The psychology of products and pricing — CXL Digital Psychology and Persuasion Minidegree Review — Part 8
This is part 8 out of 12 reviewing the digital psychology and persuasion minidegree at CXL Institute. For 12 weeks, I will deep-dive into areas such as psychology foundations, neuromarketing, persuasion models and behavioral psychology. Each week I will post one article reviewing the course content and discuss my learnings as well as my personal thoughts on it.
Psychology of products
In the first lesson this week I have learned a four-step framework for building habits and customer satisfaction around products. The framework consists of four steps and is inspired by Nir Eyal’s The Hook Model which I described briefly in an earlier post. The steps are:
1. Engage your users
2. Complete the action
3. Keep them coming back
4. Create investment
Step 1: How to get users engaged
To engage our users to use our product we utilize cues or triggers. These cues and triggers can be divided into two categories; external and internal triggers. Some examples of external triggers are notifications, e-mails, call-to-actions and ads. In order to make the external trigger as successful as possible, it needs to be exciting, engaging, clear and it needs to be sent with perfect timing.
An internal trigger on the other hand is the urge we get to use a product without external triggers. These internal triggers are emotions like boredom, excitement, loneliness, hunger etc. If you are hungry you might want to google a recipe, if you are bored you might want to scroll through Instagram or if you feel lonely you might want to chat with someone on a dating app.
By understanding your user’s internal triggers you can create external triggers that engage them if you send them at the right time.
Step 2: How to get users complete an action
After using a trigger we want our users to engage with the product. Changing people’s habits is difficult but if we start out small the chances to succeed are bigger. Start by defining a key action that you want your users to take. This key action should be clear, easy to find and the steps to complete it should be effortless.
Step 3: How to keep users coming back
The key to getting users to come back is reward. Rewards give us value and motivate us to re-engage with the product. There are three types of rewards we get out of using a product, these rewards are social, resources and achievement rewards. An example of social reward is the connection we make with other people on social media apps. Resources are about fulfilling our needs, ie get something we need from a website, and achievement rewards are the rewards of getting better at something we’re doing, for instance learning a new language at an app and being notified how much of the course you have completed.
Step 4: How to get users invested in your product
The more you use something, the more value it gets. Even if someone comes up with a better product you would probably prefer your product because you know how to use it. Building expertise in a product makes people more invested in it. Reward programs are another way of creating loyalty and investment. Showing people their achievements such as collected points etc builds investment. There is also a phenomenon called the IKEA effect which refers to the effect of feeling more invested in a product if we take part in creating it. The feeling of ownership over a product can help to create loyalty.
Psychology of pricing
When it comes to pricing the context is important because people will pay different prices depending on several factors. A price can be looked at from different perspectives and one of them is comparison. Implicit comparison means customers compare products themselves. This kind of comparison is made from our own experiences and based on those we estimate what the price should be. Explicit comparisons, on the other hand, is when the marketer or advertiser brings up comparisons to demonstrate why their product has a higher value.
The perceived benefits of a product are also creating context for pricing. Both the conscious and subconscious benefits define the product’s value to the customer and different drivers help us evaluate this.
Primary drivers — a product’s features
Level 2 drivers — benefit of the feature
Level 3 drivers — emotions or goals the benefit satisfies
Basic drivers — the biological drive behind emotions or goals. There are four basic biological drives and these are avoidance of pain, pleasure, time and money.
Having our customer’s drivers in mind can help us present the products in a favorable way.
How to change your price’s perception
There are different techniques to change the perception of pricing.
Framing — the way choices are presented changes the way we perceive our options and make decisions.
Decoy effect — By adding a third option that is priced to make one of the first two options more attractive people will change their preferences. A decoy is not created to sell, it is used to nudge the customers towards a specific product, usually the most expensive and profitable.
Center stage effect — Research has shown that we tend to choose the middle option when given the choice. Therefore it can be a good idea to put the option that you think most people want in the middle.
Anchoring — Anchoring refers to our tendency to depend too much on initial information and use it as a reference point for subsequent information. When it comes to pricing this means that if we are presented with two expensive products that cost 800 dollars and 500 dollars, the second one will be perceived as cheap because we will use the first price as an anchor.
Frame with social proof — Social proof is effective for pricing. By showing what pricing plan is the most popular among your customers or how many people that use and get value out of your product you can affect buying decisions.
Frame urgency — By using phrases such as ”only one room left at this price” urgency is created.
Visual cues
Different visual cues can be used to increase sales but these should be used carefully since they don’t add any value for the customer. Charm prices are numbers ending with 9, 99 or 95. These tend to be effective because we anchor to the numbers to the left which in comparison feel cheaper. Studies have shown that monetary cues are also effective to make a price being perceived as cheaper. By not adding currency signs after the price or including any decimals in the number, will change the price’s perception. The specificity of the price can also affect purchases. Rational purchases benefit from being specific whereas emotional purchases benefit from round numbers.
How to optimize the payment process
In the last lesson for this week I learned some tips to minimize the pain of paying. The first thing is to frame the value, this will make the purchase seem less painful. Next is to reduce the hassle and make the payment process as smooth as possible. And finally, a good idea can be to consider alternate methods and timing for payment to make the customers enjoy the purchase a little more.
Summary of the eight week
Finishing this week’s lessons means that I have now completed two-thirds of the Digital Psychology and Persuasion minidegree at CXL. It feels a bit sad that it is only four weeks left because I have enjoyed this course a lot and learned so many new things. Next week I will learn more about the psychology of websites and communication. Stay tuned for further updates!
