Category: Business

What is Loss Aversion?

Let’s talk about loss aversion, why the pain of loss results in irrational decisions, and how marketers are taking advantage of this.

Loss aversion is perfectly summed up by FOMO or the Fear of Missing Out.

It’s the irrational fear of loss. In psychology, loss aversion explains why people, too often, focus on setbacks instead of gains—it explains why the pain of losing is seen to be more powerful than the pleasure of gaining something. In their Prospect Theory study, Daniel Kahneman and Amos Tversky said, “losses loom larger than gains.”

About twice as large!

What makes loss aversion so influential?

Simply put, we hate loss. Receiving something is great, sure—but we don’t love it as much as we hate losing.

If you received a $200 jacket for your birthday, you’d be happy. However, if your dog chewed a giant hole in it the next day, the unhappiness you’d feel would be twice as powerful.  

Losing something or downgrading is psychologically distressing, so we do what we can to avoid it (even if it makes absolutely no sense).

It’s not completely our fault, though. There are intense cultural, socioeconomic, and neurological factors at play when it comes to the power of loss aversion.

Loss triggers a reaction from the same part of the brain that processes fear and risk. Our brains also associate loss with prediction errors and disgust. We’re trained to detest loss.  

We’re extremely vulnerable to loss aversion when it comes to making decisions because as soon as we imagine a choice, we’re emotionally invested and attached.  

People will go to incredible lengths to avoid a perceived loss.

Example: waiting in absurdly long lines to get something for free.

In December of last year, Starbucks created a holiday-themed travel mug that you would get for free if you ordered a Grande holiday beverage. They claimed they would keep the promo going until they ran out of mugs. Nobody knew how many they had on hand, so there were lines around blocks at Starbucks stores across the country. It didn’t matter that the travel mug was valued at less than $5 and made from thin plastic. They had already latched on to the idea of getting a free holiday treat, so not receiving that mug would be considered a significant loss.

People are also likely to make purchases they weren’t necessarily planning on making if you provide them with a free shipping coupon. They’ll recognize that this opportunity doesn’t come along all time, and the thought of losing out on it will persuade them to make a purchase.  

Businesses use loss aversion marketing strategies all the time.

A perfectly executed “flash deal” is a big moneymaker. When a product is deeply discounted for a very limited time, the consumer’s brain focuses on the ticking timer and the amount of savings rather than on the product itself. You probably don’t need another sweater or another cordless vacuum cleaner—but at 70% off, that’s a GREAT deal, right? I can’t miss out on that!

It’s also why pre-orders, coupons, and VIP exclusives work. With pre-orders, it’s an early bird discount—the discount is the prize for ordering early. With coupons, it’s a lot like being given free money. Why would anyone throw free money away, right? With VIP exclusives, all you needed to get VIP status was probably to sign up for a newsletter, and voila! It’s too easy. Why risk missing out on the action?

Free trial periods show people exactly what their life would look like with the product or service, making it exponentially harder for them to end it when the trial is over. They’ve experienced the benefits and identified with that life, so they don’t want to lose it.  

Insurance companies usually have a mile-long list of extremely unfortunate things that could happen to you and how you’ll be negatively affected if you don’t have the proper coverage. No matter how unlikely these events are, they’ve successfully set you up to view them as losses, and you’re more likely to focus on those than the regular payments required to avoid them.

If your business needs to avoid giving people more than necessary, loss aversion tactics can help you sidestep that waste. Studies have shown that when options are presented as addable rather than retractable, people will only take what they want (toppings on a salad, ingredients in a sandwich, etc.).

You can maximize the effects of loss aversion marketing in your small business, too.

The success of your offer entirely depends on your messaging.

Understanding your target audience and their fears is crucial to connecting with them. You need to clearly explain what their life would be like if they don’t purchase your product or service, and they won’t care unless you speak directly to their pain points and experiences. It’s about showing them what they’ll miss out on if they don’t participate soon and painting a picture they can’t ignore.

People must believe there’s something to lose for loss aversion to work properly. If you post an offer for 20% off and claim that it’s only available for the next two days and then post a 25% off coupon the following week, you’ve given people a reason put off making their decision. Even worse, they’ll notice that you contradicted yourself, and any trust they had in you and your brand will start to fade.  

You’re working hard to convert all the “I’ll just buy it tomorrow” shoppers into “I feel good about committing to this now” shoppers. Keep that goal in mind, and you’ll notice a positive trend in your conversion rates.

How about you? How do you leverage on loss aversion? Got a question? Don’t forget to COMMENT below and SHARE your thoughts.

Sources:

https://www.psychologytoday.com/us/blog/science-choice/201803/what-is-loss-aversion

https://www.activecampaign.com/blog/loss-aversion-marketing

https://thedecisionlab.com/biases/loss-aversion/


Have You Heard of Scarcity Marketing?

Scarcity marketing plays on the cultural trope that most people want what they can’t have. It’s not a new phenomenon—it is based on decades of psychological research and not to mention a basic economic principle.

In economics, the law of supply and demand dictates that a low supply makes something more valuable in terms of price, all things equal. It’s one of the reasons why anything that’s limited edition will be pricey.

But what makes a limited edition so attractive and in-demand?

There are many other psychological principles in play here. Some people are collectors and are motivated to purchase anything that’s limited edition. There’s also the need to be distinct from others—getting your hands on a limited edition somehow grants you bragging rights. Then there’s herd behavior—when you see other people want something, you’ll start liking it, too.

Cue #FOMO or the fear of missing out. Millennial consumers were asked if they would buy something after experiencing FOMO, and 68% of them said yes – they’d even make the purchase within a day or two.

