Behavioral Economics and Perception: How Online Purchasing Influences Customer Decision Making

As humans, we like to believe that we have free will and the ability to make decisions without being influenced by outside sources. In reality, however, people are very susceptible not only to environmental pressures but to subconscious biases that affect their choices. Businesses, especially in our increasingly online world, want to take advantage of this to guide consumers to purchasing their products. To do this, they have to understand what affects customer actions and how they can tap into these factors.

This is where the field of Behavioral Economics comes into play. Behavioral Economics is the psychology of decision making, why humans make the choices they make. It seeks to explain choices that appear unpredictable and almost irrational on the surface. In turn, it provides ways for businesses to capitalize on human thought processes.

Sara Isaac explains in her article 5 Things You Should Know about Behavioral Economics that humans have essentially two thought systems that guide choices; the first is the primitive one that allows us “to think and react quickly and efficiently” while the second is the logical one. Though most people and businesses believe that the logical System 2 drives decisions, “In fact, Nobel Prize winning behavioral economist Daniel Kahneman has shown during more than six decades of research that System 1 is nearly always in the driver’s seat” (Isaac). Therefore, humans, as consumers, tend to be driven by emotional and perceptual factors that may not seem sensible at first.

Thus, to fully understand how Behavioral Economics affects user decision making, we must first understand human perception.

Perception and Web Design

Perception is the way we take in information from our environment and interpret it to give it meaning. We use our multiple senses of sight, smell, taste, touch, and hearing to gather information which our brain then uses to craft deeper understanding.

Kendra Cherry, MSEd explains in her article What is Perception? that “We perceive things continuously, even though we don't typically spend a great deal of time thinking about them. For example, the light that falls on our eye's retinas transforms into a visual image unconsciously and automatically. Subtle changes in pressure against our skin, allowing us to feel objects, also occur without a single thought” (Cherry).

Beyond simply sensing and perceiving elements from the world, human brains then take the given information and use it to form meaning. Meaning can be created on different levels based on various factors.

In his TED Talk, The Three Ways that Good Design Makes You Happy, designer Don Norman explains his three levels of processing: visceral, behavioral, reflective.

The visceral level is the immediate reaction to a product’s appearance. It is the fundamental emotions evoked by the colors, size, shape, etc. of something when viewed for the first time. Andreas Komninos explains in his Interaction Design Foundation article Norman’s Three Levels of Design, “What we are essentially referring to here is 'branding'—namely, the act of distinguishing one product from another, not by the tangible benefits it offers the user but by tapping into the users’ attitudes, beliefs, feelings, and how they want to feel, so as to elicit such emotional responses” (Komninos). Visceral feelings are felt when interacting with a physical object, but they translate to digital experiences as well with people’s first reaction to a website’s appearance coloring their following actions. The products being sold may also appeal to this visceral level as well.

Behavioral is the next level. It focuses on the step after processing a design’s appearance which is interacting with it. It emphasizes usability, clarity, and functionality and how it feels for the user to complete a task. Komninos says, “Behavioral design [...] is interested in, for example, how users carry out their activities, how quickly and accurately they can achieve their aims and objectives, how many errors the users make when carrying out certain tasks, and how well the product accommodates both skilled and inexperienced users” (Komninos). Behavioral deals with not only how well the website functions and how easily it guides users but with what benefits the product or service will offer functionality wise.

Finally, reflective is the level where users think about the product or service in a deeper way and determine what meaning it holds for them. As Norman explains in his talk, this can include considerations such as owning a product that they feel improves their image, rather than enjoying its look which is visceral or appreciating its usefulness which is behavioral. Komninos says, “This is the highest level of emotional design; representing the conscious thought layer, where we consciously approach a design; weighing up its pros and cons, judging it according to our more nuanced and rational side, and extracting information to determine what it means to us as an individual” (Komninos). Visceral and behavioral are the base feelings towards appearance and usability; reflective, on the other hand, relies on people specifically analyzing and deciding what value a product or service may have for them beyond those initial emotions.

These three levels of processing explain how users perceive and experience a product or service. This allows online retailers to understand what draws certain customers and how to appeal to desired audiences.

Gestalt Theory

Gestalt Theory is the idea that people perceive objects in groups rather than as individual items. Elements that are close together, the same shape or color, or symmetrical become connected in the viewer’s mind and are expected to be related in some way.

Websites use Gestalt principles to lay out their content in a manner that satisfies visitors and guides them through each section. In particular, online retailers use Gestalt to organize their products into categories that make it easy for consumers to browse and find what they want or need.

Amazon.com uses Gestalt principles of Similarity, Proximity, and Common Region to group like items

Emotions

Consumers experience various emotions as they move through a process. Generally, websites want to elicit positive emotions that create a lasting impression and brings the customer back for more, but understanding the full scope of emotions allows designers to create deeper and more meaningful experiences for consumers.

