“All of us rely on decision-making shortcuts. They are ways for us to conserve mental energy because we couldn’t possibly weigh every bit of information before making a decision.” - Nancy Harhut

We make snap buying decisions extremely quickly. And all day long. You grab a coffee on the way to work. You buy a gift on Amazon. You renew a streaming TV subscription.

It all seems simple because it happens so fast. But there’s a complex decision-making network operating behind the scenes in your brain. Nancy Harhut takes a closer look at this phenomenon in her new book, “Using Behavioral Science in Marketing.” As the co-founder and chief creative officer at HBT Marketing, she sees human behavior research reshaping how companies connect with their customers.

The Basics of Behavioral Science in Marketing

If you don’t know what behavioral science is, Nancy can help. In her speaking engagements and at conferences, she commonly encounters people who are unfamiliar with the field until she describes it. 

Behavioral science isn’t about test tubes and lab coats. It’s the study of how people behave and make decisions in the real world, where the action is happening moment by moment. Behavioral scientists also examine digital metrics that illuminate online behavior.

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As Nancy explains in her book, one of the key precepts of behavioral science is that all human beings use decision-making shortcuts. Our decision-making shortcuts serve as efficient pathways in our brains that allow us to make fast decisions under pressure.

As human beings, we spend much of our lives cruising through life on autopilot without deeply questioning every tiny decision we make. When we encounter familiar situations, we tend to default to the same sorts of decisions over and over again.

Savvy marketers use behavioral science techniques to interrupt the hardwired decision-making process and make you think, “Wait! Is there a better way to do this?”

Banking on Behavioral Science

Behavioral science sometimes hits a brick wall when it encounters banking. The financial world is a serious place. Strict regulatory and legal standards keep everyone on edge, so banking behavior is more controlled than everyday behavior.

Traditional banking institutions have been successful by playing it safe. They don’t necessarily embrace new technology or new methods of thinking until they see results. But they won’t get results until they embrace new methods of thinking, so they get trapped in a vicious cycle of inaction.

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Plus, the world of behavioral science seems unfamiliar and off-putting for many bank executives. Nancy likes to share a reminder that she’s not a scientist by trade and arrived in her field via direct response copywriting. By carefully crafting the written word, she’s seen how small tweaks in messaging can have an enormous impact on buyer behavior.

In marketing, one of the simplest behavioral science tests is known as an A/B test. A company rolls out two slightly different versions of a concept and sees which one performs better. 

If you want people to open checking accounts, create two versions of the same campaign, see which one gets more attention, and refine it further from there. This is just a basic example and as you become more familiar with using behavioral science in marketing, you can deploy more complex techniques. 

Do Smart People Make Smart Buys?

Buying things is an inherently emotional and transformational process, yet most people don’t think about it too deeply in their day-to-day lives. The emotions hide under the surface. If you directly ask someone about their money, you’ll discover exactly how emotional it makes them feel.

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Nancy’s book notes that the world’s smartest people still make buying decisions based primarily on their emotions. Maybe they’ve felt an immediate emotional connection to an exciting new upstart brand, without doing any research. Or they might be sticking with the same old habit of buying a beloved brand their parents always used. It’s all emotion-based.

Nancy shares a quick brain science lesson about neurobiology researcher Antonio Damasio, who studies people with brain injuries. Damasio found that when people sustain injuries to the parts of their brains that control emotions, they become virtually incapable of making ordinary decisions. They can’t decide what to have for lunch or even what to do next. Their lack of access to emotion brings their behavior to a screeching halt.

Making The Rational-Emotional Connection

What does all this mean to a banker or a marketer? It means you can appeal to people rationally, but you’ll have more success appealing to them emotionally. Buyer behavior is usually emotional at its core. Later, after a buying experience, people tend to start justifying their emotional buys with rational explanations.

Ideally, a financial brand always appeals to people on both levels: rationally and emotionally. For example, as a bank, you can show them the great rates and suggest how their life would be better if they take you up on your offer.

But the typical financial ad is failing when it says, “Refi your auto loan with us to save money." Research shows people are more likely to take action to avoid a loss, rather than to achieve a gain.

What does behavioral science say about this?

Nancy explains that marketers have a natural desire to share the benefits of what they’re selling. Marketers want to talk about the advantages and positive impacts on your life. Yet decades of research have shown that people are at least twice as motivated to avoid the pain of loss as they are to achieve the pleasure of gain. 

To put it another way, Nancy says, a little “well-placed loss aversion” is even more effective than bragging about the benefits. So instead of vaguely talking about an auto loan refi saving people money, show exactly how much money they stand to lose this year if they don’t refi. Say, “If you don’t lock this in today, you’ll pay this much more tomorrow.”

The Endowment Effect and Social Proof

There’s also a phenomenon known as the endowment effect. It means people tend to place a greater value on things they already own. After they acquire something, they feel even more bonded with it and reluctant to part with it.

In terms of marketing, you can tap into the endowment effect by helping people feel a sense of ownership. Give them a free trial or free sample, then later, warn them that their temporary ownership will come to an end. Provide the opportunity to make a more permanent buy. Loss aversion and the endowment effect work together to motivate them to stay with your brand.

Nancy has seen banks use this technique with safety deposit boxes. They provide a free safety deposit box with a new loan or a certain tier of new banking service, but the offer is for a limited time only. When the trial period is over, the customer thinks, “I don’t want to lose that safety deposit box.”

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Banking customers also respond to social proof, which means they pay attention to other people who have had positive and negative experiences. If they encounter social proof showing there’s a negative impact to making a certain choice, they’re on full alert.

A financial brand can use this concept in a testimonial campaign. Show a real person explaining that they tried your competitor, but they experienced negative consequences. When they switched to you, they avoided the negatives and found lots of positives instead. Clearly answer the question, “What’s in it for me?”

5 Takeaways for Behavioral Science in Financial Branding

Remember, you don’t have to be a scientist to use behavioral science in your work. Start by learning the basic concepts, which are outlined in Nancy’s book, then create small and manageable new campaigns that allow you to run tests and refine your strategies.

Let’s wrap things up with Nancy’s 5 takeaways for a beginner in behavioral science.

  1. People use decision-making shortcuts to make buying choices.
  2. They respond to loss aversion.
  3. They respond to emotion.
  4. They respond to social proof.
  5. They’re more interested in themselves than anyone else.

Learn more in Nancy Harhut’s book, “Using Behavioral Science in Marketing” or reach out to her via HBT Marketing. You can also reach out to James Robert Lay and access more resources about digital growth at digitalgrowth.com.