When we speak face to face, we communicate in part through our words, our tone of voice and our body language. In total, only 7% of our communication is achieved verbally, while 55% is accomplished through body language and 38% through tone of voice. That means that when you communicate online, relying on words alone, you risk missing out on the majority of our powers of persuasion. The solution is to use marketing psychology to supercharge your communication and replace that 93%.
The good news is that techniques like hyperbolic discounting, loss aversion and FOMO — and the Von Restorff effect are more common and easier to implement than you might think.
More importantly, they are applicable to a wide range of consumer facing businesses. After all, the likelihood of the success boils down to one factor, — how well consumers purchase what you offer; your business.
Hyperbolic discounting is the practice of offering consumers an immediate reward rather than a long-term incentive.
It may surprise you to learn that behavioral studies show that most people will choose $50 today rather than $100 in six months. Interestingly, if you offer the same financial incentives but at 6-month and 12-month intervals, people will choose the latter.
In other words, it is the promise of getting a benefit at this exact moment, that is persuasive. The message to the consumer is that they are valued right here, right now, no strings attached.
Whenever you see a brand offering immediate discounts, they are taking part in hyperbolic discounting. As a customer, the offer is clear and uncomplicated. There’s no need to sign up for an annual subscription, or loyalty benefit. Instead, have a simple, easy to understand $5 off. If you were torn over whether to buy that $30 shirt, now it’s only $25.
Gap offering store wide discounts is an example of hyperbolic marketing. (Source: GAP)
Grow your data. Grow your community
Hyperbolic discounting also functions as a community building tool. Examples of this include offering discounts if users refer a friend. Businesses like AirBnB, Deliveroo, and others employ this approach.
You can also use it to gather data, which will provide deeper customer insight. You might offer a $5 voucher to visitors if they subscribe to your newsletter, helping you build up a mailing list.
You can also use that mailing list in tandem with viewed products or items left in a basket and target customers. For example, send a reminder email or reduction for this specific product. Writing a follow up email with text like “waiting for you”, can be the small nudge people need to complete a purchase.
It doesn’t have to be expensive
If you’re worried about the potential cost implications of hyperbolic discounting, you can mitigate this by providing clear terms and conditions. Many brands ensure that offers only apply to full price items, or limit referrals to one per customer.
New Balance offers 15% off a first order if you sign up to their newsletter, but the offer only applies to full price items. (Source: New Balance)
Because buying into these kinds of deals is commitment free, this approach is particularly effective for capturing first time customers. Your targets are people who have been considering a purchase, or people who are coming across you for the first time and may need an incentive. That being said, it is also an effective way of increasing the total value of a loyal customer, who may buy more than they ordinarily would without a discount.
Equally, since these deals feel quick and easy to the consumer, they are also easily achieved during those moments of procrastination that research suggests most consumers indulge in during the day.
It doesn’t have to be a discount. Advertising an offer of free shipping, or free returns, can also be a way of lowering barriers to entry for new and returning clients alike. Highlighting these offers on your home page will help grab customers’ attention and reduce click away rates.
Face your fear (of missing out)
If hyperbolic discounting focuses on making the desirable seem easy, loss aversion or FOMO marketing is all about making things seem desirable in the first place. Thanks to the internet, and particularly to social media, global consumers are more attuned than ever before to the fear of missing out (FOMO). T
he reason for this is simple – we are more aware than ever of what others are doing or buying. Think about your Instagram feed, your Facebook wall, or even your LinkedIn account. All are full of exotic destinations, restaurants, shiny products, and recommendations for great new services. Together, these things have changed the way we shop.
FOMO marketing takes advantage of this cultural shift to increase conversion and minimize the number of consumers quitting during signup or leaving the site with a full basket before checkout.
The power of running out of stock
British sportswear brand Gymshark effectively used FOMO marketing as part of its rapid growth into a billion-dollar company. Its blackout sales were preceded by shutting down the website and showing only a timer counting down to the start of the sale. When users reached the checkout, they often found that many of the products in their basket were sold out.
Even those users who didn’t manage to buy what they wanted came back more determined to triumph in next year’s sale.
You can make the most of this technique, for example, by including out of stock items on the page. If you are concerned about frustrating customers, keep out of stock items at the bottom of the page.
Software like Exponea can also help by showing real-time inventory data as users browse the website. Airlines often do this, for example to show that there are only four seats left at a particular price.
Partnerships and word of mouth
All of this works for a simple reason. Scarcity breeds desire. Think of the long queues outside Apple stores when it releases a new phone. The resulting pictures and reports create further interest and encourage those thinking of buying later to do so faster.
