In today's world, data-driven approaches are important in the sense that they can more reliably shape the future through marketing. At this time, we must not forget the importance of understanding the human psychology behind the numbers. However, did you know that when trying to interpret consumer behavior and preferences from data, there is a possibility that we may unconsciously develop a distorted way of thinking called "cognitive bias"? Understanding cognitive bias is the key to better interpreting data, accurately understanding consumer behavior, and deriving more effective strategies.

In this article, we explain the basics of cognitive biases that marketers should know and their practical applications.

The following article goes into more detail about the types of cognitive biases and examples of how they affect marketing. Please also take a look at the following article, "List of cognitive biases that marketers should know and examples of them."

Part 1: Loss/risk/regret aversion and self-centered bias

Part 2: Shortcuts and social biases

Introduction: What are cognitive biases and why do they exist?

In Japanese, bias means "bias," "prejudice," or "preconception."

One type of bias is called a "cognitive bias," which refers to a natural tendency or preference toward certain ideas, objects, groups, or individuals. These can be innate, resulting from factors such as age, gender, or race, or acquired, resulting from factors such as learning and personal experience.

Cognitive biases exist for the following reasons:

1. Cognitive Efficiency:Our brains streamline thoughts to help us quickly make sense of the information around us. Prehistoric humans unconsciously developed streamlined thinking to protect themselves from threats in the natural world.
2. Categorization:To learn efficiently, our brains first associate new information with past experiences. Once something is classified as belonging to a category, our brains will respond to it similarly to other things in that category, but this categorization process leads to biases.
3. Cultural and societal norms:Cultural and societal norms influence our beliefs and attitudes towards certain groups. These norms can result in biases based on factors such as age, gender, and race. For example, norms about masculinity can influence how men dress and behave.
4. Personal experience:We make judgments based on past experiences, which allows us to react quickly, but can also lead to false associations between events that are not actually related. For example, preconceived notions and stereotypes born from personal experiences can cause cognitive biases, such as the superstition that "sunny men, rainy women."
5. Cognitive processes:Mental shortcuts, or the tendency to quickly connect cause and effect without thinking things through, can cause us to ignore information that contradicts our existing beliefs and ideas. These shortcuts can sometimes lead to biased judgments.

In short, cognitive biases are not necessarily factual, but rather stem from our human tendency to categorize information in order to quickly process it around us. This suggests that cognitive biases are part of human nature.

The difference between statistical bias and psychological bias

Cognitive biases have different meanings in different contexts, such as statistics, psychology, medicine, and sociology.

In particular, understanding bias in statistics and psychology is extremely important in the fields of data science and marketing. Eliminating statistical bias allows for more accurate data analysis, while understanding psychological bias allows for deeper insight into consumer behavior and decision-making. Here we will briefly explain the differences between them.

What is bias in statistics?

Bias in statistics refers to bias that arises during the data collection and analysis process.

This is caused by bias when collecting samples from a population or by misinterpreting the data.

For example, if only people with certain attributes respond to a survey, the results may not be representative of the entire population. This type of bias is called "sampling bias" and is an example of bias in statistics.

For more information on bias in statistics, see:Four biases to watch out for when working with data."

What is bias in psychology?

On the other hand, bias in psychology refers to a bias in thinking that occurs during processes such as perceiving information, judging, and remembering.

This is a phenomenon in which judgments and opinions about things are influenced by past experiences and stereotypes, resulting in irrational judgments and interpretations.

For example, "confirmation bias" is a psychological bias in which, when judging whether a person's beliefs or hypotheses are correct, they tend to focus on information that supports their beliefs or hypotheses (convenient information) and ignore information that contradicts their beliefs or hypotheses. Such biases are sometimes used intentionally in marketing and advertising.

Why is it important for marketers to know about cognitive biases?

Cognitive biases can have a significant impact on consumer behavior and decision-making, and are an important factor in marketing strategies. Before delving into specific biases and their impact on marketing, let's first explain why understanding cognitive biases is beneficial for marketers. Below are three main reasons why it is important for marketers to understand cognitive biases.

1) It leads to effective communication

Understanding cognitive biases can help marketers build deeper empathy and connections with consumers through messaging, creativity and storytelling that appeals to their emotions.

For example, when consumers check product reviews and ratings, they can be heavily influenced by the opinions of other consumers. This is an example of the "bandwagon effect," which means that people are easily influenced by the opinions and actions of others. By understanding this cognitive bias, marketers can increase trust in a product and stimulate purchase intent by emphasizing positive feedback from other consumers in their product promotions.

2) Ethical marketing

Understanding cognitive biases can help you avoid tactics that may be perceived as manipulative or unethical, while maintaining the integrity and trustworthiness of your brand.

For example, providing accurate and detailed information about a product's ingredients and manufacturing process allows consumers to make more informed purchases and choices. By providing honest and transparent information, companies can gain consumer trust and build long-term brand loyalty.

