Social Commerce Today considers how behavioral economics can inform social shopping strategies.
A recent piece at Social Commerce Today raises some thought-provoking points on the psychology that drives shopping in general – and which bear implications for social shopping. Social Commerce Today decided to evaluate Dan Ariely‘s book on behavioral economics, Predictably Irrational, to understand some of the irrational reactions that drive us to consume – and their potential implications against social commerce (conspicuous consumption, magnified among our social networks). We’ve highlighted some of the key notions below, for consideration and discussion:
- The Cost of Social Norms: We are happy to do things, but not when we are paid to do them. Financial rewards or penalties create a market norm, a paid-for transaction that legitimizes behavior – even when undesirable. Social norms and market norms (business, financial rules) are not the same – recognize the difference between the two, and don’t attempt to turn a social norm into a market norm.
- The High Price of Ownership: We Overvalue What We Have. We don’t like to lose things – so once we own them, we tend to overvalue them. This may explain why influencer strategies can work – once someone owns your product, they’re likelier to advocate it.
- The Cost of Zero Cost: We often pay too much when we pay nothing. Consumers will trade-up, wait in line, and pay more just to be able to get a free gift or bonus, such as free shipping. Free is valuable.
- The Power of Price: More expensive is perceived and expected to be better and more effective. Price has an effect on experience. Consider how price is presented and how prices are compared in your product presentation/UX strategy.
- The Influence of Arousal: In a state of excitement or arousal, people think and behave very differently. Emotional states trump rational thinking; it’s easier to sell to consumers when they are excited. Social Commerce suggests using social commerce for live event shopping – rather than simply adding a retail layer to social platforms and a social layer to your retail platform.
In closing, behavioral economics tells us that consumers are less rational in their purchase decisions than other marketing models predict. But those irrational behaviors aren’t random – they are rather systematic and predictable (as is human nature). For instance, we will oftentimes sacrifice personal pleasure for public image – sometimes going against the current simply for the sake of being viewed as ‘different’, even if we prefer what most are doing. Behavioral economics can offer insight into consumer behavior, which should be considered in social commerce strategies and programs to present things in the most desirable, compelling manner.