The bottom line is that scarcity creates demand. Scarcity also creates urgency. Demand and urgency lead people to buy NOW.

The pull toward things we can’t have develops at an extremely young age.

Jack Brehm shared his findings in his book, Theory of Psychological Reactance. For his experiment, he placed two of the same toddler toys in a room. He put plexiglass around one of the toys and let the other sit out in the open. By this point, you shouldn’t be surprised that toddlers were more interested in the one with the barrier.

What are popular and compelling examples of the use of scarcity by companies?

Amazon makes it known if a product is running low in stock. Some e-commerce sites will even send you notifications if a product is selling out quickly. Whether you were almost convinced to buy the product or not, it’s suddenly a lot more desirable. When you’re taking your time to decide on a purchase, you’re passively picturing your life with the product. As soon as you know that it’s almost gone, you’re forced to quickly and intensely imagine what your life would be like if you missed out on this product. The thought of losing this chance is likely enough to make you commit.

Booking.com and Agoda.com will alert you if someone has booked the room you’ve been eyeing. They’ll also let you know how many other people are currently looking at the room you’re considering, putting the pressure on you to book it before they do.

Door Dash and other food delivery companies will send members a coupon for a specific dollar amount off an order and only make it usable for the next week. If you were on the fence about getting food delivered in the next week, chances are you’re at least going to look at the options now. But who are you kidding – you’re definitely going to order dinner from that new Thai restaurant everyone’s been talking about.

Seasonal products or limited-time items are also compelling examples of the use of scarcity in marketing. Those Starbucks fall and holiday drinks? Those are made with the scarcity principle in mind. It must work because nearly every industry has adopted a seasonal offering of some sort. Pumpkin spice deodorant, anyone?

Studies also show that the average ticket price when buying a seasonal drink is higher than buying a regular drink. Seasonal beverages are seen as special and indulgent, so people are more likely to treat themselves to another menu item while they’re at it. Holiday self-care at its finest!

Some brands use limited-time freebies to encourage purchases. Lego will release limited edition polybags and other collectibles to entice collectors to purchase on particular dates, like May the 4th for Star Wars builds. Starbucks created a limited-edition holiday travel mug that shoppers got for free when they ordered a holiday beverage, increasing their seasonal sales by even more than usual.

An e-commerce clothing company tested two versions of a product page to see which one would prompt more purchases. They’re each selling the same jacket – the only difference is that one page has an “Order within 3 hours (counting down clock), get next day delivery” message just under the “Add to Cart” button. That offer increased their sales by 226%.

Airbnb lets viewers know when they come across a “Rare Find” – that is, a space that’s so spectacular it’s usually fully booked. Mix in some social proof with that urgency, and you’ve got yourself a sale!

Let’s go over some ways for you to use scarcity marketing in your own business.

Limiting your products’ availability triggers customers to assume that these products must be far better than other ones that are readily available. In our eyes, exclusive means superior. This assumption is so strong that we can assign a quality level to a product simply by noticing its availability. This works for limited bonus products, limited sale items, limited introductory price offers, limited time for free shipping or next-day delivery offers, limited offers through a specific channel (“Order through our app in the next 24 hours for 50% off), etc.

If you consistently run sales and each one is accompanied by a “Final Hours” or “Ends Soon” message, your customers will start to catch on. They’ll notice that your warnings aren’t compelling, and their sense of urgency will disappear.

Strategy and authenticity are the keys to making scarcity marketing work for you.

How about you? How do you leverage scarcity for your business? Got a question? Don’t forget to COMMENT below and SHARE your thoughts.

Sources:

https://sleeknote.com/blog/scarcity-marketing

https://sumo.com/stories/scarcity-marketing


Do You Know the Power of FREE?

Let’s talk about the power of free stuff. Why does the word FREE have such an emotional pull? What do brands get in return when they give something for free? More importantly, how can you use the power of free to your advantage?

Dan Ariely, author of Predictably Irrational (2008), showed that nothing is more motivating than getting something for free.  

He set up a table with two bowls: a bowl of Lindt Truffles that he sold for 15 cents and another bowl of Hershey’s Kisses for 1 cent. At the end of the experiment, he found that 73% of the students chose Lindt over Hershey’s. It seemed like students preferred Lindt over Hershey’s even if the cost was 15X higher.

Next, he set up two bowls again, this time selling Lindt Truffles for 14 cents while the Hershey’s Kisses were free. Guess what? 69% of the students chose Hershey’s this time.

This is the power of free or the zero-price effect, and it threatens to turn traditional cost-benefit models on their heads. These models don’t account for the fact that getting something for free has a psychological effect that trumps conventional economic theory.  

Enter behavioral economics: the umbrella term under which the power of free falls. This covers the study of economic decision-making through emotional, cognitive, psychological, social, and cultural factors.  

Why is FREE so powerful?

It’s not just a price indicator but an emotional trigger.

We tend to make decisions based on how they make us feel. Free things make us happy, and we’ll make decisions that make us happy. It sounds simple, but a decision made in the name of a free thing is often irrational.  

That’s largely due to perceived value. We place an unreasonably high value on free things merely because they’re FREE. It’s an option with no downside. There’s no risk involved. We have everything to gain and absolutely nothing to lose.  

We’ve all taken promotional shirts, pens, stickers, koozies, frisbees, bottle openers, keychains, and water bottles from companies we don’t even care about. Do we need them? No. But we felt a pull toward them – saying no didn’t feel like an option.

Surprise! It’s because they were free.  

