How Anchoring and Framing Can Make You a Better Marketer

First, what is behavioral economics? In layman’s terms, behavioral economics explains the rational psychology behind individual economic behavior, and provides a roadmap for how to apply this knowledge in real-word marketing and sales situations.

People can be very subjective when it comes to their money, which is where behavioral economics comes into play:

• Let’s use a car for example. You have to keep it maintained and get it inspected every year. You want to make sure the money you spend is reasonable, and if you want to sell your car, that you are getting the right “bang for your buck”.

With this knowledge, companies directly or indirectly use behavioral economics to promote their products or ideas to the consumer.

When it comes to appealing to your target audience, you need to understand their behavior and how they will respond given the information thrown at them. Here are some examples:

• If you have an SUV for sale, there is a higher chance of a family buying it, so you promote the car’s space and safety features for effect.
  
  
• Younger generations might be more interested in the sleek, more compact type of car, so you can emphasize the design and the technology provided that would be more of interest to them than others.

Why are we even talking about behavioral economics? Why should you care? For starters, the Incentive Research Foundation (IRF) suggests that knowledge of behavioral economics can influence motivation and engagement and make work more satisfying, enjoyable, and rewarding for employees and salespeople.

But this field extends far beyond the workplace, and can be applied to customers, channel partners, or virtually any other target audience. Take, for example, the way that you display information. In the end, you want your target audience to feel important, and something as simple as how information is presented can give you an edge in your marketing. This is related to “framing”, which we’ll talk about below.

Ultimately, understanding how behavioral economics works and how to implement it in your business strategies can promote loyalty, motivation, and help improve communication between you and your target audience. But it needs to be deliberate and thoughtful in order for it to be effective.

The topic covers many different areas or principles, or different sections of behavior that can be analyzed and leveraged for your benefit. Today, let’s focus on two—Framing and Anchoring—and explore why they can be so impactful in your marketing strategy.

What is Framing?

Framing can seem like a very basic concept, but it’s also a very important one. What exactly is framing? Generally, it’s the process of defining the context or issues surrounding a question, problem, or event in a way that serves to influence how those issues are perceived and evaluated.

How can you use framing? You can frame all your information in a way that’s easily understood and also provides your target audience with stronger incentives to perform particular behaviors.

• Let’s go back to cars. You have a team of salespeople and a car available isn’t selling well. You want this car’s sales to go up, so you tell your team that the top five sellers will earn a bonus or trip.

All of these salespeople now have an incentive to promote this car because there’s now an award attached to selling it. They’re still doing their assigned job, but now they’re more eager to work. It’s a win-win situation.

What is Anchoring?

Anchoring is a type of cognitive bias that leads us to rely too heavily on an initial piece of information we get about a subject. For example, this is very common in the investing world, where a person buys a stock at a particular price, and then their mind “anchors” to that price. This then causes the person to resist buying the stock again when it goes higher, even if the company is worth continuing to invest in.

Clearly, first impressions are important in anchoring, and this cognitive bias can have a positive or negative effect based on those first impressions. As a result, you want to make sure your target audience has a positive impression of your company or product from the very beginning so that when you give them an incentive it will encourage a better response. Here are some examples:

• Your target audience finds a car they love but notice the price and it’s too expensive for them. You walk over and let them know about your great financing with great rates to ensure they won’t be overwhelmed with the cost. That would leave a positive impression and encourage them in their purchase.
  
  
• You advertise an anniversary or opening for your business and state that the first 100 buyers will get a discount on their purchases. This is a positive first impression that you have anchored onto your target audience.

There are also negative effects that anchoring can cause which can heavily impact the way your target audience will view a company:

• If your business heavily promotes a product with a guarantee of fast delivery, and a customer’s first order is delayed longer than implied, they will probably be less likely to order from that company again.

Their impression was positive in the beginning – my order will get here within 2 business days – and now it is arriving a week later? Why would they want to test their luck twice? This is why it is very important to frame your information properly and provide an easy way to get engagement.

Conclusion

Framing and Anchoring are just two of many principles of behavioral economics worth exploring when it comes to incentives. Both are very important and connect with how an audience will perceive the information a company is trying to project. As with other principles of behavioral economics, they can have an outsized impact on the relative success or failure of an incentive strategy.

As a result, you need to understand your target audience and how they will react to the information you are putting out. It will take trial and error to figure out the best way to frame your information and anchor the audience in ways that will benefit you. But once you have figured it out, the positive effects can be exponential and enduring.

If you want to learn about the other principles in Behavioral Economics, please take a look at the IRF’s piece on Applying Behavioral Science. They give plenty of examples to easily understand each principle, and it can help expand your existing knowledge on these topics.