The Role of Psychology in CRO

AB TastyBlogUser PsychologyThe Role of Psychology in CRO

A real estate agent, a capuchin monkey and a ninja walk into a coffee shop… Just kidding! But what could possibly link all of these to financial bubbles, pocket dogs and A/B testing? At our recent Mad CRO event, we joined forces with industry leaders Pedro Bermejo, José Manuel Piedrafita and Nassim Messaoudi, experts in Neuromarketing, Online Marketing and Conversion Rate Optimization (CRO), respectively, to unveil the best practices for optimizing your site! The psychology behind buying decisions! And… monkeys? Keep reading – the answers are on their way.

Mad CRO Madrid


Neuromarketing: Discovering the ‘Buy’  Button in the Brain

The Unending Tug-of-war

The majority of the human brain – and all its psychological dimensions – remain an uncharted mystery, explains Pedro Bermejo, President of the Spanish Society for Neuroeconomics. Despite considering ourselves rational beings, most of the time, humans are simply guided by an unending series of irrational impulses. From video games to pocket dogs, all buying decisions are influenced, for the most part, by two opposing forces: the reward and the risk aversion systems.

Bermejo illustrates how, inside of every brain, there are two opposing sides raging a ceaseless tug-of-war: a constant struggle between the reward system, and the risk aversion system. Let’s take a closer look at both:


The Reward System

This portion of the human brain oversees measuring the probability of success of every step we take, weighing the potential benefits of each situation; and is steered by a variety of cognitive biases. The two most important ones which guide it are:

  • The goggle effect bias: the user is first presented with an enticing primary stimulus (gifts, food, alcohol, attractive people…), which shall activate the nucleus accumbens in their brain. At this point, the secondary stimulus (your brand and/or product) is introduced. Thus, the client associates your offer with the former (and alluring) element, creating a link which shall prove to be quite profitable, surely making your image shoot through the roof. After this, branding will be child’s play!
  • The Halo Effect: People tend to tailor an overall impression of others based on a single trait; in this manner, attractive people are ‘surely’ courteous, intelligent and friendly. Due to the fact that we judge others in a manner which will confirm our initial perception, this is a type of confirmation bias. And it isn’t limited to the person themselves: even the products and brands which accompany them may bask in their glow…
Halo Effect psychology
The ‘Halo Effect’ is commonly employed by brands when selling their products.

(Tommy Hilfiger x Gigi Hadid Spring 2018 RTW Collection)


The Risk Aversion System

As the counterpart of the previously detailed reward system, this side of the brain manages the negative outcomes of every scenario, playing an essential role in consumers’ decision-making process. While less wide-spread than the opposite system, it’s the foundation of numerous experiments by Baba Shiv, one of the leading American experts in neuroeconomics at Stanford University. He dedicated years to researching how creativity and motivation affect decision-making and economic behavior through a considerable number of studies, some of the most compelling being focused on financial decisions.


The Coin Toss: Emotions Play an Essential Role

In one experiment conducted by the Stanford University professor, each participant would receive 20 dollars in coins, and was presented with the opportunity to take part in a simple game of chance. For 20 rounds, they would bet a dollar, and toss the coin into the air – if it came up heads, they’d win two and a half dollars; and if it was tails, they’d lose the coin. On the other hand, were they to abstain from betting, they would keep the money.

After crunching the numbers, the statistics revealed that the best option was to take a chance: assuming the coin will fall on each side half of the time, they’d win 1.25 dollars for each round (25% profitability). On the other hand, despite this clear advantage, the subjects only bet on 58% of the rounds – illustrating the influence which loss aversion has on our decision-making process.

Coin toss psychology
(Source: Photo by NeONBRAND on Unsplash)

Alas, there’s more to this story! Turns out, despite the fact that most of the volunteers started off betting, most of them became more cautious as the game wore on. After a lost toss, only 41% of the subjects would give it another try; the rest reacted emotionally, turning down the opportunity, almost as if the past toss were to influence the next one.

Digging deeper into this curious phenomenon, Baba Shiv revealed that out of the 41 participants, 15 had presented lesions in certain areas of their brains related to emotions and risk assessment. Contrary to the other subjects, they decided to place bets 84% of the time (and were undeterred after lost tosses), gaining an average of $25.70 at the end of the experiment; in comparison to the average $22.80 the rest won.