Let’s look at an even stronger pull: free food. It’s nearly impossible to turn down free food. It doesn’t even matter if we’ve just eaten, are saving our appetite for something later, or aren’t that crazy about the food being offered. If it’s free and right in front of us, we’re likely to take it.

Most of us don’t consider time or even extra money to be lost when exchanging them for a free item or service.  

That’s why we’ll happily wait in a line for multiple hours if Starbucks is offering a free drink when, instead, we could stop by the next day, pay less than $10 for the same drink and be on our way in a matter of seconds.  

Another example is paying for additional products that we don’t need to receive free shipping. We could run out of shampoo and go to Ulta’s website to buy a new bottle but end up buying 4 because we didn’t want to pay for shipping. The shipping cost would be much less than those extra three bottles of shampoo, but we want it to be free.  

Paying for shipping feels like a waste, but paying for more products to get free shipping feels like a deal. It makes us feel like we’ve worked the system and are coming out on top.

While it may seem beneficial for companies to have free shipping minimums so that we’ll buy more to reach it, studies have shown that we’ll buy more things more often if free shipping is a constant offer.

When Amazon first started offering free shipping, they implemented it everywhere except for France but still lowered France’s shipping cost to 20 cents. Sales across the globe increased dramatically, but the sales in France stayed the same. After a while, they announced free shipping in France as well. Their sales there quickly climbed to match those of the rest of the world.  

Twenty-cent shipping wasn’t even close enough to free to be worth it to consumers.   

Lots of companies have figured out how to use the power of free to their advantage.

Various restaurants and retailers will send out freebies to people who have downloaded and made an account on their app.

Their FREE app.

They figure that you’ll come in to get your freebie and end up buying more while you’re at it. They got you into their store when you weren’t necessarily planning on it and made a sale, proving that freebie more than worth it to them.

Many restaurants also utilize a buy-one-get-one-free strategy to get us to come in and spend money. You’re excited to go in and share a discounted meal with a friend, riding the high of the free offer. The benefit for the restaurant is that you’re likely to buy more than what the coupon is for, such as drinks, appetizers, desserts, etc.  

A slightly different approach is giving away something for free that will, in turn, create a demand for something costly. Cell phone companies do this by bringing in customers with a free phone offer and then charging them for the necessary plan.  

The original user of this tactic was the founder of Gillette Razors and Blades. He was having trouble selling his disposable razor blades, so he started giving away the razor for free in various marketing partnerships with other brands. This created the demand for disposable razor blades and is what ultimately got his sales off the ground.

Increasing digital capabilities has had a significant impact on the ability to distribute free things.

Distributing free things online has little to no cost and gives businesses the freedom to reach people they would otherwise be struggling to connect with. 

This is one of the best ways for small businesses to utilize the power of free. 

Whether it’s a webinar, podcast, workshop, newsletter, or blog, small businesses can give away free things online that will gain them mass exposure at little to no cost while establishing themselves as an expert in their field.  

Especially this past year, as even more aspects of running a business have moved online, small businesses are offering free consultations. If they invest a small bit of time into sharing their expertise with a potential customer, that customer is likely to come back to them when they need a paid service.  

The key to gaining a return on these types of freebies is to provide value. 

While the FREE label will pique interest, small businesses aren’t going to gain loyal followers unless they provide a reason for them to stay.  

First, understand your ideal target audience.  

Then put yourself in their shoes and identify the type of content they would want or be interested in.  

What are their frustrations? What do they face day-to-day? Moreover, what are their aspirations?

Create your freebie around what would be useful to them and deliver a value-packed gift they can’t walk away from. Make it so beneficial to them that you and your business will occupy a part of their memory from that point on. 

Small businesses also create positivity in these difficult times by offering their free thing as a celebration.

What do people want on National Margarita Day? A free margarita! Perhaps with the purchase of an entrée.  

National Pi Day brings a flock of hungry shoppers to the internet, hoping to find deals on pizza and bakery pies. This is an excellent opportunity for a buy-one-get-one-free deal to increase business at your restaurant.

Free birthday items are another celebratory way to make someone feel special and get them into your shop.

Will some of us only pick up our free birthday treat? Yes. Will a good number of us buy other things while we’re there? Definitely.

Adding on a free item to something that has already been purchased is also an effective way to gain returning customers.

Going back to the fact that free things make us happy, you have associated yourself with that happiness. You gave us a gift that we didn’t ask for, and you made us happy.  

The other side to that strategy is that your freebie may be something that we’ve never heard of or used before. You’ve just opened our minds to a new product, increasing the chances that we’ll come back to make a purchase.  

The power of free isn’t something that should be overlooked.

There’s more than enough proof that this psychological wonder affects people everywhere.

However, it’s essential to take away that this marketing strategy shouldn’t be used to trick people into spending exorbitant amounts of money.  

Doing good business is about harnessing deep, genuine connections with people, and sneaky gimmicks will not get you there.

The best way to use this gold nugget of human behavior is to understand it, embrace it, and use it in the most ethical way possible.  

How about you? How are you harnessing the power of free? Got a question? Don’t forget to COMMENT below and SHARE your thoughts.

Sources:

https://www.behavioraleconomics.com/resources/mini-encyclopedia-of-be/zero-price-effect/

https://avgjoefinance.com/power-of-free/

https://www.forentrepreneurs.com/power-of-free/

https://thedecisionlab.com/insights/business/impact-free-consumer-decision-making/

https://www.wired.com/2008/02/ff-free/


Have You Heard of Nudge Marketing?

How about the term “nudge”?  

