Factors that influence consumer purchasing decisions you will find interesting.
Have you ever wondered what truly goes on in a consumer’s mind when they’re making decisions? What factors influence their choices?
As someone deeply interested in psychology, I frequently find integrating these tactics into my business strategies fascinating. I assure you – this is an interesting one. You will discover that you have even fallen victim to some of these tactics.
You will learn all about factors that influence consumer purchasing decisions including the consumer decision making process, the psychological factors affecting consumer behaviour, and real-life applications of these factors.
This article is all about the factors that influence consumer purchasing decisions.
About Consumer Decision Making
Before we jump into the psychology of it all, let’s break down the basics. Understanding the stages of consumer decision-making is key to making sense of the whole process and how psychology comes into play at each step.
Stages of Consumer Decision Making
In consumer decision-making, there are five essential stages:
- Need/Problem Recognition
- Information Search
- Evaluation of Alternatives
- Purchase
- Post-purchase Processes
Stage 1 – Need/ Problem Recognition
In the initial stage, consumers identify a gap between what they have and what they desire. This “gap” could be anything from a need to a problem or a want, creating a discrepancy between their current and desired states.
Stage 2 – Information Search
Once they acknowledge this gap, they move to stage 2, initiating the search for information. This can be internal, tapping into memory and recollection, or external, involving online research, media exploration, and seeking advice from friends. During this stage, consumers compile a list of factors, conscious or not, that influences their decision-making.
Examples of these factors include:
- Motivation: How crucial is the purchase of the product or service? What perceived risks are associated with the decision?
- Ability: Have they acquired sufficient knowledge to make this purchase? What past experiences inform their decision-making?
- Opportunity: How urgently do they need to make the purchase?
- Personality: Does the brand’s personality align with what they are seeking?
Stage 3 – Evaluation of Alternatives
With gathered information, consumers enter stage 3, where they compare alternatives based on their predefined criteria. Think about your own approach when buying a product—what catches your eye first, and what factors weigh most heavily on your decision? Let’s take the example of purchasing an iPad. Some consumers prioritise finding the lowest price, while others focus on specific colours or technical specifications.
Imagine this stage as a mental checklist where consumers weigh the pros and cons of each alternative. For brands aiming to clinch the deal, the goal is to secure a spot in the consumer’s consideration set. This increases the chances of conversion, making it a critical juncture in the consumer decision-making journey.
Stage 4 – Purchase
Once consumers have narrowed down the set of options, the actual purchase occurs – the CHA-CHING moment. It is important for brands to focus on influencing consumers positively during the physical or online transaction to enhance the overall consumer experience.
Stage 5 – Post-purchase Processes
The final stage takes place after the purchase, as consumers use or experience the product or service. Satisfaction or dissatisfaction during this stage can lead to positive behaviours such as brand loyalty or negative behaviours like brand switching. The key for brands is to deliver on promises and potentially exceed expectations, turning positive experiences into repeat purchases.
It is important to note that consumer decision-making isn’t always a linear journey. Consumers might skip or enter stages at different points. Gathering feedback across all stages becomes crucial for brands, influencing decisions at every step and ultimately converting insights into sales. After all, the real CHA-CHINGs come from delivering on promises and ensuring a positive consumer journey.
Buckets of Consumer Decision Making
In decision making, there are 3 buckets – Cognitive, Habitual, and Affective.
- Cognitive Decision-Making: Decisions are made using cognitive thinking, where information is assessed, options are weighed, and choices are crafted with logic and analysis.
- Habitual Decision-Making: Choices are effortlessly made through habitual decision-making, relying on established routines and the comfort of familiar options, making it a low-effort, automatic process.
- Affective Decision-Making: Here, emotions take the lead, choices are influenced by intuition, personal values, and the ever-present impact of feelings and social vibes.
The blog’s focus will be on habitual decision making. In the upcoming sections, we will dive into three main concepts – Common Heuristics, Availability Heuristics, and Anchoring Heuristics.
Resource for you: Mindset: The New Psychology of Success by Carol S. Dweck
Psychological Factor #1: Common Heuristics
1) Context Effect
Ever heard of the default effect? It is the first concept under the umbrella of the Context Effect. So, what exactly is it? The default effect is a clever psychological quirk where the default option presented is more likely to be chosen over any other alternative. It’s like getting the VIP treatment in decision-making – the option already chosen for you, sparing you from the agony of an active decision.
Now, let’s dive into a few examples that might ring a bell.
