Behavioral economics in e-commerce marketing. What is it? How can you use it?

Do economics and psychology have anything in common? As it turns out, yes! Behavioral economics is a discipline of knowledge that tries to find answers to questions about our purchasing decisions. To be more precise – why are they irrational sometimes? Of course, such knowledge can be extremely useful for every entrepreneur. In this article, we will talk about behavioral economics and see what it all means for the e-commerce sector.

Traditional economics assumes that consumers act rationally, and their decisions have to be, above all, beneficial. However, as you probably suspect, the reality is oftentimes different. That’s why there was a need for a discipline that would take a closer look at that interesting matter. And that’s how behavioral economics was born.

According to many studies, customers frequently make irrational decisions, and they depend on many facets. Knowledge of what these facets might be and what can influence purchasing decisions could help you increase sales in your e-commerce company. Let’s talk a bit more about that. 

What does affect consumer decisions?

Here, we need to mention several important elements. As it happens, the first thing that you ought to consider is… your customer’s mood. That’s true; a customer who is happy will more likely buy something from you than one that’s sad or depressed. Frequently, upset people are more eager to analyze all the pros and cons of the offer and are restrained when it comes to spending money.


The second thing we need to talk about is relativity. In short, it’s all about providing a reference point so that customers can compare products and pick the best offer. That’s what Phil Barden mentions in his “Decoded: The science behind why we buy” book. In it, he cites a straightforward example:

There were four beers on sale, but not simultaneously. When there were just two to choose from – one for 1 pound and the other for 2 pounds, customers more often chose the more expensive one. When a drink for 30p was added to the offer, no one was buying it, but sales of £1 beer increased. When the £4 beer was added to the offer, no one was after the one for £1, but sales of the £2 beer increased significantly.

What does it mean for the e-commerce business owner? That price is something subjective. Sometimes, in order to raise a price of a specific product, you simply need to offer another one with a different price. This way, it will be possible to compare both products and make an informed decision. If one of the products is noticeably better than the other – most customers will choose it. That’s what the decoy effect is all about – if you want to turn your customer’s attention to a specific product, show them a second one that’s less attractive.

Carmakers perfectly know about this rule. To raise the prices of their cars, they create new “supermodels” that are nothing more than just a demonstration of technical possibilities. Such cars are never bestsellers, but that’s not their role. Their role is to enable the manufacturer to bump up the price of their other, more average models and trigger more interest in them.

The decoy effect is clearly visible in the SaaS world. Why do these online platforms usually offer three plans? To promote one plan that’s the most profitable to them. See how it works with Grammarly, an English grammar-checking platform:

In this example, Premium is the target plan. The Business plan doesn’t offer anything that would simplify using the platform. The biggest qualitative leap is between Free and Premium plans. Give your customers a reference point that’s less profitable than your target product. You will soon see how this one strategy will affect your sales!


Let’s go further. Daniel Kahneman, an American-Israeli psychologist and economist, the author of “Thinking Fast and Slow”, says: If there are several ways of achieving the same goal, people will eventually gravitate to the least demanding course of action”.

Therefore, if something doesn’t require thinking about it, most people won’t. That’s what we call a behavioral cost. It’s not related directly to money, but it involves our time and effort (both physical and intellectual) – they are the things that we pay with to buy a specific product or to use a specific service. The higher the behavioral cost is, the less probable it is that a customer will place an order.

What can you do about that? Streamline the decision. Eliminate all the elements that can make the purchasing process more difficult or complicated. That’s how all the biggest e-commerce websites work. Let’s take a look at Amazon. You enter a given product category, and what can you see? Four best seller offers. For many customers, that’s a suggestion that they are especially worth looking at. And if a given person finds what they are looking for there, what’s the chance they will continue their search and browse through the next one or two hundred offers? It’s rather unlikely, isn’t it?


It’s no secret that you can show data in different ways. And frequently, the effectiveness of each of these ways can be different. For instance, if you focus on the cons of a particular product, it’s unlikely you will close many deals, even if the offer itself is good. If, in your product tab, the first thing the customer sees is the information about low availability, they will most likely go elsewhere. Communicate positive messages – talk about the advantages and benefits behind each product. Of course, we’re not saying here that you should lie or conceal anything. Instead, it would help if you looked for a way to describe the products in your offer that will show its attractiveness.

Summary: Prices in e-commerce

In this article, we talked a lot about elements influencing customer decisions. And what about prices? They are also immensely important here. They play a valid role in your offer, but you have to be aware of your competitors’ offers. This way, you can optimize prices in your store and exploit the possibilities of behavioral economics. If you want to know more, see our tools for e-shops, especially the price monitoring feature. This way, you will be able to set prices that are attractive to your customers and profitable to you.

You can start monitoring your competitor’s prices right now!