We’re going to talk all about nudges: what they are, how they work, and how brands and businesses use them to their advantage.

The term nudge was introduced in the book Nudge (2008), written by two behavioral economists: Cass Sunstein and Richard Thaler. They have defined it as:

“A nudge, as we shall use the term, is any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives. To count as a mere nudge, the intervention must be easy and cheap to avoid.”

Why are nudges effective?

Behavioral economics assumes that people’s choices involve a lot of guesswork. We tend to want to make decisions as quickly and efficiently as possible, but we never want to regret the decision we’ve made.  

A nudge is used to influence people’s behavior by making choice-making easier and seemingly less risky. It provides our brains with a shortcut, and the most we consciously notice is the feeling of being less stressed.

Nobody wants to feel forced or manipulated into making a decision, so subtle nudges with their best interests in mind will automatically make the decision-making process feel natural and smooth.

Let’s look at some of the companies that are making nudges work for them.

Companies selling software systems or anything that requires choosing a plan (Adobe, QuickBooks, Microsoft Office, etc.) will often have a banner highlighting the “Most Popular Plan.” If someone is looking at the options and don’t know what factors to focus on to make the best decision, this identification lets others do it for them.  

There’s a similar powerful persuasion in labeling a display of products as “Staff Picks,” “Editor’s Picks,” or more specifically, “Amazon’s Choice.” People are often put at ease when they see that a product made a good impression on someone else.

Subtly nudging confidence into consumers makes them more likely to make a purchase.

Discount popups are another type of effective nudge. Kate Spade’s website sometimes puts an extra discount on your screen as a popup when it senses that you’ve looked at a particular product multiple times without making a purchase. That extra incentive may be what pushes the shopper to commit.  

We’ve all experienced mind-numbing scrolling when trying to choose something to watch on Netflix or something to order from DoorDash. Sites and apps like these benefit from including a “Featured” list in a prominent place so that when viewers inevitably reach decision paralysis, they’ll have a section with fewer options and a higher perceived value. Making a decision that they’re not likely to regret will seem much easier.  

A strategy used by e-commerce sites is adding functional benefits and personality triggers to the product descriptions on their gallery page. This would be easy for small businesses to implement. Appealing to shoppers directly and as quickly as possible pulls them in, helps them feel seen, and makes their job much faster and easier.  

If you want to subtly change someone’s behavior, you can change the tools they use.

For example, some waste management companies have made recycling bins larger and garbage cans smaller to nudge people toward being more thoughtful about what they throw away. Also, giving people smaller plates at hotel buffets nudges them toward taking less food, ultimately reducing waste.

Not all nudges have a purchase as the end goal.

One of the most famous nudges is the piano stairs at the Odenplan station of the Stockholm Metro. A team transformed the stairs leading out of the station into a giant functioning keyboard. There’s a video showing commuters having fun on the stairs that went viral about a decade ago (Google “piano stairs Stockholm”).

The objective was simple: make more people take the stairs. Did they? Video footage showed that 66% more people than usual chose the stairs over the escalator!

Google has a free food benefit for their employees and found that it was making it harder for people to choose healthy options. To help improve their employees’ eating habits, they made the containers that held the sweets and snack items opaque, moved the salad to the beginning of the buffet line, and placed the sugar-free drinks at eye level in the cooler. Snacking and calorie intake were reduced by roughly 8%.

When strategizing nudges, it’s important to consider the order of the given options. People almost always prefer convenience over rationality, so it’s a great way to persuade them while making them content.

Have some fun with it!

People love friendly competition.

If your business is seeing a decline in tips and you’ve already addressed potential quality and service factors, make a game out of your tip jars. Play on peoples’ strong identification with popular conflicting sports teams and have each jar labeled and decorated for one. Or have a fun yet controversial question posted such as, “Does pineapple belong on pizza?” and have the tip jars labeled as “Yes” and “No”. Nobody is obligated to leave a tip, but it draws attention and gives an emotional incentive.  

There are a few things to consider when planning nudges for your small business.

Nudges must resonate deeply with your target audience, so you need to understand their motivations (values, interests, habits, psychological inclinations). 

If you make your nudge more about increasing your sales and less about benefiting the customer, it’s likely to backfire and decrease trust in you and your business.  

As previously mentioned, nudges should never be misleading or meant to trick people. They’ll know if they’re being pressured or manipulated, so it’s best to keep things transparent.  

If you focus on your audience’s true needs and plan your nudge marketing to ease their stress, this tactic could help you build the strong relationships needed to maintain a thriving business.

Do you have any nudge examples that you use for your business? Got a question? Don’t forget to COMMENT below and SHARE your thoughts!

Sources:

https://blog.crobox.com/article/behavioral-economics-marketing?_ga=2.173434656.2000106776.1555316919-124876615.1554128205

https://blog.crobox.com/article/nudge-marketing

https://www.convertize.com/what-is-nudge-marketing/

https://www.veeqo.com/us/blog/nudge-marketing

https://medium.com/swlh/the-7-most-creative-examples-of-habit-changing-nudges-7873ca1fff4a


What Do You Know About Social Proof?

Let’s talk about the power of social proof: why it’s important, how businesses are using it, and how you can start using it to your advantage too.

Business psychology professor Robert Cialdini coined the term “social proof” in his book Influence (1984). The concept of social proof is simple: When we don’t have enough information about something, we base our decisions on how others decide and act.

We follow the masses and feel most comfortable conforming to a group decision.

