know how other people react and how you can affect them.
Online we reach more potential customers. We get them to our websites, but we have forgotten how we can convert them.
To reach people or to influence people?
Due to the shift from offline sales to online sales, we increased our reach. A good salesperson could talk with up to forty people in one day, a good website reaches millions of people. At the same time, our impact has decreased: the probability that an interaction actually leads to a sale has reduced dramatically.
Of course we are already working hard to increase our impact. We make sure we have the right products for people (recommender systems) and we ensure that we reach the right people: those who want to buy (SEO and SEA).
But we forget one thing that a good salesmanl does very well: sell the product in the correct manner. A good salesperson can sell anything. Not because he knows a lot about the product, but because he, perhaps intuitively, can understand the psyche of his client.
The psychology behind human decisions
To know how people react, we need to embarce the notion of Kahneman’s System 2: people use mental shortcuts to make their decisions.
People do not weigh all the pros and cons, but are affected by so-called ‘peripheral’ cues.
An example: Try to sell a book and say that you still have a whole pile of them lying around. Or try to sell the same book and say that you have only five left. This says more about your own purchasing procedures than about the book, but in the second case, people are still more inclined to buy the book.
The six weapons of influence
Professor Cialdini described a number of years ago six ways that successful salespeople can influence people. He bundled them together to six principles of influence, six types of sellers using System 1 stimulate:
- Scarcity: people love things that are scarce or special. So, “only five products available”.
- Reciprocity: People return a favor. Online example: “Download our free whitepaper”.
- Social Proof: People do what others do. This is the main reason that everyone is collecting Likes on their company website.
- Authority: People follow the advice of authorities. So ‘recommended by the editor’, or the man in the lab coat in the toothpaste commercial. (See also Figure 1).
- Liking: People listen to people they like. This is why a good salesperson asks you how your holiday was and why he finds it so interesting that you also kite surf.
- Consistency: People try to be consistent. The wish lists of some online retailers are a nice implementation of this: by letting know that you want to have some specific thing, you are more likely to eventually buy it.
Figure 1: The use of authority arguments
Cialdini and hundreds of other social scientists – clearly show that the qualities of the product that you are selling only account for a small part of the real story: people buy products because they are using System 1, and are tempted by the six weapons of influence.
In recent years we have scantily applied influencing theories online. Offline salespersons are experts in applying these theories: hence the large differences between online and offline conversion.
A first step towards increasing the impact are implementing the principles of Cialdini on your website. But even so, we are not nearly as good as our offline counterpart: to get there, we need to selecte the appropriate aproach (the right influencing strategy) selected for each individual customer.
That is what it means to really know why your visitors buy your products.