Behavioral Economics: How Understanding the Brain Can Build Your Business

Do you want to increase your conversions? Wondering how to leverage behavioral science to improve your results? 

In this article, we’ll explore how understanding the brain can help your business.

What Is Behavioral Economics, and Why Does it Matter to Marketers? 

Behavioral economics offers powerful insights into consumer decision-making processes that can help marketers reach and persuade their target audiences more effectively. By understanding the subtle ways in which emotions, cognitive biases, and external triggers influence choices, marketers can better frame their messaging for optimal response.

Behavioral economics incorporates psychological and emotional factors into economic models and theories about decision-making. Whereas traditional economics assumes people behave rationally, behavioral economics recognizes that conscious and unconscious biases and emotional motivations impact decisions.

Author, podcaster, and marketing expert Melina Palmer explains, “If traditional economics and psychology had a baby, we’ve got behavioral economics.” The key benefit for marketers is that behavioral economics reveals how people make choices in the real world. Understanding the actual drivers of human behavior, including the role of the brain, is essential.  

And while there are a lot of overlapping terms—psychology, neuroscience, behavioral science, etc—they all relate to understanding human behavior at a high level. The “economics” part of behavioral economics refers to analyzing decision-making, including financial decisions and getting buy-in for ideas. It’s essentially looking at any transaction or exchange.

Research shows that, on average, people make 35,000 decisions per day, mostly unconsciously relying on heuristics—mental shortcuts to problem-solving—and habit. Behavioral economics identifies the “rules” and patterns the subconscious brain typically follows when weighing choices. Understanding these rules allows marketers to anticipate reactions and frame messaging for maximum appeal.

For example, humans are loss averse—we hate losing things more than we like gaining things. But typical marketing offers like “buy 10, get 1 free” focus on the upside. Underlying psychology shows we are more motivated to act when we feel we may lose something. 

Reframing your messaging to leverage this insight can improve results despite feeling negative at face value. Tapping into people’s fear of missing out can drive more action. 

While conscious reasoning can override subconscious urges, it takes significant mental effort, leaving less capacity for resisting emotional appeals. Consequently, subtle factors in messaging can hugely influence behavior despite buyers feeling like they made a rational choice.

Behavioral Economics: Marketing Decision-Making 

In her book, What Your Customer Wants and Can’t Tell You: Unlocking Consumer Decisions with the Science of Behavioral Economics, Melina culls from hundreds of behavioral concepts to several core ones you can incorporate into your marketing business. Here are four concepts to help you get started:

#1: Framing Effects 

Melina highlights framing as one of the most actionable behavioral concepts for marketers, referring to the finding that “how you say something matters more than what you say.” 

For example, imagine you’re at the grocery store, and in front of you are two identical packages of hamburger meat, except one says “90% fat-free” on the label and the other says “10% fat.” Logically, they are the same, but you perceive them differently. 90% fat-free sounds like a healthy choice you can feel good about, whereas 10% fat makes it sound unhealthy and like something to avoid, even though it's the same meat. 

This example shows how framing the same thing in different ways influences our decisions. It's not always the product or pricing that's the problem. Sometimes it's just the messaging. Flipping the frame can make a big difference while keeping the actual offering the same.

Marketers should pay attention to negative versus positive framing. Tiny reframes leverage how our brains work. They nudge people toward the behaviors and mindsets we want.

Melina offers subtle reframes to make your messaging more compelling:

First, change “if” to “when.” For example, saying “if you have questions…” in emails makes it hypothetical. It puts the action out in the uncertain ether. But “when you have questions…” implies certainty. It sets the expectation that people will have questions in the future. It's a slight nudge, but it makes people more inclined to take the next step you want them to take. 

Another example: “If you decide to attend…” keeps attendance at a conference uncertain. “When you attend…” sets the expectation that people will attend. It gets them imagining that future state. Our brains take ownership of things we imagine—”endowment effects.” 

We already know our brains are loss-averse. When we imagine an ideal future self, our brains try to preserve that identity. So, if you can get customers to envision their best selves using your product or at your event, they will be more motivated to make it a reality. Using “when” taps into psychology to increase the likelihood of a desired action. 

Next, change “anyone” to “everyone.” “Anyone” sounds unconvincing. But we are wired to feel safe in groups—it's human nature. So, “everyone” taps into that herding tendency.

