Predictably Irrational Web Marketing Strategies

Sep 9th
posted in

I'm reading a book called "Predictably Irrational", by Don Ariely. It's about the hidden, irrational forces that shape our decisions, and it's a great read.

There are a few interesting case studies in this book that can be applied to web marketing. I'd like to look at two aspects which might help those of you involved in e-commerce.

Relative Pricing Structures

The first experiment looks at relative pricing structures. How do you structure your prices in order to achieve higher returns? Often, it can be a simple case of making an offer no one in their right mind will accept.

Huh?

Here is an example.

The Economist presented readers with the following subscription offer:

1. Internet only subscription for $59
2. Print only subscription for $125
3. Print and Internet subscription for $125

Notice something odd about option 2 and 3? Why would anyone take up option 2?

They wouldn't. And that's the point.

It turns out humans rarely choose things in absolute terms. We work out how much things are worth based on what other things are worth and compare them. In the above example, the "Print and Internet" offer is better that just the print offer. The "Internet Only" offer might be better than both, however there is no point of relative comparison for that offer. The relative comparison is made between offers 2 and 3, which makes option 2 look poor, and option 3 look like a steal. Ariely ran real tests to measure take-up, and sure enough, most people took option three.

To illustrate how powerful this pricing method is, let's remove option 2.

1. Internet only subscription for $59
2. Print and Internet subscription for $125

In this example, people are faced only with a cheap option and an expensive option. The point of comparison is largely about price. You can guess what option most people chose. They selected the cheapest option, as price becomes the key differentiator.

So, try splitting your offers. Create offers that are valuable compared to other - deliberately substandard - offers.

The Effect Of Expectations

In another chapter entitled "The Effect of Expectations", Ariely asks why the mind gets what it expects, and not necessarily the reality of a situation.

For example, Ariely conducts an experiment whereby researchers offer students a free cup of coffee, along with some rather unusual condiments, such as cloves, nutmeg, orange peel, anise and sweet paprika. Not the sort of thing you'd likely put in your cup of coffee! The students were asked to rate the taste of the coffee, and specify the maximum price they were prepared to pay for a brew.

From time to time, the researchers made one subtle change. They placed the condiments in a range of containers, from rough styrofoam cups, through to beautiful glass-and-metal containers. The condiments were never actually used, however the mere appearance of the serving bowls had a curious effect. When the condiments were placed in luxury containers, the coffee drinkers were more likely to say they liked the coffee, and whats-more, they were prepared to pay a lot more for it.

If people thought the coffee was upmarket, they convinced themselves the coffee was upmarket. The reality was that the coffee never changed. The coffee was of the same quality throughout the experiment.

Self-evident, right? So, can this theory be directly applied to web marketing?

Essentially, we're talking about branding. There is the logical first step of using upmarket web design in order to help convince people your product or service is more desirable. There is a trap, however, and this is the reason I think this case study needs to be adapted for the web environment. When it comes to e-commerce, upmarket, glossy sites do not necessarily result in higher sales. There are various reasons for this, but I think mainly it has to do with the level of trust. A slick website can sometimes feel impersonal, and people crave a personal feel on the web.

Trust, not slick graphical design, is the equivalent of the elaborate serving bowls.

In order to raise expectations, consider raising the level of design, but only if you do so without losing trust. Achieving a fine balance between excellent usability, trust metrics and excellent graphic design is a great target to aim for.

Consider the converse. Have you bought from sites that are unusable? Plastered with over-the-top Adsense? Such sites are less desirable as expectations are set low, primarily because of the low level of branding. The buyer is expecting "cheap". That's probably the only reason people buy from such a site.

Such sites are the web equivalent of broken styrofoam cups, compared to the elegant serving bowls.

Have your say

What do you think? Have you got any "irrational strategies" to share?

Published: September 9, 2008

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Comments

September 10, 2008 - 2:49am

Yeah it's a great book!

Read it a few months back, and might go in for a second session! Really opens up new ways to market/price products and it is amazing the research that was done to highlight cost vs value.

I think some of the points you cover can also prove how useful a good graphic designer really is too. Nice post!

September 10, 2008 - 4:34am

Now this, this was fascinating. You've met my challenge nicely Peter - keep it up!

On a related note, you might enjoy reading Electronic Retailer magazine. You can get a few issues free through Tradepub or one of those types of sites. They have great case studies and you can learn a lot, especially since their focus is direct response marketing. I learned about building up an offer in the most recent edition - the process of adding value to an existing offer with 'but wait, there's more' type things. You were going to offer those anyways, but by presenting them as bonuses, it boosts sales.

September 10, 2008 - 9:45am

Before I moved into search, I had been a Marketing Exec and Campaign Manager in a few interesting roles, so I love going back to my traditional marketing roots, with pricing structures being one of my favourite topics!

The psychology of marketing is a really interesting area too; managing people's expectations and then blowing them away with rewards...something us SEO's often have to think about when working on clients sites...

Interesting read Peter, and I only hope my visitors continue to see my sites as 'elegant serving bowls'!

September 10, 2008 - 4:52pm

Excellent post Peter... Great job hiring this guy Aaron...

This post really brought a new dimension to the idea of online marketing because sometimes we get so consumed with link building and keyword strategies that we forget to open our eyes up to strategies like this...

It sure does show how valuable it is to present several options to visitors instead of just one.

Thanks for the summary on this book, now I want to read it...

September 10, 2008 - 5:11pm

I often run into prospective clients who have a hard time grasping the value of SEO as opposed to PPC or banner advertising. Is there any correlation in the book that describes this type of irrational behavior . . . spending money on something that is more tangible even when presented with numbers showing that ROI would benefit by spending on the more intangible (SEO)?

September 10, 2008 - 8:37pm

I think you have to make SEO seem more tangible then.

  • Gather stats about the ratio of PPC clicks to organic clicks and other such data - this article is rich in such data http://training.seobook.com/google-ranking-value
  • Show him Google's stock price and explain that there is more value in organic search than PPC
  • each time you guys pay PPC bills remind him that SEO can help reduce his overall cost per click
September 10, 2008 - 10:14pm

Have you tried explaining the lifetime value of SEO vs. PPC to them?

I remember someone bragging he knew that "trick"..that PPC gives him better returns than SEO anyway (on a German SEO forum), but some SEO (not me ;)) stepped up and told him that he forgot to consider that an SEO effort still gives you ROI after the work on the campaign has stopped. Which often makes SEO more valuable than PPC.

But then again if youve tried to convince them with numbers before maybe this won't help, either...I guess people are often just biased and when their bias are too strong with many of them even facts won't help, because they're simply not willing to accept the facts. People who are sharp thinkers will think "oh yeah, this is true, actually. Interesting". Whereas those who don't get it/aren't willing to accept the facts will go "umm yeah, but umm.." without being able to make an actual point other than just not trusting it (w/o being able to explain why they dont trust it).

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