Sherine Kazim, in her article Emotive UI, says, “Robert Plutchik, an academic psychologist who (literally) wrote the textbook on emotions, in 1980 introduced the concept of eight basic emotions — joy, trust, fear, surprise, sadness, disgust, anger, and anticipation. His ‘wheel of emotions’ shows the interplay of those emotions, and their varying levels of intensity” (Kazim).

The intensities of these basic emotions and the overlap between them to create secondary emotions provide a broad overview of what people feel and how strongly they feel it. It gives designers an idea of what emotions they can appeal to in varying situations to please users or get them to do what they want.

Because of the wide range and flexibility of emotions, small additions or changes can have a large impact on customer experience and positive perception.

For example, Nada Nasr Bechwati and Lan Xia investigated how satisfied users were with a search process by how much effort they felt an online decision aid saved them. Their paper, Do Computers Sweat? The Impact of Perceived Effort of Online Decision Aids on Consumers’ Satisfaction With the Decision Process, describes their two studies involving participants completing fake “job searches” and how satisfied they were with the process.

In the second study, Bechwati and Xia had participants attempt the search with some being updated on progress as they waited (“‘The search engine has already searched 30% of the database and is now going through the remaining 70%. Please wait.’”) while others were not.

Bechwati and Xia state that “online shoppers ’satisfaction with the decision process was found to be positively associated with their perception of the effort saved for them by electronic aids. Moreover, informing shoppers about search progress led to a higher level of perceived saved effort and, consequently, satisfaction. This finding implies that using cues that make online search more salient to consumers could lead to higher level of satisfaction with the aid’s performance” (Bechwati, Xia).

Adding a simple line of text was able to make users feel that progress was happening while they waited, reducing potential impatience or frustration.

Color

It is well known that colors evoke different emotions in people. Red may mean passion, love or anger, blue may be sad or calm, yellow energetic and happy.

In her article 8 Ways to Use Color Psychology in Marketing (With Examples), Céillie Clark-Keane explains, “Color psychology is the theory that certain colors elicit a physical or emotional reaction and, in doing so, shape human behavior. This isn’t quite as simple as seeing red and getting angry or seeing blue and feeling at ease—but almost. Medical studies suggest that the color red correlates to an increase in blood pressure, and the color blue corresponds with a decrease. Because of this impact on behavior, color can play a big role in creating a mood” (Clark-Keane).

Harnessing this knowledge is the key to creating designs that properly convey messages and brand identity as well as guiding users through cultural signals of what colors mean.

Guiding Users: Affordances and Signifiers

Understanding human perception allows businesses to use key visual elements to guide users to their destination. They can do this through the use of affordances and signifiers.

Affordances are what actions are possible to do with something, or at least what actions users believe are possible. For a physical product like a pencil, they expect to be able to draw with one end and erase with the other. For a website, three horizontal lines are expected to open up a menu. Interaction Design Foundation says in their article What are Affordances?, “For example, Don Norman defined affordances as perceivable action possibilities – i.e., only actions which users consider possible. So, designers must create objects’ affordances to conform to users’ needs based on these users’ physical and perceptual capabilities, goals and past experiences” (IDF).

Signifiers are the cues that explain what affordances an object has. A physical object may have a handle, a hole, or a button and relies on people having knowledge of how they operate. Digital signifiers include shape, color, position, or other visual cues that suggest what a button or option may do.

That is crucial to remember; these cues signal what they may do, ie what they are expected to do, but if the affordance does that match that assumption, it can cause confusion or frustration.

With websites, having clear signifiers for what buttons do and what choices people are making when they select them is important. The payment screen with online retailers is especially crucial to get right since people want to be certain that they are choosing the options they want and their money is being handled correctly. Having clear signifiers simplifies the process for customers and adds a sense of ease and trust that they are getting what they want.

Influencing Users

Having knowledge of how people choose to act gives great power to companies that want to earn money and retain and grow a customer base. Key Behavioral Economics principles shine light on the methods businesses can and do use in both physical and online shopping experiences to take advantage of consumer biases in decision making.

Defaulting

Defaulting is the notion that people are likely to go with whatever the “default” option is simply because it is easier than making a decision themselves.

According to Bridgeable’s article The Top 5 Behavioural Economics Principles for Designers, “People don’t like to disrupt the status quo — it’s easier and more comfortable to stick to what we already know. This makes the selection of “default” options one of the most important choices you can make. When setting user defaults, you provide a cognitive shortcut that signals what people are supposed to do” (Bridgeable).

Having a default option selected gives users a suggestion of what they could or should do and offers them a way forward if they do not know what to choose otherwise.

This has been shown to have positive outcomes such as when certain European countries made organ donation an “opt-out” rather than an “opt-in” procedure; donations increased because rather than having to go through effort to join, people were automatically included and had to be determined to go through the effort to leave.

In commerce, this is often seen when choosing a plan or subscription for a service such as a phone.