Psychologist Solomon Asch conducted a conformity experiment in 1951. Eight male college students (participants) were put in a group with two other people (influencers) who were secretly in on the experiment. Each group was shown an image of a line and then another image with three different lines. They were asked to choose which of those three lines matched the first line. The influencers always gave their answers before the participant. In 12 of the 18 trials, the influencers gave wrong answers, even though the correct answer was obvious. On the other hand, 75% of the participants gave the wrong answer as well. In the other six trials where the influencers gave the correct answer, the participant gave the wrong answer less than 1% of the time.

Asch determined that these participants followed the consensus because they wanted to fit in with the group. Some even believed that the group was better informed than they were.

Why is it essential for businesses to pay attention to the power of social proof?

Think about how we decide on which smartphone to buy. Most of us will do the research. Some will take a careful look at the specs. But not everyone will have the tech know-how to understand everything. So, we look to other people to fill in the gaps for us, such as family and friends.

If it’s a new product, you’ll probably join a forum or tech group to ask around, see what people know about it. You’ll also probably scour YouTube for review videos from the tech experts—AKA tech influencers. If they say that it’s a good product, you’ll be more likely to buy it when you get the chance.

This is why many brands work with influencers, who create content and review products. In doing so, they prime the mass market and influence them to buy the product when it gets released.

We tend to trust well-known people who have earned our confidence more than actual brands.

Let’s talk examples.

Ever wonder why restaurants have such small waiting areas inside the building? They want you to have to wait outside where people will see you. If you drive by a restaurant that has a large group of people waiting in front of it, you’re going to take a mental note that this restaurant must be fantastic. So, you’re more likely to come back to it. It’s hard to be impressed by an empty restaurant because our instinct is to assume that it must not be any good if nobody is there.

Another aspect of social proof is our want to be a part of a community. Canva plays on this with their sign-up landing page. It says, “Join over 10 million people designing on Canva.” This call to action is especially effective because it’s framed as an invitation rather than a statement. Sure, having 10 million customers is notable. However, people will want to sign up because they can join that large number of users and become part of their community.

Subaru has included a “Reviews and Awards” page on their website that shows potential buyers they’ve gone above and beyond the industry standard and have been recognized by institutions that matter. They also have a “Dear Subaru: Owner Stories” page set up like a collage. This personal touch lets customers see real people who have had wonderful experiences with Subaru.

There are stores and country clubs that use the idea of exclusivity as social proof. Whether they need a waitlist or not, they’ll use one to give the impression that their establishment is so popular and extraordinary that they must limit access.

Social proof is one of the most accessible marketing tools for small businesses.

You can utilize customer reviews in nearly every type of marketing collateral. Social media posts, blogs, sales pages, product descriptions, landing pages, and more can all immensely benefit from the addition of positive customer reviews.

People tend to check 2-3 review sites, like Yelp and Google, before deciding about a brand, so it’s best practice to get positive reviews on as many different sites as possible.

What’s even more powerful than reviews? Testimonials. These show the big picture, a whole experience rather than simply stating that a product worked. The key to great testimonials is value. The best ones address common objections and overcome them, giving viewers confidence in the product or service.

We trust authentic, peer recommendations far more than paid advertisements, so don’t be afraid to reach out to past customers for testimonials. You can create a short survey for them to take, ensuring that you get the exact information you need.

If you want to work with an influencer or a celebrity to promote your brand, finding the right match is crucial. The person you team up with will only help your conversions if your audience knows them, likes them, and trusts them. You’ll be out a lot of time and money if you choose the wrong fit.

Social media is ground zero for social proof. If you see a customer tagging you on Facebook or Instagram, acknowledge the post and share it on your feed or stories. Encourage your customers to tag you on their social media posts and reward them with engagement.

Remember that people are more likely to buy or do something when they know that other people are doing it, too.

How about you? How are you using social proof in your business? Got a question? Don’t forget to COMMENT below and SHARE your thoughts.

Sources:

https://sproutsocial.com/insights/social-proof/

https://optinmonster.com/11-ways-to-use-social-proof-to-increase-your-conversions/

https://www.subaru.com/index.html


Have You Experienced Choice Overload?

We’re going to talk about choice overload, why offering too many choices to customers is a bad thing, and what you should do instead.

Businessman and futurist Alvin Toffler first introduced the concept of choice overload in his book Future Shock (1970). The premise is that living in the post-industrial age (translate: TODAY!) means that we are faced with many choices—far more choices than even two decades ago.

How do we make choices?

Psychology professor Barry Schwartz summarizes the framework of decision-making in his book, The Paradox of Choice:

1) Identify your goals

2) Assess the significance of each goal

3) Organize the options according to how well they meet each goal

4) Figure out how likely each of the options is to meet your goals

5) Choose the best option

There are two types of decision-makers: Those who spend some time considering their options and are satisfied when something mostly meets their criteria, and those who can’t choose something until they’ve deeply examined every possibility in existence. 

Offering lots of options may not be the best idea.

Freedom of choice is a good thing, right? But having too many overloads our brain and paralyzes us from making a decision.

Columbia University conducted a study where a research team set up a booth of jam samples. Every few hours, they would switch from a selection of 24 jams to a group of six. When there were 24 jams, 60% of customers would stop to get a sample, while 3% would buy a jar. When there were six jams on display, only 40% stopped, but 30% bought jam. Lots of options attracted customers to browse, but fewer choices got them to buy.

The more options we’re faced with, the more likely we are to experience unhappiness, decision fatigue, decision paralysis (avoiding making a decision altogether), anxiousness, regret, and decreased satisfaction with the option they do choose.