For example, instead of “if anyone is interested…” say “For everyone excited to learn more…” Rather than “there's a link in the notes if anyone wants it…” say “There's a link waiting for all of you excited to get a copy…”

Then, if some customers don't join, no problem. Follow-up just for those folks with another inclusive “everyone” message tailored to them. It keeps that sense of safety and belonging.

Finally, end with a question rather than a statement. Our brains feel compelled to answer questions, so ending emails, posts, etc., with a question makes people more likely to respond. Asking questions is a powerful way to get that call to action, like “Ready for the next step? Click here.”

Instead of just stating, “Let me know if you want to meet,” try ending with, ” Does Tuesday at 4 pm work to meet?” Even if they can't do that exact time, people tend to respond with an alternative rather than ignore a question hanging out there.

An open-ended request like “Let me know times that work for you” often gets ignored. The brain doesn't know how to respond efficiently, so it avoids the work. A specific question, on the other hand, prompts a response, even if it's “No, not Tuesday…” For social posts, “What do you think?” is perfect. Questions get comments!

So, leverage this neuroscience tendency. End your communications with straightforward questions rather than statements. Doing so encourages ongoing conversations and drives engagement rather than allowing people to consume passively.

#2: Priming the Consumer 

The next behavioral concept is priming. Priming refers to how contextual factors just before a buying decision can unconsciously influence the consumer’s choice. Regarding our brains and behavioral economics, everything matters, even small, arbitrary things. 

Research shows subtle environmental factors can influence our perceptions and decisions, even if we're unaware. For example, Melina describes a study in which people briefly held a hot or cold drink before rating a person's personality based on a description. Those who held the cold drink rated the person as colder and more distant compared to those who held the hot drink.

Other studies found things like word scrambles with certain words, shapes of objects in a room, or images on marketing materials impacted people's speed, cooperation, feelings, and purchase decisions. For example, a picture of a rose in an ad that runs in December means something different than on February 14. Our brains make connections we don't consciously register. So, details like color choice or visuals on a website aren’t neutral—they can prime our brains.

Similarly, gas stations piping coffee aromas at the pumps increased coffee sales by 300%, demonstrating the influential power of sensory priming. Though marketers will not have opportunities to manage physical sensations around consumers, they can consider more practical applications for priming effects through:

• Carefully selecting emotionally-charged images like photos of smiling faces interacting, not just crowd shots.
• Using evocative descriptive language like “investment” instead of “expensive” subtly conveys value and significance, priming customers that your product or service will cost meaningful money. It naturally filters out window shoppers who aren't seriously committed and primes those interested in investing in themselves. 
• Incorporating engaging, relatable narratives like customer success stories or testimonials—think short movie trailer quotes like “best experience ever,” or everyone must attend.”
• Where possible, layering stimuli across multiple senses—like an unboxing video—helps people experience what it’s like to be in the moment. 

While priming stimuli seem tangential and minor, behavioral economics shows environmental factors consistently “nudge” choices. Melina says gentle nudges that frame helpful information are reasonable as long as no one is manipulated or loses free choice. Even something as simple as ordering items on a list impacts people’s choices, whether you think about it or not. 

Thoughtfully and intentionally presenting ideas can assist people. The goal is to ethically prime interest and consideration of your offerings in an authentic way.

#3: Anchoring With Numbers 

The third behavioral concept is anchoring, which names the human tendency to latch onto initial numerical values (the “anchor”) and then under or over-adjust remaining estimates against that original number. 

For example, when asked if Antarctica has more or less than 100,000 penguins, people significantly under-guessed the actual count of 12 million. However, beginning with an anchor of 1 billion prompted far higher guesses. Our brains are lazy, and when we put out things like numbers, it can impact the decision someone will make. 

Anchoring frequently occurs around prices, making the initial price shared important for setting perceived value. For example, one study found that when selling candy bars in grocery stores, ads reading “Snickers, buy 18 for your freezer” rather than “buy some for your freezer” lifted sales by 38% despite 18 being vastly more than a typical purchase amount.

“Some” means zero in people’s minds if they weren’t planning a purchase. It’s hard to nudge people up from nothing. But stating 18 jars people—“Who needs that many?” Then, we scale down—“Well, maybe I’ll get 6…” Behind the subtle framing, change is a shift in the question posed: “Would you like some Snickers?” became “How many Snickers do you want?” A high anchor still pulls more sales than no number by priming people to choose their own quantity actively.