EXAMPLE 1 : ORGAN DONATION
Consider the checkbox for organ donation. The first example showcases the default option of not joining the program, while the second example presents the default option of joining
EXAMPLE 2: AMAZON DELIVERY OPTIONS
Ever notice how the default delivery option is often the first-class one? Companies strategically position the default as the preferred option, subtly nudging you towards it.
Application
The Default Effect comes into action whenever a consumer faces a decision. Whether it’s signing up for a newsletter, choosing a product, selecting a delivery method, or even accepting cookies, offering a default option can significantly influence choices. It’s like gently guiding visitors toward the decision you’re secretly hoping for, increasing the odds of them making the choice you want. Clever, right?
2) Attraction Effect
Let’s dive into the next concept – the attraction effect, also known as the decoy effect. This nifty psychological trick suggests that adding a similar but inferior option to the mix makes the superior option more desirable, simply by making them easier to compare.
Now, picture this scenario. You’re faced with two options: Product A and a bundle of Product A and B. How do you boost sales for the bundle which has a higher margin?
Here’s the game plan: introduce another SKU – Product B.
Voila! In the consumer’s mind, the bundle suddenly becomes the best value. Individually, the products add up to $90, but grab the bundle, and you save $9. This simple tactic can sway consumers towards choosing the bundle over the standalone product.
Application
Now, how do we apply this to real-life scenarios? Imagine the impact on your Average Order Value (AOV). By strategically placing a decoy and making your bundle more attractive, you are not just selling products; you are selling an irresistible deal. It’s like sprinkling a bit of magic to boost those sales and keep customers coming back for more.
3) Compromise Effect
Now, let’s explore the compromise effect—the art of nudging consumers toward the middle option rather than the extremes in a choice set.
Here’s a relatable scenario. Think about Starbucks and their size options. Take a moment to reflect—what’s your go-to size? For many, it’s probably the grande, with an occasional venti splurge during those irresistible 1-for-1 deals. 😉
Now, imagine there is a secret Starbucks size called the “short.” How does that change things? In reality, Starbucks has this size, but they keep it under wraps. Why? Because they want to subtly guide consumers toward choosing the larger sizes.
Resource for you: Starbucks Coffee Sizes, Explained by Kelsey Rae Dimberg
Application
This psychological phenomenon becomes a powerful skill when showcasing your products or services, especially in a menu format. Let’s consider a common example in the knowledge industry—offering Basic, Pro, and Ultimate packages, each delivering the same results but with different sets of offers. For instance,
Now, faced with these options, which one would you likely go for?
The compromise effect subtly encourages you to find that sweet spot, making the middle option not just a compromise but a strategic choice that feels just right. It is like having your cake and eating it too, or in this case, finding the perfect package that meets your needs.
Attraction Effect vs Compromise Effect
At first glance, the attraction effect and compromise effect may seem like peas in a pod, but let’s unravel the differences.
Imagine a graph with the x and y axes representing factors that matter to consumers—things like moisturise, size, price, convenience, etc. In our scenario, let’s take Product B, the one we want to promote.
- For the compromise effect, we introduce a product C that excels in one attribute compared to B and inferior in another. This leverages the compromise effect, nudging consumers to opt for the middle ground.
- For the attraction effect, we bring in a product C where both attributes fall short compared to B. This magnifies the attractiveness of B, increasing the probability of consumers choosing it.
Application
Now, let’s bring these concepts down to earth. Imagine a brand analysing whether bundles or variants work better for Product A. Standard data analysis involves analysing conversions, clicks, page views, and Add-to-Cart rates for existing bundles and variants of Product A.
But armed with the knowledge from the compromise and attraction effects, you can up your game.
Could there be other products that, when bundled with Product A, could lead to higher sales with better margins? A bit of basket analysis might reveal that customers tend to buy Product B or C or D when purchasing Product A. Learn more about product bundling here.
And what if variants prove to be the winner? Could introducing another variant for the Product A spark a sales boost?
With these hypotheses and data in hand, we can then dive into experiments like AB testing or tweak how products appear in the recommendation system on the site. It’s like playing chess with consumer behaviour, making strategic moves backed by psychology and data.
Resource for you: The Compromise and Attraction Effects Through Frame Preferences by Alex Poterack
Next, let’s see how availability heuristics influence consumer purchasing decisions.
Let’s kick off with a quick activity.