As Schwartz explains, “The existence of multiple alternatives makes it easy for us to imagine alternatives that don’t exist — alternatives that combine the attractive features of the ones that do exist. And to the extent that we engage our imaginations in this way, we will be even less satisfied with the alternative we end up choosing. So, once again, a greater variety of choices actually makes us feel worse.”

How do companies manage choice overload?

Target makes it easy by carefully curating the wares on their shelves. They have thousands upon thousands of amazing products, but they don’t offer them up to you all at once. There are carefully selected spots, and they don’t fill racks to the brim because that’s visually overwhelming. There are probably one or two styles of clothing on a single rack. Their displays are designed to draw customers in and to encourage them to pick up and inspect the product. There’s always just enough product to pique interest and make you want to see more. Ever wonder why a Target run can take so long?

Proctor and Gamble found that when they decreased the number of Head & Shoulders shampoo varieties available to purchase, revenue increased by 10%. It can be hard to differentiate between very similar niche products, so taking away some of the options made the remaining ones easier to compare.

Squarespace has four plans to choose from on its website. Each subscription plan’s features can be complicated to weigh, so they made a chart that compares what you get with each subscription option. It’s pleasing to look at and simple to read, making the deciding process a lot more bearable. 

Companies like jewelry stores and car dealerships often have a comparison tool on their websites that lets you select your top three choices, see them next to each other, and closely examine their features and benefits. This process is much more user-friendly than making your customers go back and forth between web pages. 

Netflix has an option that pops up after it detects that you’ve been scrolling for a while that offers to choose a show for you. They do their best to categorize their material so you can narrow down what you want to watch, but we all know the difficulty of making that final commitment. 

AirBnB’s website gives you multiple chances to narrow your search by choosing preferred features in small batches, ensuring that you’re only presented with options that are the best fit for your needs. 

On DoorDash’s website, the first thing you see is a section of featured restaurants. Suppose scrolling through every restaurant available is overwhelming for you. In that case, this collection makes deciding easier because the agonizing work of determining which places are above average has already been done for you. When you choose a restaurant, they start by listing the featured and most popular items so that you don’t need to sift through the entire menu if you don’t want to.

What should small businesses be doing?

Remember that giving lots of options comes with good intentions, but it can backfire on your business. You don’t want to scare off potential customers by overwhelming them. Plus, you don’t want your brand to be associated with stressful feelings from choice overload. 

The best thing you can do to ease the anxiety of decision-making for your audience is to offer only the necessary number of options and make it as easy as possible to compare their features. Keep the design simple and highlight specific benefits that would appeal to your customers.

As a consumer yourself, you know and understand what your customers go through when faced with too many choices. Empathize with their distress and show your compassion through your messaging and marketing. Your efforts will not go unnoticed!

How about you? How do you make choice-making easy for your customers? Got a question? Don’t forget to COMMENT below and SHARE your thoughts.

Sources:

https://thedecisionlab.com/biases/choice-overload-bias/

https://blog.crobox.com/article/choice-overload

https://medium.com/choice-hacking/choice-overload-why-simplicity-is-the-key-to-winning-customers-2f8e239eaba6


Are You Familiar with the Framing Effect?

We’re going to talk about the framing effect, what it is, and how it’s used by savvy brands.

Is the glass half-full or half-empty? Do you like frozen yogurt that is 90% fat-free or one with only 10% fat in it? Would you invest in something with a 10% risk—or are you more willing to invest if it had a 90% chance of earning money?

What is the framing effect?

It is a cognitive bias (aka an error in thinking) that leads us to decide on something based on the connotation presented. If an option bears a negative connotation, like “20% risk of loss” or “20% trans-fat,” you’ll likely decide to stay away from this option. But if it bears a positive connotation, like “80% chance of winning” or “80% fat-free,” you’re more likely to choose this option.

It matters what you say and how you say it. It matters how you frame it.

The study of the framing effect began in 1981 with psychologists Tversky and Kahneman. They ran an experiment where participants had to decide between two treatment plans for 600 people who contracted a fatal disease. Treatment A would end 400 lives, and Treatment B had a 33% chance of ending no lives but a 66% of ending all 600 lives. When framed as saving 200 lives, 72% of participants supported Treatment A. However, when framed as ending 400 lives, only 22% of participants were in favor.  

People’s choices are influenced by the way the options are framed.  

The information itself is often irrelevant.

We put more focus on how the information is given rather than the information itself.  

Behavioral economics has us pegged as irrational decision-makers, remember?

We despise risk and loss, both of which are associated with negative connotations. If you want to sell a product, don’t try to use a characteristic that could be perceived as negative. We’re programmed to avoid loss, so we’ll respond better when positive benefits are highlighted.

Making decisions is hard, so we tend to pull on the most readily available information to help us with the task. Rather than take the time and energy to try and process, evaluate, and understand information, the framing effect gives us a mental shortcut.

It also appeals to our emotions, another huge factor in making choices.

Let’s look at the framing effect in action.

You go to the store to buy hand sanitizer, as one often does during a pandemic. You find two completely identical options. However, one claims to kill 98% of bacteria, while the other claims to only let 2% of bacteria survive. What is the single most important benefit of hand sanitizer? The fact that it kills bacteria. Therefore, you’re going to pick the first one because it highlights the one thing that hand sanitizer should do. You don’t want to be reminded that 2% of bacteria are left to roam around.  

It’s nacho night, and you’ve been tasked with the grocery shopping. When you get to the meat section, you choose the package that defines the contents as 75% lean meat. Would you feel as good about buying this meat if it was identified as 25% fat meat? Nope, that sounds a bit gross. Is there a possibility you wouldn’t even buy it and just get more cheese for your nachos instead? Absolutely.

