Cognitive Bias

5 foolproof Cognitive biases to improve sales

When you read a suggestion by your favourite author, you are more likely to believe it or use it; when you read something like a statistic, you are more likely to find it reliable. The reason being – Bias; we are all biased in some way or another. Some of these biases work in our favour; some of them don’t. 

According to – ​​A cognitive bias is a systematic error in thinking that occurs when people process and interpret information in the world around them and affects their decisions and judgments. 

The bias means that many times the decisions we make aren’t entirely our own. There are loopholes in our thinking process that force us to incline towards a particular choice. Marketers & salespeople often exploit these loopholes to convince customers to buy their products. 

Let’s read about a few that you can use in e-commerce to improve sales.

Loss aversion 

Imagine two scenarios; you can save the 100 dollars you have in your pocket or gain 100 dollars in the future. The majority of us will prefer not to lose the 100 dollars because loss is much more intense than the sense of gain. 

It means the happiness of saving or not losing the 100 dollars will be more than the happiness of gaining. Because of this, humans tend to make decisions that will help them avoid losses. For example, reading the word ”Side effect” is more alarming than reading the word ”Benefits” because side effects mean you may damage something you already have. 

How to use loss aversion in marketing

Hurry offer lasts till tonight!!

Buy this product now and get 

Only 4 left in stock

Free shipping if you order within the next 56 minutes

What did you think when you read the above offers? Did the messages sound urgent? Did they make you feel like you were running out of time? Did you feel if you don’t take immediate action, you may lose out on the offer?

There are 4 different messages in the above examples, but they are all framed in losses. The messages indicate to the customer that if they don’t take action right away, they might miss out on something they can have or already have but might miss out on  

To avoid the feeling of loss, the customer will follow up with the offer.

You can frame your offers in such a way that they sound scarce, be it in terms of pricing or quantity or a limited time reward. 

We have discussed this bias in one of our previous blogs too. You can read the blog here.

Availability bias

You can probably recall that during the pandemic, almost all the stores around you, irrespective of the product they sold, started selling either masks or sanitisers. Of course, it was the need of the hour, but merchants also felt that they could cash in this opportunity.

Availability bias is dependent on recent events. Most of us didn’t even make a conscious choice of buying that mask, but we did it anyway because right before leaving the house, we heard on the news that masks are one way to protect ourselves from the virus. Availability bias exploits recent events and news. 

How to use availability bias to increase sales

Events such as sporting events, Independence days, marketers can use festivals to apply availability bias. When Game of Thrones was airing on Netflix, many online stores used it to sell merchandise; many gadget stores used the game to their advantage during the pokemon go. If a product was recently seen on a popular show, you can inspire it and sell something similar. You can also hire someone who was recently in the news to promote your product.

Decoy effect

The decoy effect is tricking the customers by adding a third option to an existing equation, making the option the customer chose seem like a bargain. In simple terms, it is a pricing strategy that compels the customer to go for the expensive option instead of the cheaper one. 

The decoy effect is used by companies like Starbucks, Apple and Mcdonald.

How to use the Decoy effect to sell more

The aim here is to shift customer preference to the price/quantity you want them to buy. In the video shared above, the watermelon seller has purposely priced 3 watermelons at 10 dollars, so the customer thinks he has made an intelligent choice by buying 3 watermelons at 3$ each. 

The seller tricked the customer into buying 3 watermelons at 1 each; if the seller removed the 10 dollar offer, the customer might have bought just one watermelon, but he thought that the actual value of 3 watermelons was 10 dollars. He could buy them 1 dollar cheaper if he bought 3 watermelons.

Another way of using this bias is by keeping 3 pricing options where the middle option’s pricing is closer to the expensive option, but the features/size etc., does not justify the price. The middle option is just there to skew the customer’s preference towards the expensive option. 

Ikea effect

We all know that the USP of Ikea is that most of the furniture they sell requires self-assembly. But why would a customer pay for something when they have to assemble it themselves? Turns out that a 2011 study found that subjects were willing to pay 63% more for furniture they had assembled themselves than for equivalent pre-assembled items. 

But why? The underlying reason behind valuing a self-assembled product is Effort Justification. People often overvalue things that they have made. Even though customers have to spend their own time and energy, the satisfaction of creating something drives up the value. 

How to use the Ikea effect to improve sales? 

You can add DIY options along with your existing products. For example, if you sell T-shirts, you can give them a tie-dye kit. If you sell accessories, you can let customers choose the beads, colour size shape or offer them a jewellery making kit. If you can’t give a DIY option, give them options to customize their purchase.

Hyperbolic discounting

This bias may seem similar to ‘Loss aversion’ but is different in principle. This discounting means that humans prefer an immediate smaller reward over a bigger but time taking reward. Amazon Prime service can be an example of hyperbolic discounting; people are ready to pay a fee for faster shipping and other deals. It costs them, but they want immediate rewards.

How to use Hyperbolic discounting 

You can give multiple shipping options; the immediate shipping option can be costlier, delayed shipping can be cheaper or free. You can allow delayed payments, overtime the price might be more, but the idea of buying the product immediately without having to spend in a lump sum can be appealing. 

There is a good chance that you might already be using the above techniques, but it is always good to find out the reason behind giving a discount or reward, and how your strategies influence your consumers. 

Many biases can help you sell more, and many biases can hinder your sales too. Merchants must keep both of them in mind while implementing any new strategy.

You can take advantage of these loopholes without exploiting your customers. 

Using the loss aversion bias, Flits had implemented a limit period reward option named Bonus credit. We will try to incorporate more such features in future. 


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Rashmi Singh
Rashmi Singh
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