What does this experiment illustrate? When it comes to making decisions, a battle rages in our brains between the reward and the loss aversion systems. By employing dopamine, the former motivates us to take the necessary steps to obtain a reward, while the latter ensures that this effort is carried out without taking major risks – especially ones greater than the expected gain.

Our survival instinct makes us more prone to avoid risks than to take them, even when it would make sense to take a chance. This is all well and good when we must decide whether to wrestle with a lion or run away, but quite impractical when facing financial decisions. For this reason, most investors prefer bonds and fixed rates, even though, by opting for diversification, variable incomes are the better option in the long run (even taking into account market fluctuations).

Takeaway: Emotions compete with our rational side..

The Capuchin Monkeys: Gains and Profits

In another experiment conducted by Baba Shiv, each monkey was given a metal badge, which they could exchange for fruit, with two different caretakers. Caretaker ‘A’ would hand it over and, half the time, he would give them an extra piece. Caretaker ‘B’ would give them two pieces from the start – and, also at random, take away one of the two half the time.

Statistically speaking, both keepers gave the monkeys an equal amount of fruit (an average of 1.5 pieces each); but, repeatedly, the creatures would rather ask the first caretaker – specifically, 71% of the time. The creatures preferred the potential added fruit, rather than the potential loss of it from the second caretaker. This openly irrational behavior is also present in human beings (it’s known as loss aversion), and it constitutes one of the key factors which explain why our brains deceive us when we make economic decisions.

Monkeys psychology
(Source: Jeremy Bishop on Unsplash)

Takeaway: We fear losses more than we aspire for gains.


Finding a Balance Between the Two Systems

How can we determine whether a certain investment is worth the risk? It is undeniable that each decision is accompanied by a certain degree of uncertainty, and every single bit of information can be interpreted differently, depending on our perspective.

Our state of mind, when making a significant choice, is paramount. We are gifted with brains which, despite excelling at making quick and safe decisions in the face of a threat, are more poorly equipped when it comes to planning for the far future. Since we can’t swing by our friendly neighborhood supermarket and pick up a crystal ball, the successful investor relies on careful planning, and strict(-ish) discipline.

Whenever a decision sparks conflict between reason and our instincts, the latter usually prevails; and, as it so often does, our ‘reptilian brain’ (which is responsible for instinctive thinking) wins out over our ‘rational brain’ (governs strategic thinking).

Take a look at the general trends in the marketplace. Let’s not limit ourselves to investments, per se; assess clothing, video games and even breeds of pocket dogs. What do all these seemingly unrelated groups have in common? They’re all driven by what the folks in neuroeconomics refer to as the tendency to act as a group (in layman’s terms, ‘moving with the herd’), and it serves one of the most relevant purposes which drives every species: helping to ensure survival. Just as a zebra browsing the open plains will try to stay with the herd, thus reducing its individual vulnerability to predators, people tend to feel more secure following the crowd, be it investing in real estate, or choosing the most impressive restaurant for a date.


Beat the Systems: Watch your Marketing Efforts Soar

Multiple studies have proven that seemingly innocent, slight tweaks can significantly influence the choices that consumers make, thanks to the two aforementioned systems. Knowing users value perception over reality, how can you employ this to increase your firm’s brand strength?

Since beating your chest across every channel known to man, in order to prove your brand’s reputation, is a near impossible task (not to mention expensive), employ everything we’ve learned to rise above your competitors! Remember the popular saying, “Jack of all trades, master of none?” Rather than get down in the dirt and scuffle (solely) over the latest product updates and releases, gain a significant advantage by turning towards the Buy button in every users’ brain!

Due to the infamous confirmation bias, consumers tend to favor information which supports their existing beliefs. Which are the best brands for X product? Which e-commerce offers the best experience, which is the most advanced? Try to name a single company which the public has no prejudices against – it’s more difficult it seems, right? This is why marketers must strive to find the ideal balance between the reward and the risk aversion systems: by combining these two opposing forces, you’ll be able to ride out – and hitch a ride on – the psychology behind purchasing decisions.