There’s a new show on Netflix that everyone has been talking about, and you want to watch it, but you don’t want to pay $8.99 just to be in on the latest binge-watching trend. One more look at their website couldn’t hurt though, maybe they’re having a promotion. To your surprise, a new number catches your eye: “Just 30 Cents Per Day!”. They must be running some once-in-a-lifetime special! Everything suddenly seems more than worth it, and you start to get excited about all the other shows and movies you’ll have access to as well.

It’s almost tax season, and you’re starting to realize you need some help. You begin researching free finance tracking software and find one that’s recommended by 7 out of 10 professional accountants. If the same software exclaimed that only 3 out of 10 accountants would oppose it, you would keep looking for something with a more positive spin.

Home Depot is having a sale on vacuum cleaners. Which promotion do you think would sell more? A $75 discount on a $500 vacuum cleaner or a 15% discount on the same $500 vacuum cleaner? People are more likely to be attracted to a $75 discount because it sounds like a better deal than a 15% discount—even if it’s the same amount (15% of $500 is $75). Most people don’t like to do math problems anyway—and the brain easily recognizes a large number.

How can small businesses use the framing effect to their advantage?

Delve into your target audience and gather as much information as you can about who they are, what they do, and what they seek. You could theoretically be framing something in a successful way, but if the characteristics presented don’t appeal to your audience, you’re at a loss. There’s a better chance of them buying your product if you frame it with positive attributes, but you need to know which attributes to present to make them care.

As we tend to avoid loss, we actively seek out positivity.  

There are countless ways to persuasively guide your customers to make a purchase, just be careful not to cross over into misleading them. Focus on positive influence and pure intentions, and you’ll end up making their lives easier.   

So, the next time you’re offering a new product or selling something at a discount, remember that framing is important. Communicate the positives and remember that sometimes, giving a dollar discount is better than a % discount. It’s all about how you frame it.

How about you? How do you make choice-making easy for your customers? Got a question? Don’t forget to COMMENT below and SHARE your thoughts.

Sources:

https://www.digitalalchemy.global/framing-in-marketin/

https://boycewire.com/framing-effect-definition-and-examples/

https://www.crowdcontent.com/blog/2018/04/03/the-framing-effect/

https://thedecisionlab.com/biases/framing-effect/


McMinnville, OR Business Owner Recognized by Prestigious Goldman Sachs 10KSB Program

FOR IMMEDIATE RELEASE

McMinnville, OR Business Owner Recognized by Prestigious Goldman Sachs 10KSB Program 

Sacred Fire Creative, a McMinnville-based digital marketing agency founded in 2014 by Malee Ojua, has been named one of the most promising small businesses in the nation by the top investment bank. 

McMinnville, OR (June 20, 2019)—When former aerospace engineer Malee Ojua first studied graphic design, she did it just for fun. She never thought it would lead her to build a successful digital marketing agency or that Goldman Sachs would eventually select her for an exclusive business development program.

“I left my career as an aerospace engineer with Top Secret government security clearance in 1998 to be with my mother after her Stage IV breast cancer diagnosis,” recalled Ojua. “Everything was moment to moment. I decided then that life is too short not to do what you are passionate about and what makes you happy.”

Her passion drove Ojua to pursue a different path from her established engineering career, in which she successfully marketed multi-billion-dollar defense satellite systems to hundreds of military generals at a time. “People have always asked me to design, to make everything look better. It’s what I do without thinking.” With her natural knack for design, Ojua went back to school and earned a degree in web development and design. In 2014, she established Sacred Fire Creative, LLC, a business she started from nothing and on her own.

“I mentioned at a women’s networking event that I was starting a side business in web design. Next thing I know, four business owners came up to me, handed me checks and told me that I needed to register my business right away. That’s how it all started,” Ojua shared.

By 2015, Ojua was working full-time at her company. Corporate accounts started coming in by 2016, first the New York University Langone Medical Center, followed by Johnson & Johnson and ArisGlobal Health. By 2017, Sacred Fire Creative posted six-figure revenues. And, in 2018, the company experienced 117% business growth.

“For me, this is the American Dream—that you can achieve success with persistent hard work and determination no matter what obstacles are in your way,” said Ojua.

“My parents are immigrants who came to the US separately, bringing with them only the clothes on their backs. Together, they built a grocery business and worked hard so that my brother, my sister, and I could live a good life,” Ojua said. “They taught us the value of hard work and the importance of giving back to the country and community that took us in.”

“I have always wanted to contribute to my community, and I do that through my business,” said Ojua. “I started this business from scratch and figured it out through the help of other women business owners and mentors. I want to show that people like me—a woman, a daughter of immigrants, and a member of ethnic minority groups—can build a successful enterprise. I am excited to give back and inspire other women and minorities like me to do the same.”

In 2017, Ojua applied for the prestigious Goldman Sachs 10,000 Small Businesses program, also known as 10,000 Small Businesses or 10KSB. This education and mentorship program for entrepreneurs was developed by finance industry leader Goldman Sachs in partnership with Babson College in Wellesley, Massachusetts.

She was one of under 150 business owners invited to participate in the program from over 800 applicants.

“Being chosen to participate in 10KSB is an amazing opportunity,” said Ojua. “It opened my eyes to new avenues of growth I’d never even considered before.”

Goldman Sachs created 10KSB in 2009 with the belief that giving small business owners access to education, capital, and support is the optimum way to overcome barriers to their growth. The program’s scholars take part in a condensed and intensive MBA-like training lasting 12 weeks. The training includes guidance in building a customized growth plan, one-on-one counseling, membership to a peer support network, and support from leaders in the business world.

