Online retailers use psychological tricks and tools to get consumers to make purchases.
Experts told Insider that many retailers often tap into shoppers' fear of missing out, or "FOMO."
Retailers have been deploying these tactics for over a decade. But we're shopping even more online.
Online retailers use psychological tricks and marketing tools to get consumers to make purchases. And as online sales have grown during the pandemic, retailers have learned to be more persuasive.
Companies are relying more on first-party data to build personal relationships with customers and convince them to make purchases. This data will only grow in importance as social media ads become more costly, and Internet cookies, which help track users on different sites, are phased out.
Experts that spoke to Insider said many of the business strategies deployed by retailers tap into shoppers' fear of missing out, or FOMO, on the latest and most popular products. Offering incentives for adding more items to online carts like free shipping is another example of the psychological tricks a retailer can play.
Nike and Lululemon are two companies leading the pack on using FOMO to sell products, according to Manini Madia, adjunct professor at Columbia Business School and expert in consumer shopper behavior. Lululemon's app will explicitly let customers know how many items are left in their size. Meanwhile, Nike uses its SNKRs app to gather information about customers and keeps them checking the app frequently through notifications.
"Nike does product drops on their SNKRS app. So you have to download the app, which means you give them your information. You have to enable their notifications to show you when certain sneakers are going to drop, and they give you a window of 10 a.m. on a Saturday morning," Madia said. "People who are sneakerheads know that that inventory is going to be super limited and it's probably going to sell out in the first couple of minutes."
Retailers have been deploying tactics that close more sales and increase the order basket for well over a decade. But we're shopping online now more than ever before, and these subtle nudges are starting to feel more widespread.
"There are a ton of cognitive biases that retailers know about and use in shopping experiences. Most of them started in-store and have moved online," said Jason Goldberg, chief commerce strategy officer at marketing firm Publicis Groupe and an e-commerce expert who goes by the nickname @Retailgeek.
Below are the tricks retailers use to get you to buy more and tips on how to avoid them.
Discounts in exchange for a cellphone number
It's become more common for retailers to offer 10% to 15% discounts on customers' first orders in exchange for an email and mobile phone number.
By opting into emails and text messages, customers open the door to be contacted about everything from seasonal sales a company is offering to a reminder about items left in their carts.
"Having a cell phone number is probably the single most valuable source of communication with a customer right now," Madia said. Emails can be filtered or avoided altogether, but a consumer is much more likely to click on a text.
Some companies use this tactic better than others. The key is not to bombard shoppers with communication. Startups like Klaviyo and Twilio, which offer technology for brands to create personalized customer engagement platforms, are used by DTC companies like Who Gives A Crap and Solo Stove to create deeper relationships with customers.
"The communication needs to be tailored for how that customer interacts with your brand," Madia said. "If they bought a down coat and they live in a zip code that has a four-season climate, in the spring, you may want to show them some rain coats, and then you have a better shot of getting them to complete a transaction."
Apple Pay and buy now, pay later
Who hasn't abandoned their online cart because they were too lazy to grab a credit card out of their wallet? Multiple payment options have now been introduced to consumers to make the online checkout process easier.
One-click checkout on Amazon, Apple Pay, and Google Pay are able to save customers' credit card information online. Buy Now, Pay Later options Klarna and Afterpay allow shoppers to purchase items now and set up monthly payment plans.
In making the checkout process easier, these payment forms improve conversion rates for retailers that adopt them.
According to a Insider Intelligence and eMarketer study, more than half of Gen Z digital shoppers used a BNPL service in 2022. And the list of retailers across the industry adding Google Pay, Apple Pay, and PayPal as checkout options continues to grow.
These services "take the friction out of the final step," Madia said.
Buy online, pick up in store
Buy online, pick up instore was all the rage during the pandemic. Retailers still love it as it saves on shipping.
But there is another benefit, Madia says. It's a great way for retailers to increase a customers' basket size by bringing them into the store.
"You may want to pick up in store because you want the item faster than it can be delivered," Madia said. "But there's a good chance that you will buy something else while you're in there."
Implying that an item is scarce taps into what Goldberg from Publicis Groupe called our "lizard brain."
So much of how we shop and make purchase decisions is subconscious, he said, and while you may rationally know that scarcity is a marketing tactic, your subconscious doesn't.
"That was a survival strength that served our ancestors really well," he said. "We've probably in many ways outgrown the necessity part in the modern era, but it's still hardwired into the neuropathways of our brains."
Examples of this tactic include when a retailer says there's limited inventory of a product and it's not coming back in stock, when their website shows an item is selling fast, or when items can only be held in your cart for a limited window. While it may or may not be what Goldberg called "false scarcity" — meaning, retailers actually have plenty of the product in stock — there's no doubt it's effective.
Positive ratings and reviews are the most common form of social proof. These supply 'evidence' that people bought a product before you did and had a good outcome.
But we're increasingly seeing more sophisticated versions of the social proof tactic. Depending on how much data retailers have about you, they're able to show you when people in your area, or even people you follow on social media, bought a product and liked it. Then, of course, there's influencer marketing, where celebrities and social media stars are paid to promote products tailored to what their audiences and followers might be tempted to purchase.
"Sometimes the tactic is used to make you confident to buy the product, or sometimes it's used to make you confident to pay this price for the product, or sometimes it's to pick this size for the product," Goldberg said. "It's telling you this is super popular and that you should for sure buy it."
We've all seen it while online and in-store shopping: a product has two prices listed, a higher one that's crossed out and a new, lower price.
Called was/is pricing, this tactic is designed to let shoppers know they're getting a good deal — or in some cases, trick them into it.
"There's an ethical version of that that really happens, and then there's an unethical version," Goldberg said.
This type of pricing is common at outlets, he said. In an ethical example, a product that originally cost $100 ends up at an outlet store and is discounted to $30 — it is, in fact, a good deal. But an unethical example would be if a product that was only ever made for an outlet and priced at $30 gets the was/is treatment, tricking you into thinking you've found a bargain.
Tips for avoiding retailers' marketing tricks
Just being aware of these marketing tactics isn't enough to protect you from them, Goldberg said.
"What you can't do is just say, 'oh, I'm smarter than the marketing, and I'm going to know about it and therefore avoid it,'" he said. "What you can do is build new habits that make those tactics less effective on you."
Goldberg recommended giving yourself a "cool-down period" after you add items to your cart, even if it's just for a few hours. Separating the add-to-cart process from the check-out process should help you make a more rational decision, he said.
Another tip: don't fall for the discounts and give your contact information to companies. That invites more targeted marketing that may get you to spend more.
Madia also suggested signing up for subscribe-and-save options on websites like Amazon on products that you buy frequently.
"That way, you're not constantly going on Amazon, Target, or whatever websites can be triggering for you to make an impulse purchase," Madia said. "If you sign up for the paper towels, you don't have to go in and complete a transaction where you might add on some other items in your cart that you maybe would regret later."
Read the original article on Business Insider