Think of the race to get tickets for festivals. Even things that are difficult can benefit from this, for example challenges like Tough Mudder which offer early bird prices, or marathons which are oversubscribed year after year.
Former Fintech start-up and now established bank Monzo also channelled FOMO when it burst onto the scene. Monzo created a virtual queue for its signature coral cards. Cleverly, that queue could be skipped if customers had a golden ticket, which could only be given by another user. Monzo used this system to incentivize referrals and create word-of-mouth marketing.
Monzo’s golden ticket created buzz and at times also worked in tandem with a referral bonus. (Source: Monzo)
Companies can also use FOMO to benefit from the marketing buzz around another brand. For example, phone companies often bundle free headphones, or subscriptions to services like Spotify, Now TV or Sky Go that consumers might otherwise consider unaffordable. In this scenario, both companies win, building on each other’s audiences and increasing the perceived value of their offer.
Make it easy for customers
FOMO also plays a role in disrupting industries. FOMO is actually driving customers to be less loyal to brands, because their chief concern is not the quality of what they know, but the worry that what they don’t know might be better. Because of this, it can also work well in harmony with some of the principles of hyperbolic discounting.
For example, to help convince potential customers to take the leap, reducing barriers to entry with free shipping and an attractive returns policy is critical.
Creating a minimalist customer journey is also crucial. This means smoothing the path from homepage to checkout so that consumers are encouraged to purchase or sign up quickly and easily. Software that allows customers to buy or sign up with one click works well too.
If you’re looking to get even more precise with your campaigns, bear in mind that some studies suggest people’s fear of missing out deepens later in the day and later in the week. This may be because we associate evenings and weekends with socializing, fun, and exciting experiences.
Creating visual change – the Von Restorff effect
Human beings are neurologically programmed to detect change. From our hunter / gatherer roots, we evolved to quickly notice differences in the world. Brands can take advantage of this by setting up their websites, or also their physical stores, in such a way that change is everywhere. Website designers are increasingly using asymmetrical design, or at least alternating text and images, to draw the eye around the page.
In e-commerce, this can be enhanced with the use of different fonts, colors and sizes to promote high-margin items. Or, you could use different-colored call to action buttons on products that your insights, perhaps generated by a Customer Data Platform (CDP), show often lead to cross-selling.
A different-colored call to action button can promote high-margin items. (Source: Exponea)
Your marketing doesn’t have to be the same as everyone else’s, it just has to be different from your standard content.
Make marketing psychology work for you
Your business is unique, and so are the ways in which you will be able to take advantage of these techniques. What is certain is that a clearer understanding of your customers and their psychology will enable you to communicate more effectively with them, almost as if you were face to face.
Fintech Kennek raises $12.5M seed round to digitize lending
London-based fintech startup Kennek has raised $12.5 million in seed funding to expand its lending operating system.
According to an Oct. 10 tech.eu report, the round was led by HV Capital and included participation from Dutch Founders Fund, AlbionVC, FFVC, Plug & Play Ventures, and Syndicate One. Kennek offers software-as-a-service tools to help non-bank lenders streamline their operations using open banking, open finance, and payments.
The platform aims to automate time-consuming manual tasks and consolidate fragmented data to simplify lending. Xavier De Pauw, founder of Kennek said:
“Until kennek, lenders had to devote countless hours to menial operational tasks and deal with jumbled and hard-coded data – which makes every other part of lending a headache. As former lenders ourselves, we lived and breathed these frustrations, and built kennek to make them a thing of the past.”
The company said the latest funding round was oversubscribed and closed quickly despite the challenging fundraising environment. The new capital will be used to expand Kennek’s engineering team and strengthen its market position in the UK while exploring expansion into other European markets. Barbod Namini, Partner at lead investor HV Capital, commented on the investment:
“Kennek has developed an ambitious and genuinely unique proposition which we think can be the foundation of the entire alternative lending space. […] It is a complicated market and a solution that brings together all information and stakeholders onto a single platform is highly compelling for both lenders & the ecosystem as a whole.”
The fintech lending space has grown rapidly in recent years, but many lenders still rely on legacy systems and manual processes that limit efficiency and scalability. Kennek aims to leverage open banking and data integration to provide lenders with a more streamlined, automated lending experience.
The seed funding will allow the London-based startup to continue developing its platform and expanding its team to meet demand from non-bank lenders looking to digitize operations. Kennek’s focus on the UK and Europe also comes amid rising adoption of open banking and open finance in the regions.
Featured Image Credit: Photo from Kennek.io; Thank you!