Anchoring also contributes to the success of tactics like quantity/bonus limits. Restricting the maximum number of incentives can be applied to lead consumers to increase quantities, assuming high limits signal popularity/value. 

For example, “get your tickets” in plural may nudge people to purchase more than one. But you could anchor even higher. Explicitly suggesting a quantity links value like “get three tickets—one for you, one to give to a client, and one to give to a friend!”

When stores offer deals with a “limit of 10 per customer,” people assume that’s how many they should buy. Otherwise, why highlight a maximum? It implies the deal’s so good that stock may run out unless you get 10 now. Anchoring works on discounts, too. A canned soup sale taking 10 cents off seems weak. But “limit 10 per customer” makes people grab 10 to maximize savings.

Implementing numeric anchors in communications helps establish a value reference in buyers’ minds. So, consider quantifying your offer in your messaging when possible, linking tangible value to a number. And impose reasonable “caps” on purchase quantities so people buy up to that limit. This leverages the anchoring effect within behavioral economics to drive higher conversion rates.

#4: Relativity and Price Perceptions

Finally, relativity loops tie together priming and anchoring to illustrate how initial price points shape impressions about subsequent prices. 

For example, imagine seeing a couch you like and asking the price. In Scenario A, the salesperson says, “It’s $900…oh wait, $700.” In Scenario B, they say, “It’s $500…oops, sorry, $700.” The actual price is $700 either way. But our perception of the deal relative to the first number, or “anchor,” drastically shifts our perception of a reasonable price.

Anchoring matters. Typically, salespeople show cheaper options first to build buy-in before introducing premium offerings later. But that backfires—the lower pricing anchor makes the higher prices seem unreasonable.

Instead, introduce higher-priced options first to shift perspective on pricing. Then, when you present the primary option you want people to select, it looks like a great deal relative to that elevated baseline.

In the couch example, $900 made $700 feel like a steal. But $500 made $700 feel expensive, even though the couch hadn’t changed. It’s all about relativity. Use strategic anchoring to make your actual target price look far superior in context. The premium “wingman” option increases perceived value through comparison.

Anchoring works well with sale pricing. If a washing machine is “$2,000, but just $1,400 today,” that original anchor makes $1,400 seem like a deal. Just stating the price as $1,400 lacks impact. Retail stores use this strategy. TVs upfront have a high price tag. In the back, the ones you’re meant to buy are cheaper, feeling like bargains compared to that anchor.

With ordered price lists, our eyes now go right to the priciest. So, on package pricing tiers, the premium version belongs on the far right, with lower tiers stepping down on the left. Melina says we’re conditioned for that layout in Western cultures. But in other contexts, sequence high to low pricing. For example, lead emails or brochures with the most expensive offering, then price down. This elevates perspective on the value before introducing lower-cost options.

In both cases, the key is establishing an aspirational anchor early. Savvy anchoring tactics make target options look superior in context. Don’t misrepresent actual regular pricing or bait-and-switch—keep it ethical, Melina says. Over time, expectations adapt around perceived price histories, making early positive associations vital.

Putting it All Together

Behavioral economics pulls back the curtain on biases driving consumer behavior. While buyers believe they objectively weigh information, science shows unconscious emotional forces guide decisions. This complicates marketing messaging intended solely for rational consideration. 

Leading with clear value propositions and calls to action certainly remains essential. However, accessorizing communications with choice-architecture considerations identified in behavioral research will likely boost conversions.

Other Notes From This Episode

• Connect with Michael Stelzner @Stelzner on Instagram and @Mike_Stelzner on Twitter.
• Watch this interview and other exclusive content from Social Media Examiner on YouTube.

Where to subscribe: Apple Podcasts | Spotify | YouTube Music | YouTube | Amazon Music | RSS

✋🏽 If you enjoyed this episode of the Social Media Marketing podcast, please head over to Apple Podcasts, leave a rating, write a review, and subscribe.

---

Stay Up-to-Date: Get New Marketing Articles Delivered to You!

Don't miss out on upcoming social media marketing insights and strategies! Sign up to receive notifications when we publish new articles on Social Media Examiner. Our expertly crafted content will help you stay ahead of the curve and drive results for your business. Click the link below to sign up now and receive our annual report!