Make your email marketing more efficient. In this article, Shopware technology partner CleverReach outlines three powerful principles from sales psychology that help you set the right purchasing impulses and strengthen your sales.
Principle 1 - Targeted price anchoring
When a customer is valuing a product, how do they determine whether it’s a bargain or too expensive? They follow the rational decision making model and compare it with similar products.
Retailers can have an invisible hand in this decision making process using price anchoring. Following this principle, the first price the customer perceives becomes the “anchor”, so the standard price to which all others are be compared. Essentially, an anchor price provides the customer with orientation when determining the value of a product. When placed in the immediate vicinity of a more expensive product, the anchored product will seem like a more reasonable offer.
The classic example: If you want to sell a watch for 2,000€, place it next to a model that costs 10,000€.
Naturally, this doesn’t work for every product. Everyone has a rough feeling for reasonable prices. However, there is a profitable margin between rough feeling and concrete knowledge. If a newsletter offers three products at different price points, the majority of customers will opt for the medium-priced product, which they assume has best price-performance ratio.
So, if you want to increase sales for a certain product, create context and frame your offer with a more expensive product from the same category. That’s how you control and influence your sales!
Want to increase your revenue? Here too, price anchoring becomes a decisive marketing tool, especially for discount campaigns. Always display the original, more expensive price next to the discount price.
(image source: CleverReach®)
Through teasing the bargain, your customers get the sense they are making a more informed decision and can better judge the value offered.
Principle 2 – Use the paradox of choice
Although a wide selection of services and products may seem attractive, abundance can actually have an inhibitory effect.
Why? Customers get overwhelmed when faced with too many choices – a vast selection essentially paralyses the purchasing decision. In his book “Paradox of Choice”, author and psychologist Barry Schwartz argues that “choice overload” actually leads to higher levels of buyer’s remorse and dissatisfaction.
Customers want to be confident they’ve purchased the best available option. As the number of options increases, so does the “fear of missing out”. If you choose product A, you miss out on the benefits of products B – Z. The greater the choice, the greater the risk of choosing the wrong product. The consequence: the customer prefers to not buy anything!
A classic experiment by field researchers Sheena Iyengar and Mark Lepper illustrates the paradox of choice. In an A/B testing, customers at an upscale supermarket were offered different varieties of jam to taste while shopping - 6 varieties in test phase A and 24 varieties in test phase B.
(image source: CleverReach®)
The larger selection attracted 60% of browsing customers to the stand, while the smaller selection attracted only 40% – at first glance, offering larger variety seemed beneficial, as it motivated more potential customers to taste jam.
However, the purchasing behavior tells a different story. Of the larger selection, only 2% of the customers actually made a purchase, whereas 12% made a purchase from the stand with reduced options.
This profound outcome can be applied to your email marketing: limit your offer!
Instead of overwhelming customers with 5 different shirts, 8 dresses and 10 brand jeans, narrow the selection down to two to three products per category. If you still want to weigh in on the assumption that having more choice is attractive, be sure to help your customers narrow down their options.
- Social Proof: Product reviews are one of the most valuable resources for customers when deciding whether a product is a secure investment.
- Categorize: Product characteristics subdivide the range and help the customer chose products that best match their personal preferences (i.e. "Low Sugar", "Bio-Product", "Strong Berry Flavor").
- Highlight: Showcase a product that was recently added to your assortment, or draw attention to a seasonal favorite or special offer of the day.
- Personalization: Use your existing knowledge of your customer’s purchasing behavior to highlight personalized product recommendations (you need a well-maintained customer database to do so).
Principle 3 – Play into the need for balance
Our decisions are driven by a hard-wired need to feel balanced with ourselves and others. We tend to take action when we feel unbalanced. For instance, gifts or special favors motivate us to return something of equal value.
As a shop owner, you can capitalize on this need in a number of ways. When you offer complimentary products or free downloads, the customer feels more inclined to reciprocate this gesture by making a purchase in your shop.
For instance, wine and spirits sell in larger quantities when also offered with a free additional product. Discount vouchers offered for a future purchase have the power to turn first-time customers into regular customers. Moreover, freebies are an effective way to make customers feel more committed to you than your competitors.
There are various ways you can influence your customer’s purchasing decision using slight changes in your product offering, all of which are particularly suitable for email marketing.