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How Behavioral Economics Is Impacting Direct Marketing

Posted by Brian Jones on July 12, 2023

In the dynamic world of direct marketing, knowing your consumer has always been paramount.

In the last few years (I’m sure you’ve noticed), behavioral economics has started to impact the way marketers build their strategies and campaigns. So let’s explore this discipline and see what it means for us direct marketers.

What exactly are we seeing out there?

We’re Unraveling Decision-Making:

Behavioral economics, as outlined in Daniel Kahneman's seminal book "Thinking, Fast and Slow," examines the psychological biases that influence human decision-making. Today’s direct marketers are leveraging this kind of knowledge to create campaigns that “speak” with customers on a deeper level.Image_courtesy_of__Stuart_Miles__FreeDigitalPhotos.net_-_Email

By understanding the way our customers think — fast (reflexively, think autopilot activities, like walking) and slow (deliberately, think mental activities, like math), marketers can tailor their messaging to align with consumers' intuitive and rational processes, which means a more persuasive message and more effective campaigns.

We’re Nudging Behaviors:

Behavioral science includes the concept of choice architecture, also known as "nudging" — a way to subtly influence consumer behavior. By using various nudging techniques, such as framing, and scarcity, marketers can steer or guide consumers toward a desired action.

For instance, studies have shown that presenting information in a certain way, such as emphasizing the potential loss rather than the gain, can significantly impact decision-making (for example a price change framed as a $5 discount gained or as a $5 surcharge avoided, has a significant effect on consumer behavior). We can leverage this kind of insight to craft compelling messages and offers that tap into consumers' cognitive biases and encourage them to take action.

We’re Personalizing More:

You see it more and more these days. Because marketers recognize the power of personalization in driving customer engagement and conversion. By harnessing the vast amount of data available today, marketers can create bespoke experiences that resonate with the reader’s preferences, needs, and behaviors.

A price change "framed" as a $5 discount gained or as a $5 surcharge avoided, has a significant effect on consumer behavior

By "speaking" to the consumer about what matters to them and structuring our content and the user experience strategically, we marketers can guide consumers toward desired actions, which translates to higher engagement and conversion rates.

We’re Anchoring and Pricing Strategies:

Anchoring, a cognitive bias described in behavioral economics, reveals that people tend to rely heavily on the first piece of information they see when making their decisions. In direct marketing, this has been used to set pricing strategies. By presenting a higher-priced option first, marketers can anchor the consumer's perception of value, making subsequent, lower-priced options more appealing. This plays on the consumers' tendency to compare and evaluate options based on their first impression or the first thing they saw — the anchor.

We’re Using Social Influence and Viral Marketing:

Behavioral science has shed light on the power of social influence in shaping consumer behavior. People tend to put a lot of trust in the actions and opinions of family, friends, and even other consumers when making their own decisions.

Optimize_all_channelsAnd direct marketers have capitalized on this by integrating social proof and viral marketing techniques into their strategies. By showcasing, reviews, testimonials, user-generated content, and social media trends, marketers are tapping into the desire for social validation. This helps provide credibility and, if all goes well, generate buzz around their product or service. This social influence can be a powerful driver of engagement, brand awareness, and ultimately, sales.

So, direct marketing is undergoing a bit of a transformation these days. And a lot of it seems to be fueled by the integration of behavioral economics and behavioral science. By understanding the inner workings of human decision-making and behavior we can design more effective campaigns, by leveraging nudging techniques, personalization, pricing strategies, and social influence.

By presenting a higher-priced option first, marketers can "anchor" the consumer's perception of value, making subsequent, lower-priced options more appealing

And if we can align our messaging and information architecture with consumers' cognitive biases, we’ll be able to create stronger connections, enhance engagement, and drive more of the desired action we’re seeking.

11_19-2As behavioral science continues to evolve, its impact on direct marketing will undoubtedly continue. And if we can stay on top of these trends, we’ll be able to navigate the ever-changing consumer landscape with even greater precision than before.

At J&C, our direct marketing expertise helps CMOs create clear, compelling, and highly responsive campaigns. Our process and approach help clients keep their response rates up and their marketing ROIs high.

Contact J&C today if you aren't seeing the results you'd like from your direct marketing, J&C can help. For over 40 years, we've helped clients get better results from their campaigns. There's a reason marketers turn to direct marketing again and again — because when you mix the right words, images, offers, CTAs, and persuasive DM know-how, it creates some powerful chemistry. 

Topics: Direct Marketing, Direct Mail, Creative

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