Applying Behavioral Economics To PPC - HeroConf 2015

I recently had the humbling experience of not just attending, but speaking at HeroConf in Portland – THE PPC conference.

Forgive me for being a couple weeks late revisiting the subject I spoke on. I’m still trying to digest all of the great content and takeaways from the conference! Plus, I took a few days off to enjoy the Portland and Mt. Hood.

I definitely hit the jackpot by being able to co-present with one of the most well-known and respected PPC experts, Matt Umbro (view Matt’s presentation here). We presented on how consumer psychology and behavior affects PPC campaign performance.

As humans, we like to think we’re in control of everything. We make well-thought, rational decisions and aren’t influenced by any outside factors. This idea is what the classic economic theory suggests.

Enter behavioral economics – which says the classic theory isn’t entirely true. Behavioral economics says people are irrational and our decisions are influenced by outside factors. This goes for every single decision we make, not just purchase decisions.

Over the last year and a half, I’ve entrenched myself with books and research on behavioral economics and began wondering why, as PPC advertisers, we not using it more often.

My presentation at HeroConf covered the “outside factors” – the principles of behavioral economics – like social proof, scarcity, anchoring, and framing can be applied to PPC ad copy to influence or guide users to make a specific decision. I gave a brief overview, how to apply them to PPC text ads, then followed up with real-life examples of each one. I know, you’re probably thinking “get to the principles already, Davis!” well here you go:

Social Proof

Social proof hits on our condition to assume the actions of others or want what others have. Most of the time, we don’t even need what the others have. Think back to the “Be Like Mike” campaign in the early 90’s. This agency’s plan was to make people think that they needed whatever the heck Michael Jordan has. So how can you, as a PPC advertiser, apply the principle of social proof to your text ads? Consider these steps:

• Make the user feel like they’re not the only one making this choice
• Show them directly how many people have chosen their product or service
• Create a feeling of envy
• Show them that experts are making that choice and recommending it
• Use the rating and review extensions within the Adwords interface

Here’s what social proof looks like in a text ad:

Scarcity

The next principle I covered was scarcity. This taps into the condition in which our wants appear to be greater than the resources. As humans, we place a higher value on something that is of limited time or quantity than in abundance or everlasting. This gives us the feeling that we got something that not many other people can get. When we see that there’s only 1 of something left or just 2 hours remaining in a sale, our brains start thinking “irrationally” and are more inclined to make that purchase. Here are a few ways you can use scarcity in your ad copy:

• Communicate time sensitivity and product quantity. Convey the point that this deal won’t last long
• Make the user feel a sense of urgency using words like “hurry”, “only” and “ends soon”
• Utilize the ad customizers and countdown features in Adwords

Below are examples of PPC ads with scarcity applied:

Anchoring

Anchoring hits on our tendency to rely too heavily on the first piece of information we see. This first piece of information, or the “anchor”, isn’t even relevant to the situation we’re in. As consumers, we latch on to the first number, word of piece of information and compare everything else that follows to it. Pop Quiz/Joke – When does a $50 bottle of wine look like a great deal? When it’s next to a $100 bottle. Restaurants are notorious for using this. They frequently put an extremely expensive entre at the top of the menu, that way everything that follows seems like a really good, reasonable price. Use the items below to get started on applying anchoring to your text ads:

• Set the value with an anchor. Give the users a number or piece of information they can latch on to
• Create an environment where B always looks better than A.
• Always promote the original price with the sale price
• Offer a lower price than your competitors

What does a PPC ad look like with the principle of anchoring applied? Great question! See below:

Framing

The last principle I went over in my presentation was framing. This is a condition that occurs when the same information is presented in different ways which evokes different emotions, in turn, creating different decisions.

Our decisions depend on how a problem is presented. In other words, it’s not what you say, it’s how you say it (married folks probably know a lot about this). We react differently when presented with the same information in different ways.

Framing Pop Quiz #1 – Would you rather eat ice cream that is 80% Fat Free or 30% Fat? Data shows that 99.99% of us would chose to eat the 80% fat free ice cream. It’s the same exact product, just framed/presented differently.

Framing Pop Quiz #2– You’ve been diagnosed with a potentially fatal condition. Would you rather take a pill that gives you a 90% chance of living or one that gives you a 10% chance of dying? Most of us would choose the 90% chance of living pill. Guess what, it’s the same exact pill as the 10% chance of dying pill. Again, same product, just presented differently.

Framing is a great principle to apply to your ad copy. Use the following list to get started on using it in your ad copy:

• Think like a lawyer or car salesman – present the facts in the best possible way
• Frame the product, service or proposition as a gain or loss
• Use absolute numbers instead of percentages
• Break down the cost of a product

Here are a few examples of what framing looks like in text ads:    

I closed my presentation with questions to ask yourself to unleash your inner behavioral economist:

Social Proof: How can I make the user feel like they’re not the only one making this choice?
Scarcity: How can I communicate time sensitivity and product quantity?
Anchoring: How can I convey the benefits compared to the first piece of information received?
Framing: Can I frame the product, service or proposition in the best way possible? Check out my entire presentation below: 

For more information on behavioral economics, I highly suggest you read the following books:

• Predictably Irrational
• Nudge
• Think Fast & Slow

While I’m the subject, be sure to follow Dan Ariely and Rory Sutherland on Twitter. They’re essentially the Brad Geddes and Larry Kim of behavioral economics Want to learn more about behavioral economics or how to apply it to your PPC campaigns? Give us a shout!