Mirror Neurons

Picture this: you’re taking a stroll through the park when, out of nowhere, you watch a child trip and scrape his hands and knees on the sidewalk. You just recoiled in sympathy, didn’t you? Or you watch someone carrying out their trash, wrinkling their nose in disgust, and feel your own stomach lurch. Or perhaps you’re watching the last minutes of a soccer game, feeling the energy of the room around you rise with each passing second, your heart hammering in your chest, waiting for that victory yell as your players sprint closer and closer to the net…

How is it possible to connect to others at this level? How do we manage to instinctively share those emotions and thoughts?

In the early 1990s, Giacomo Rizzolatti discovered mirror neurons, a type of brain cell that responds in the same manner when we witness someone perform an action, and when we do the same. But how does this tie into financial decisions, or even neuromarketing? Let’s take a look at the following chart:

Consumers trust brands

Source: The Beginner’s Guide to Generating Sales Through Social Media

Consumers have grown to be more and more skeptical of corporate messages; and, as we well know, at the foundation of every solid relationship lies trust. For the past couple of years, however, the trust between brands and consumers has been on a downward slope. The average modern user is exposed to more than 6,000 advertising messages every single day – the sheer volume can be enough to impact the perception of a company’s credibility. The 2018 Edelman Trust Barometer reports that only 48% of American consumers claim to trust brands, having fallen from 58% the previous year, and reflecting a steady decline over the past decade.

The ‘lack of trustworthiness’ of businesses leads them to be perceived as part of another member of the elite, set apart from the ‘average Joe’. However, in line with the aforementioned ‘moving with the herd’ mentality, it has become clear to corporations that even though their clients shy away from their assurances… consumers trust each other, especially the people they perceive are ‘experts’ in specific fields. This is precisely what set off one of the world’s most substantial financial crisis: the property bubble of 2008.


The Psychology Behind the Real Estate Bubble

A profitable investment can be broken down into two phases: finding which slices of the market are cheap at the moment, and identifying those whose prices will skyrocket. This is more related to psychology than most people realize, explains Robert Shiller, the expert in financial bubbles who was awarded the Nobel Prize in Economic Sciences in 2013.

Behavioral finance studies the influence of psychology on the conduct of investors, and its effect on the markets. Human beings are instinctively drawn to stories, a tendency which is even applied when deciding how to allocate our savings: depending on the spin we assign to different economic trends, their prices will soar or plummet – and when stories turn into tall tales, exaggerating the tangible facts, financial bubbles are born.

With the turn of the century, Shiller explains, consumers were overtaken with optimistic visions: everyone believed that great things were in store for them at the stroke of midnight. The popular belief, back in the day, was that in order to be successful – and secure, an essential trait for every hardworking citizen crafting a tidy little nest for their golden years – was to be a homeowner.

Thus, came a rush to secure as many properties as possible – and the fancier, the better! After all, the banks were handing out substantial loans with every complimentary lollipop, so why not take a bit extra for your summer vacation and the kids’ new uniforms?

Brilliantly explained in “La crisis NINJA” (‘The NINJA Crisis’, a the term which refers to consumers with ‘No Income, No Job, No Assets’) by Leopoldo Abadía, the majority of financial institutions were more than happy to grant these loans. Even if most customers wouldn’t be able to pay them back, they could always receive the house as collateral. Since these were the hottest product on the market, the bank would come out on top, regardless.

You may be asking yourself how this all relates to mirror neurons, so let’s loop back around, shall we? The mass of investors who jumped on the bandwagon spearheaded a trend which was blindly followed by every single citizen who could rush to the nearest bank.

If these professionals make a living out of buying stock, they must be (if you’ll pardon the pun) right on the money… right? Hearing your neighbors boast about the spectacular loan they’d gotten, while you sip a cocktail on their newly purchased beachfront property, would nudge even the most sound saver into joining the trend… if only because, if everybody’s doing it, it’s bound to be all right!


The Future of Neuroeconomics

When making decisions, we usually opt for the alternative which is tempting in the short-term, even if that means turning our backs on a greater one later on (to learn more, check out the Stanford marshmallow experiment).

Have you ever found yourself boasting about that new diet you’re dying to start on Monday, only to find yourself scarfing down fast food after work? Or preparing to knuckle down and get a load of work off your back, only to end up surfing the web for hours? It’s happened to the best of us, and there is a scientific reason behind our eternal struggle between instant gratification and long-term goals – which also applies to our customers.