3) Complementarity with data science

Data science is an approach to analyzing huge amounts of data to extract useful insights, but understanding cognitive biases makes it even more effective. Data science helps evaluate the effectiveness of marketing initiatives and predict the behavior of target customers, but knowing cognitive biases allows you to take into account the human emotional and behavioral factors behind these data.

For example, by taking into account the psychological factors of consumers that are often overlooked through statistical analysis alone, it is possible to design more effective messaging and campaigns. Understanding how consumers respond to products and services requires both data and psychology perspectives.

Reinterpreting data with cognitive bias in mind

Being aware of cognitive biases allows marketers to avoid common pitfalls in interpreting data, leading to the development of more accurate and effective marketing strategies. Not only will it refine your interpretation of data analysis, it will also enable you to make decisions based on true consumer needs. Below are some examples of how being aware of cognitive biases can help prevent incorrect data interpretation.

Confirmation bias and survey responses

When a company conducted a survey to assess customer satisfaction with its products, the initial results showed that customer satisfaction was generally high.

However, after recognizing the potential for confirmation bias, we re-evaluated our survey and found that the wording of the questions was leading respondents to give positive feedback. By redesigning the survey to mitigate confirmation bias, we were able to uncover areas for improvement that had previously been overlooked and truly understand the context of customer satisfaction.

Anchoring effect in price perception

A retailer was analyzing sales data to determine the optimal pricing strategy.

Our earlier analysis showed that consumers are sensitive to price changes. However, when we took into account the anchoring effect, we realized that the first price consumers saw had a disproportionate impact on how much a product valued them. This insight allowed retailers to adopt a strategy of offering higher "anchor" prices, thereby improving product value and sales volume.

Availability heuristics in product development

One beverage company used focus groups to decide on a new flavor.

The flavor that was most frequently mentioned in the discussion was initially considered to be the most popular flavor.

However, aware of the availability heuristic, marketers reanalyzed the data taking into account broader market trends, discovering that the most mentioned flavors weren't necessarily what the market wanted, but simply what had been recently promoted, leading to a more informed product development strategy.

The bandwagon effect in social media

On social media, a fashion brand observed high engagement rates for certain styles.

Initially, this was interpreted as a clear demand for these styles among their target customers. However, by recognizing the bandwagon effect, the brand realized that their engagement rates were inflated by passing trends, not genuine interest. This realization prompted a shift in their marketing strategy to focus on timeless styles, rather than fleeting trends.

For a list of cognitive biases that affect marketing activities, including those mentioned above, and specific examples, we have prepared two supplemental articles for you to check out if you are interested.

[List of cognitive biases that marketers should know and examples: Part 1]
Loss/Risk/Regret Aversion and Self-Centered Bias

[List of cognitive biases that marketers should know and examples: Part 2]
Shortcuts in thinking and biases caused by social norms

What marketers need to be careful about when using cognitive biases

Cognitive biases are widely used in marketing strategies, but they require careful evaluation of how their application affects specific products and markets, and whether their use is ethically appropriate.

1) Types of bias and their understanding

As we have seen in this article, there are various types of cognitive biases, each with different characteristics. It is important to understand these biases and use them appropriately. Trying to forcefully apply a bias may have the opposite effect. It is necessary to have a deep understanding of the characteristics of each bias and develop an effective strategy for each situation.

2) The importance of ethical use

It is essential to consider ethical aspects when using cognitive biases. Marketing techniques that unfairly manipulate or mislead consumers should be avoided. It is important to be transparent and provide accurate information to consumers. Exploiting biases to deceive consumers can undermine long-term trust. It is necessary to use biases only in appropriate circumstances and with great care not to harm consumer interests.

3) Consideration of long-term effects

When applying cognitive biases in marketing, it is necessary to consider not only short-term sales increases but also long-term effects. For example, if a negative impression is created, consumers may be less receptive to new information, making it difficult to restore the brand image.

Conclusion: The future of marketing through the fusion of psychology and statistics

Understanding and leveraging cognitive biases is essential for marketers to combine data-driven approaches with psychological insights to better understand consumer behavior and develop effective marketing strategies. Cognitive biases are a key factor in the consumer decision-making process, and ignoring them can lead to overlooking market needs and trends.

Understanding cognitive biases not only improves marketing efficiency, but also provides a foundation for building trust with consumers and practicing ethical marketing. Marketers are required to consider the ethical aspects of using biases and maintain transparency and honesty.

Ultimately, the future of marketing through the convergence of statistics and psychology lies in combining data-driven insights with human psychology to improve the ability to predict and influence consumer behavior, strengthening relationships with consumers and building brand loyalty, helping marketers stay competitive and thrive in a changing marketplace.

XICA has been providing services in the field of data science in marketing for over 10 years, and has a track record of supporting over 250 companies, mainly domestic enterprise companies. Our analysts and consultants have extensive and deep expertise in a wide range of industries, and they use data science to help clients make better decisions.

If you would like to discuss understanding cognitive biases and complementary data-driven approaches to marketing,Contact us.