For luxury brands, one of the toughest nuts to crack is identifying exactly what motivates consumers’ decisions when they shop.
The challenge is that consumer behavior is a highly personal and unique process determined by several factors, many of which are impossible for retailers to control. While brands can develop strategy around inventory, styles and discounting based on data and salient trends, there are also a number of mental processes that impact how humans shop both online and in store. Retailers are realizing that the key to better attracting shoppers is understanding the psychological underpinnings and behavioral economics that influence the way individuals select products. In other words, fashion brands are using the inner workings of the human brain to better understand purchasing patterns and thus inform operations.
In psychology, these decision processes are known as heuristics. Here’s a look at how retailers are using them to drive strategy.
What are heuristics?
Heuristics are principles of behavioral psychology that involve a series of mental processes used to make decisions and solve problems. In essence, they’re intrinsic algorithms that occur instantaneously in the brain to help generate understanding and perception in everyday scenarios. Annie Hooper — a strategy consulate at Qubit, a technology company that works with fashion brands including Alice + Olivia, BCBG and AG Jeans — described the concept as a “mental shortcut,” or “rule of thumb,” based on sensory experiences.
Got it. But how does this apply to fashion and retail?
Humans are easily influenced by the actions of their peers, a major catalyst in how trends are determined and styles in stores are displayed. In turn, this impacts how they shop and what selections they make. “Let’s say, for example, you see a long line for a restaurant and you assume the food is really amazing. That’s a decision you’ve made, and an assumption you’ve made in your brain without even considering it,” Hooper said, speaking at an event in New York on Wednesday. This same concept explains why consumers seek out certain brands and styles, and explains how companies can seemingly rise from obscurity.
That seems pretty objective. How can marketers use this to their advantage?
The mind is fickle, and these snap judgements lead to cognitive biases or “irrational conclusions, in the sense that it’s not economic rationality, but rather based on the brain’s leanings and tendencies,” said Hopper. However, there are specific types of heuristic practices that brands can use to their advantage through small, simple tweaks, like the way they display products on e-commerce sites.
What does that mean in practice?
One heuristic property is the paradox of choice, meaning that when a consumer is overwhelmed with decisions, they have a tendency to become distracted and disengaged. A simple solution to increasing retention during e-commerce experiences is reducing the number of dropdown categories on the site, said Izzy Murray, a fellow strategy consultant at Qubit. Another heuristic concept is scarcity, and a consumer’s fear of missing out: Fashion brands can lure shoppers by noting when an item is in limited supply on its site by using a badge, which has proven to transpire to more sales.
Wait, what’s a badge?
Badges are basically ways retailers spotlight specific products online as new arrivals or bestsellers, which can be tailored and customized based on consumer preferences. Qubit worked with BCBG so that different shoppers see different badges, to increase the chances they’ll zero in on certain products and shop.
“This leverages the most powerful heuristic, which is the bandwagon effect,” Murray said. “We make decisions based on what other people think, not necessarily on our own private information. We aren’t going to spend the time to look at every single product, but if we see that other people are buying something, we’re going to be like, ‘Oh cool, it’s popular; it looks good’ it’s on trend.’”
Interesting. Are there other heuristics brands are focusing on?
As machine learning and AI continues to grow in the fashion and beauty world, automation bias is starting to play a role in how consumers shop. Murray and Hopper said that while humans might be skeptical of a sales associate providing help with looks, as they may be motivated by outside factors like commission in some cases, they tend to trust selections made online using AI technology. As a result, they’ll more likely click on features like “Recommended Items,” since it pulls from user preferences.