Resources for you: Mini Analytics Course | Power of Analytics Course for Beginners
Psychological Factor #2: Availability Heuristics
What you just experienced is called availability heuristic—a mental shortcut where we estimate the frequency or likelihood of an event based on how easily instances come to mind. As our brains register –ing better, it makes things feel more common than they might be.
Now, let’s put this concept to the test. Which do you think causes more deaths in the scenarios below?
- Scenario 1: Tornadoes or asthma?
- Scenario 2: Accidents or diabetes?
In Scenario 1, many might lean towards tornadoes, but surprise! Asthma causes 20 times more deaths. As for Scenario 2, deaths by accidents are often perceived as over 300 times more likely than deaths by diabetes, when, in reality, the ratio is 1:4.
Why does this happen? This is because our minds are heavily influenced by the vivid and sensational stories the media loves to report. The more emotional, the more memorable the stories are. Media outlets, well aware of this, often exaggerate stories to capture our attention, resulting in our distorted perceptions of likelihood and risk of events.
Application
So, where does this concept play out in the real world?
1. Retargeting Ads:
Marketers apply availability heuristics when retargeting ads. Repeatedly showing the same ad to a potential buyer ensures that your message lingers in their mind. It’s the art of making your product seem more important as compared to your competitor’s, just by being more available in their mental space.
2. Pre Launch Campaign Strategy:
Another common application is the pre launch campaign strategy. By creating a buzz about a product before its official launch, brands embed it in the subconscious minds of consumers. When the campaign launches, the product is already familiar to them, leading to higher uplifts and success.
Time for another quick activity
Psychological Factor #3: Anchoring Heuristics
What you just engaged in is a glimpse into anchoring heuristics—a mental shortcut where consumers cling to the first piece of information given, often failing to adjust sufficiently.
A classic example is Steve Jobs’ slick move during the iPad launch in 2010. Picture this: he projected a hefty $999 on the screen behind him, setting the stage. Then, bam! Apple dropped the price bomb to $499. Anchored to the higher figure, consumers saw $499 as a steal, showcasing how our minds stick to the initial reference point.
Here are 2 common places where this is applied:
Multiple Unit Pricing
Consider this pricing experiment: “4 rolls of bathroom tissue for $2” versus “$0.50 per roll of bathroom tissue.”
Surprisingly, even with the same per-roll price, the first option performs 40% better. Our brains quickly latch onto the idea of getting a deal, even if we don’t need all four rolls.
Product Quantity Limits
In a Campbell’s soup study, limiting the purchase to 12 cans per customer triggered a sales spike of 112%. The brain anchored to the number 12, and the adjustment from there resulted in a buying spree.
Application
Making discounts super appealing is a skill, and anchoring heuristics is a smart move to influence consumer purchasing decisions. When customers see a sale price, they don’t quickly calculate savings. Instead, their brain shouts, “What a deal! Don’t miss out!” This trick works like magic, especially for customers who might find the original price a bit too high.
Rule of 100
Here’s a simple trick—follow the “rule of 100.” For things under $100, use percentages. Going from $5 to $4? That’s a 20% discount and feels way better than just $1 off. If it is over $100, talk about the dollars saved. Example, for a $200 thing, saying it’s $50 off sounds better than 25%.
Website Design
Anchoring isn’t just about numbers; it shapes how your shop appears and how you present your products and services. Apply this in your website design by setting anchors. For instance, pre-select certain options in forms. If you are pushing an annual subscription, make it the default choice. If you offer a basic and premium version, ensure the premium one is selected by default.
Harness the anchoring effect further by including customer testimonials on your site. Those little banners on hotel websites saying “Three guests have just booked!” work in exactly the same way, subtly nudging visitors towards positive decisions and making that purchase more likely. It’s about creating a shopping environment that speaks to your customers without them even realising it.
Resource for you: The Anchor Bias Principle in Marketing with Examples by Moses Mehraban | Why a $499 Steve Jobs’ iPad Seems Inexpensive – Price Anchoring by Guy Abramov
—
And there you have it—the psychological factors that influence consumer purchasing decisions. Now, it’s time to translate these insights into action for your business—whether refining your defaults, strategically employing decoys, or anchoring prices.
This post highlights interesting psychological factors that influence consumer purchasing decisions.
If you love to see more content like this, connect & follow me on social media to stay updated with the latest information.
Other posts you may like:
- 9 Simple Steps to Conduct Consumer Research Survey to Gather Consumer Insights
- 5 Common Ecommerce Analytics Use Cases that Every Business Owner Should Know
- A Comprehensive Guide to Product Bundling Strategy to Increase Revenue