When used in certain ways, defaulting can have more complicated effects, however. C. Whan Park, Sung Youl Jun, and Deborah J. Macinnis’ paper Choosing What I Want Versus Rejecting What I Do Not Want: An Application of Decision Framing to Product Option Choice Decisions studied what choices participants made when presented with defaults that either asked them to remove features for less money (subtractive option framing) or add features for a higher cost (additive option framing). They explained their hypotheses by saying, “In addition, Hardie, Johnson, and Fader (1993) find that loss aversion for product quality (utility) is greater than aversion to price (economic losses). Because of this differential loss aversion, it is expected that consumers engaged in [subtractive option framing] will be more averse to deleting options (utility loss) than those engaged in [additive option framing] will be to adding them (economic loss)” (Park et al.). Through their three studies, they found this to be true; those whose default or “option frame” asked them to remove features ended up choosing and paying for more than those who could add.

This can have significant implications for how businesses set up their purchasing options. As they say at the end of their paper, “Knowledge of this effect may lead to a situation in which marketers intentionally load a brand with options to realize a higher purchase price, irrespective of the actual value delivered by such options” (Park et al.). Therefore, although defaulting can be a valuable tool used in moderation to nudge users towards decisions, it can be misused to essentially scam consumers.

Anchoring

Another mental bias that can affect customer purchasing decisions is called anchoring.

Anchoring is the idea that the first fact or number a person hears becomes the basis to which they compare all later information. This can affect customer decision making by causing them to inaccurately perceive prices as better than what they are.

The article What Is Anchoring Bias? Definition & Examples by Kassiani Nikolopoulou says, “Once the anchor is set, subsequent judgments are made by adjusting away from that anchor, while staying within the range set by it. For example, the initial price offered for a used car sets the standard for the rest of the negotiation. Here, prices lower than the initial price seem like a good deal, even if they are still higher than the car’s actual value. As a result, our perception of reality is distorted, and our decisions are biased” (Nikolopoulou).

Conclusion

Through understanding how humans perceive the world and their interactions with it, companies seeking to sell online can tailor their websites and services to guide users through a process with positive emotions as well as capitalizing on biases to earn more profit.


Sources

Bechwati, Nada Nasr, and Lan Xia. “Do Computers Sweat? The Impact of Perceived Effort of Online Decision Aids on Consumers’ Satisfaction With the Decision Process.” Journal of Consumer Psychology (Taylor & Francis Ltd), vol. 13, no. 1/2, Jan. 2003, p. 139. EBSCOhost, https://doi.org/10.1207/153276603768344852.

Cherry, Kendra. “What Is Perception?” Verywell Mind, 1 Feb. 2023, www.verywellmind.com/perception-and-the-perceptual-process-2795839.

Clark-Keane, Céillie. “8 Ways to Use Color Psychology in Marketing (with Examples).” WordStream, 26 Feb. 2024, www.wordstream.com/blog/ws/2022/07/12/color-psychology-marketing. (Module 3 Emotional Design)

Interaction Design Foundation. “What Are Affordances?” The Interaction Design Foundation, UX courses, 2019, www.interaction-design.org/literature/topics/affordances. (Module 4 Perception and Cognition)

Isaac, Sara. “5 Things You Should Know about Behavioral Economics | Marketing for Change.” Marketing for Change, 21 Feb. 2019, marketingforchange.com/insights-center/5-things-you-should-know-about-behavioral-economics/. Accessed 15 Dec. 2024.

Kazim, Sherine. “Emotive UI.” Medium, 2 Nov. 2016, uxdesign.cc/emotive-ui-10cb9811c35e. (Module 3 Emotional Design)

Komninos, Andreas. “Norman’s Three Levels of Design.” The Interaction Design Foundation, Interaction Design Foundation, 29 June 2017, www.interaction-design.org/literature/article/norman-s-three-levels-of-design? Accessed 15 Dec. 2024.

Nikolopoulou, Kassiani. “What Is Anchoring Bias? | Definition & Examples.” Scribbr, 16 Dec. 2022, www.scribbr.com/research-bias/anchoring-bias/.

Park, Cheol & Jun, Sung & Macinnis, Deborah. (2000). Choosing What I Want Versus Rejecting What I Do Not Want: An Application of Decision Framing to Product Option Choice Decisions. Journal of Marketing Research - J MARKET RES-CHICAGO. 37. 187-202. 10.1509/jmkr.37.2.187.18731. 

TED. “The Three Ways That Good Design Makes You Happy | Don Norman.” YouTube, 9 Mar. 2009, www.youtube.com/watch?v=RlQEoJaLQRA. (Module 3 Emotional Design)

“The Top 5 Behavioural Economics Principles for Designers.” Bridgeable, 11 Jan. 2019, www.bridgeable.com/ideas/the-top-5-behavioural-economics-principles-for-designers/. (Module 4 Perception and Cognition)

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