“These business owners represent the best of the US economy. This program helps them grow their business, create new jobs, and strengthen our communities. Nearly 70% of participants increase revenues and 50% create new jobs just six months after graduating,” said Babson College’s Richard T. Bliss, the National Academic Director of Goldman Sachs 10,000 Small Businesses.

With her 10KSB diploma firmly in hand, Ojua is back in McMinnville, OR and has set her sights on certifications for her business that would allow her to offer graphic design services to government agencies on the federal level.

“I’m applying for federal SBA 8(a) Business Development Program as well as acquiring SBA Women-Owned Small Business (WOSB) Program certifications. Also, I’m renewing our Certification Office for Business Inclusion and Diversity (COBID), Women Business Enterprise (WBE), Minority Business Enterprise (MBE), and Emerging Small Business (ESB) certifications.”

“We’re aiming to get listed on the US General Services Administration (GSA) Schedule for Advertising and Integrated Marketing Solutions (AIMS). This will allow government buyers to purchase directly from us with pre-established pricing, terms, and conditions.”

According to Ojua, there are no other currently certified graphic design agencies in Oregon on the GSA Schedule. Sacred Fire Creative is additionally qualified for the HUBZone (Historically Underutilized Business Zone) Program certification, which even fewer agencies hold. Having these certifications, said Ojua, would further separate her company from its competitors.

“As someone with past experience working with government agencies, I truly believe we have the qualities that government buyers on the federal, state, and local level are looking for in their contractors. It’s an opportunity we are excited to explore,” Ojua said.

Sacred Fire Creative is a digital marketing agency that provides a wide range of business development services, including graphic design, web design and development, social media management, and content marketing. For more information about Sacred Fire Creative and Malee Ojua, please visit www.sacredfirecreative.com.

CONTACT:

Malee Ojua

malee@sacredfirecreative.com

503-816-3890

Also see this press release in:


Examining the 30-Year Legacy of NAWBO and the Women’s Business Ownership Act of 1988

Recently, I had the opportunity to speak with the Business Tribune in my capacity as Programs Director and President-Elect of the National Association of Women Business Owners (NAWBO) Oregon Chapter. In that interview, I talked about how the 18-month-old NAWBO Oregon Chapter stands on the 30-year legacy of NAWBO and the groundbreaking 1988 law that made it all possible. I also spoke about the challenges that women business owners still face today.

 

Women’s contribution to business is previously misrepresented

 

Before the 1990s, the business sector’s spotlight is focused entirely on men and their contributions. Women’s contributions to business didn’t matter much. In fact, prior to the passage of the Women’s Business Ownership Act, the US Census Bureau only collected data from women business owners who operate from home. The Bureau largely disregarded data from bigger women-run corporations, known as C-corporations.

 

This level of misrepresentation obviously made it difficult for women back then to start up and grow their own enterprises. Gender stereotyping labeled women as high-risk borrowers, so few banks and lenders were willing to give them the funding they needed. Those that were required women borrowers to have their male relatives sign their loan applications for them. There were even stories of women having their teenaged sons sign these applications for them, if you could believe that.

 

Aside from lack of funding sources, women in business also didn’t have much support in terms of education and resources. Women business owners were pretty much on their own back then, to succeed or fail only by their sheer grit.

 

NAWBO lobbies to change the scene for women in business

 

Fast forward to 1975, when a group of like-minded, Washington DC-based businesswomen got together to share information and solutions to challenges faced by women in business. Led by Susan Hagar, this group of women eventually incorporated themselves as the National Association of Women Business Owners.

 

Initially, NAWBO endeavored to show support for women business owners by publishing a directory of women-run enterprises in the Baltimore area. NAWBO’s growing influence led the group to take part in the White House Conference on Small Businesses. They also participated in task forces and committees to bring to the fore women’s concerns and challenges in the world of business that time.

 

Their efforts paid off in the long run. In 1988, President Ronald Reagan signed H.R. 5050, also known as the Women’s Business Ownership Act. NAWBO was recognized as one of the organizations whose support made this historic law possible.

 

H.R. 5050 changed the landscape for women in business. For one, it scraped existing laws requiring women to get male family members to sign for their loans. For another, the Act created women’s business centers throughout the country. From these centers, women can get seed funding, training, resources, and other forms of support to start up and grow their businesses. Lastly, the Act enabled the formation of the National Women’s Business Council. The Council assists in creating policies regarding women in business.

 

Women in business still face challenges today

 

The passage of the Women’s Business Ownership Act of 1988 certainly opened more doors for women in business. More than that, the law revealed the true value that businesswomen bring to the table.

 

Nonetheless, women business owners still face a myriad of challenges today, 30 years after President Reagan signed the Act. These issues lie mostly with finding adequate funding and gender discrimination. Entrepreneur Magazine has a great infographic that illustrates the problems that women in business still face right now.

 

Personally, I find finances to be a major challenge in running Sacred Fire Creative. As I mentioned in the Business Tribune article, I can be obsessive with my personal finances and the money that comes in and out of my company. So, it’s always my advice to other women business owners who are just starting up to keep track of their finances. More importantly, they should seek financing instead of using their credit cards when taking care of their business expenses.

 

With regards NAWBO Oregon, our focus right now is to build a strong support network for our growing membership. Eventually, once we get the numbers, we will shift our attention to advocate state-level legislation that will promote concerns of Oregon’s women business owners.

 


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