Fortune 500’s race for generative AI breakthroughs
As excitement around generative AI grows, Fortune 500 companies, including Goldman Sachs, are carefully examining the possible applications of this technology. A recent survey of U.S. executives indicated that 60% believe generative AI will substantially impact their businesses in the long term. However, they anticipate a one to two-year timeframe before implementing their initial solutions. This optimism stems from the potential of generative AI to revolutionize various aspects of businesses, from enhancing customer experiences to optimizing internal processes. In the short term, companies will likely focus on pilot projects and experimentation, gradually integrating generative AI into their operations as they witness its positive influence on efficiency and profitability.
Goldman Sachs’ Cautious Approach to Implementing Generative AI
In a recent interview, Goldman Sachs CIO Marco Argenti revealed that the firm has not yet implemented any generative AI use cases. Instead, the company focuses on experimentation and setting high standards before adopting the technology. Argenti recognized the desire for outcomes in areas like developer and operational efficiency but emphasized ensuring precision before putting experimental AI use cases into production.
According to Argenti, striking the right balance between driving innovation and maintaining accuracy is crucial for successfully integrating generative AI within the firm. Goldman Sachs intends to continue exploring this emerging technology’s potential benefits and applications while diligently assessing risks to ensure it meets the company’s stringent quality standards.
One possible application for Goldman Sachs is in software development, where the company has observed a 20-40% productivity increase during its trials. The goal is for 1,000 developers to utilize generative AI tools by year’s end. However, Argenti emphasized that a well-defined expectation of return on investment is necessary before fully integrating generative AI into production.
To achieve this, the company plans to implement a systematic and strategic approach to adopting generative AI, ensuring that it complements and enhances the skills of its developers. Additionally, Goldman Sachs intends to evaluate the long-term impact of generative AI on their software development processes and the overall quality of the applications being developed.
Goldman Sachs’ approach to AI implementation goes beyond merely executing models. The firm has created a platform encompassing technical, legal, and compliance assessments to filter out improper content and keep track of all interactions. This comprehensive system ensures seamless integration of artificial intelligence in operations while adhering to regulatory standards and maintaining client confidentiality. Moreover, the platform continuously improves and adapts its algorithms, allowing Goldman Sachs to stay at the forefront of technology and offer its clients the most efficient and secure services.
Featured Image Credit: Photo by Google DeepMind; Pexels; Thank you!
UK seizes web3 opportunity simplifying crypto regulations
As Web3 companies increasingly consider leaving the United States due to regulatory ambiguity, the United Kingdom must simplify its cryptocurrency regulations to attract these businesses. The conservative think tank Policy Exchange recently released a report detailing ten suggestions for improving Web3 regulation in the country. Among the recommendations are reducing liability for token holders in decentralized autonomous organizations (DAOs) and encouraging the Financial Conduct Authority (FCA) to adopt alternative Know Your Customer (KYC) methodologies, such as digital identities and blockchain analytics tools. These suggestions aim to position the UK as a hub for Web3 innovation and attract blockchain-based businesses looking for a more conducive regulatory environment.
Streamlining Cryptocurrency Regulations for Innovation
To make it easier for emerging Web3 companies to navigate existing legal frameworks and contribute to the UK’s digital economy growth, the government must streamline cryptocurrency regulations and adopt forward-looking approaches. By making the regulatory landscape clear and straightforward, the UK can create an environment that fosters innovation, growth, and competitiveness in the global fintech industry.
The Policy Exchange report also recommends not weakening self-hosted wallets or treating proof-of-stake (PoS) services as financial services. This approach aims to protect the fundamental principles of decentralization and user autonomy while strongly emphasizing security and regulatory compliance. By doing so, the UK can nurture an environment that encourages innovation and the continued growth of blockchain technology.
Despite recent strict measures by UK authorities, such as His Majesty’s Treasury and the FCA, toward the digital assets sector, the proposed changes in the Policy Exchange report strive to make the UK a more attractive location for Web3 enterprises. By adopting these suggestions, the UK can demonstrate its commitment to fostering innovation in the rapidly evolving blockchain and cryptocurrency industries while ensuring a robust and transparent regulatory environment.
The ongoing uncertainty surrounding cryptocurrency regulations in various countries has prompted Web3 companies to explore alternative jurisdictions with more precise legal frameworks. As the United States grapples with regulatory ambiguity, the United Kingdom can position itself as a hub for Web3 innovation by simplifying and streamlining its cryptocurrency regulations.
Featured Image Credit: Photo by Jonathan Borba; Pexels; Thank you!