Each of the big four tech companies sports an insane amount of market cap. It’s because they have an incredible amount of consumer attention. The interaction between these technological products and the users has led to a spike in interest in consumer psychology.
Indeed, if you have designed online marketing campaigns, you might have extensively leveraged cognitive biases to persuade your audience. For instance, product listings contain testimonials from influencers (acts as social proof) and time-bound discounts (for creating urgency).
As a marketer, you need to spend time trying to understand a consumer’s mental makeup. However, even you are prone to making faulty decisions. Being aware of these biases is insufficient, as you can’t magically become immune to the pressures of human nature.
Indeed, even if you pursue data-driven marketing, you can make irrational decisions (as you will see later in the article).
Today, you will look at three such biases that plague marketing campaigns and lead to bad business decisions. You will also see typical scenarios of companies committing these mistakes in their online marketing campaigns. Here we go with the first bias.
1. Survivorship Bias: Skewing your perception towards optimistic results of the outliers
Media outlets are obsessed with success stories. They glorify the leaders of an industry with details of their toil, grit, and determination. However, there is a lack of visibility for the industry folks that are putting in the hard work, yet failing.
It leads you to draw false conclusions. For example, college dropouts that launch a successful startup make for great headlines. However, dropping out is not the recipe for success. In general, people with higher education tend to earn more.
The logical error of focusing solely on the winners that survived the selection process is called as survivorship bias.
How does the bias affect your business decision-making?
Here’s a typical scenario.
You visit an industry thought leader website. They have broken down how their viral marketing strategy helped a startup they consulted to reach 100,000 users in 3 months. You feel ecstatic and decide to replicate the strategy.
One month in, you are nowhere near the projected growth. However, you keep patience and keep investing your resources to emulate that strategy. Three months are over. You are nowhere near a thousand users; forget one hundred thousand.
Now, you are dejected, out of money, and blame the thought leader for your situation.
Well, you overlooked that the strategy was likely executed a few months ago with a different set of variables. As more marketers jump on the bandwagon to implement the same strategy, it loses its effectiveness.
A decade ago, going viral was relatively easier. Dropbox growth hacked its way to a waiting list of 75,000 users overnight by posting a demo video (with lots of insider jokes) on Digg. They got 10,000 Diggs from the community of internet geeks.
Today, the same strategy won’t work as well.
In the context of content marketing, the bias could mean not blindly trying to copy worshipped strategies like writing long-form content, creating infographics, and publishing blog posts daily. Before attempting to replicate these strategies, you should out why they worked.
- Long-form content works when it’s engaging, data-backed, actionable, and backed by a robust distribution strategy. You also need to ensure such content is at the level your audience seeks. For instance, for a keyword like SEO for lawyers, beginner-level content may do better than advanced.
- Infographics need relevant data, compelling design and copy, and a stellar outreach strategy.
- Publishing content daily might work for you if you don’t compromise on quality and don’t burn your audience.
If you have the resources to pull off these strategies successfully, then only you should take the next step.
2. Bandwagon Effect: Leads you to follow your entrepreneur network blindly
Our minds want to save effort and time. Instead of investing our energies in thinking from the first principles with minimal assumptions, we fall back to what’s easily accessible in the vicinity. It might mean a network of similar-minded entrepreneurs.
The convenience of such a network often proves useful. However, it also means that your business decisions are copied from other business’ requirements and their audience behavior.
The bandwagon effect is the tendency to follow the herd and make decisions around what people around you are doing.
Most business owners use the effect to persuade consumers. They show five-star ratings and glowing testimonials on their product pages. However, as an entrepreneur, you are equally prone to fall for the bias.
In the context of online marketing, the bias can lead you to invest in shiny social platforms like Instagram and YouTube. These platforms are relentlessly chased down by brands around you for eyeballs.
However, are they the best for your time and available resources? Will they drive relevant customers for your business?
It’s not essential. Indeed, newer platforms might take experimentation to find the strategies that work. Let me share an example.
My former client Neil Patel interviewed 208 companies in 7 months (with yearly revenue ranging from $1 million to $ 291 million).
He found that all the companies invest significantly in Google AdWords and Facebook Ads. It was followed by content marketing and SEO. The paid marketing channels convert well and see a higher number of conversions as well.
However, they don’t stack up well in terms of ROI in comparison with content marketing and SEO. The reason is consumers don’t like advertisements. When they perform a search on Google, they prefer clicking organic results over the paid listings.
Why is there a disconnect between the ROI and investments made by million dollar businesses?
Well paid marketing channels deliver immediate results. Facebook and Google offer you dedicated advertising dashboards to gauge the performance of your campaigns.
However, SEO and content marketing take a significant amount of time. They deliver delayed results, and most of the times measuring the ROI is also tricky.
In the name of convenience, you shouldn’t blindly adopt paid marketing. The cost of acquiring a customer from paid marketing is significantly higher than organic channels. Instead experiment with the slower but proven strategies: content marketing and SEO.
3. Selection bias: No your data isn’t God
Many companies proud themselves on making data-driven decisions. In an Oracle-Forbes insight survey, 70% of senior marketing executives said that data-driven marketing is a core element for a majority of their campaigns.
Does that mean data is a panacea for all your business problems?
You might think, but no.
The tendency to select data subjectively for analysis is rooted in the selection bias.
Unless you randomize your data, it might not represent the behavior of the entire data set that you plan to analyze.
A good example of the bias is surveys. Businesses conduct them to gain specific insights. The problem with a voluntary survey is that it represents a subset of your customers (that agreed to fill out your form).
Now, any subsequent analysis you make is based on a skewed dataset. It might not represent your true customer behavior, and it will result in inaccurate insights.
Further, you always need to conduct a qualitative analysis of your data to gain deeper emotional and other relevant insights.
For example, the recent advertising campaign by Nike featuring Colin Kaepernick received a lot of online attention. If you merely go by the number of comments, you might see the campaign as an astounding success.
However, the campaign received backlash as Colin is a polarizing sports figure. #NikeBoycott was trending on Twitter and many consumers burned and destroyed their Nike sneakers because of the campaign. The company stock closed down at 3.2%.
With the above context, the 30th anniversary of the “Just Do It” campaign doesn’t sound as successful.
The selection bias layers well with confirmation bias (the tendency to look at information as per one’s existing beliefs).
These two biases can together lead to another common data error – relying on the “average” to make one’s decisions. The smaller number of winners almost always skews it.
For instance, in their 2018 survey, the Content Marketing Institute found that the average percentage of total marketing budget spent on content marketing was 26%.
If you make a budgeting decision based on the above data and expect stellar results, then you might get disappointed. Here are two additional data points that show a more precise picture:
- Most successful companies spend 40% of their budget,
- The least successful spend 14%.
In such scenarios, to make sense of the data you can rely on the median of the data set. It’s more representative of the data set.
In business, established best practices are a good place to start. However, human intuition and creativity are equally important.
Before you make your next business decision, back up your hypothesis with relevant data. It is critical and helpful to bring objectivity. However, even data crunching can lead to inaccurate insights.
The way out is critical thinking and approaching a problem from multiple perspectives.
What are the biases you have fallen for in your marketing decisions? Share them in the comments below.