David Laibson, a professor of economics at Harvard University, explains that while our emotional brain “has a hard time imagining the future”, our logical brain clearly sees the future consequences of our current actions. Our clients’ emotional brain wants to order dessert, buy the flashy car, max out their credit card – and their logical brain knows they should start working out, go with the more ‘sensible’ model, and save for retirement.

A ‘For sale’ sign is aimed towards people who want to buy a house; while a ‘Sold’ one appeals to people who wish to sell their homes.


Marketers know that when users see, feel or smell something they want in a store – or even if they’re influenced by the previously mentioned Halo Effect – the temptation becomes too great to resist. The dopamine in their brains gets the best of them, presenting a golden opportunity for brands to coax them to the register with many more items in their cart (both online and in-store).

Furthermore, there is the matter of consumers’ distrust towards corporations. The professionals dedicated to neuroeconomics are ready to start a revolution… to regain the perceived trustworthiness of international corporations and small local businesses alike. From reducing the abandonment rate of shopping carts, to encouraging users to part with their personal information in subscription forms, studying – and, indeed, learning how to harvest the psychology behind buying decisions – shall truly bring about a revolution in modern day consumerism.

In economics, behavioral scientists shall continue studying these perplexing phenomena, since clients act impulsively, always following ‘the crowd’ – even when they know for a fact that a specific choice isn’t in their own best self-interest. By exploring the human brain, and the reasons why we’re inclined to act in a certain manner, brands will be able to adjust their messages, and even their very images, to cater to these whims and impulses, getting the most out of the modern-day consumer.


Case Studies: A/B Testing Joins Forces with Psychology

Nassim Messaoudi, a Conversion Rate Optimizer at Europcar, showed the attendees of the Mad CRO event the continuous web optimization process implemented by the corporate global leaders, sharing several case studies – many of them carried out with AB Tasty – based on psychological theories.

  • Display price per day on the result page (A/B/n test): Rather than show the final price of the whole booking for a vehicle, display the price per day – visitors will, subconsciously, perceive a lower amount.
  • Display the ‘Last search module’ on the homepage (A/B/n test): Reduce the necessary effort by showing the user, on the homepage, the last vehicle they’d viewed; shorten the booking funnel, and get customers on the payment page in less time, thus drastically cutting down on the abandonment rate.
    4%  increase on the conversion rate for returning users

.After working with AB Tasty for one year, Europcar obtained the following results:

+8% Revenue per user
+20% Traffic on payment page
+10% Conversion rate


Implementing the Lessons: Optimize your Website

Having explored the effect which psychology has on consumer behavior and buying habits, let’s proceed to put everything we’ve learned into action through testing: which techniques do the market leaders employ when optimizing their online platforms?

Representing Prosegur, one of the leading companies in the private security sector, José Manuel Piedrafita explains how it’s essential to clearly define each step in the CRO testing period, keeping an open mind at each stage – and, notably, scrutinizing your own site in search of flaws and possible areas for improvement. Never be afraid of admitting there’s always room to grow! After all, mistakes are a fact of life – and if you’re not evolving, you’re simply stuck in the mud while your competition races ahead. Cultivate a progressive and constructive environment in your company, and watch your company’s effectiveness and reputation soar!

Optimize your website(Source: The Roaming Platypus on Unsplash)


Piedrafita went on to describe the three phases to carry out the CRO process:

  1. Studying the current state of the website: Search for any errors or other aspects which you could tweak in order to optimize your platform. How do users navigate my website (heatmapping, etc.)? What is my competition doing?
  2. Setting objectives: Now that the primary assessment of the current state of your pages is complete, move on to define the primary and secondary goals. What you could do to achieve them? What steps can you take to optimize your platform? Analyze your competitions’ sites and strategies. What can you learn from them?
    Hold weekly meetings with the team: go over the current tests, present the hypothesis for future ones, bounce ideas off one another and find the best solutions! Use AB Tasty to launch the tests, and track the results in real time – make the most out of this all-in-one conversion optimization platform!

  3. Analyzing the results the tests have obtained, and maintaining a continuous cycle of self-evaluation, testing and optimization.


Get Cracking on Boosting your Conversions!

It’s pretty clear by now that consumers adjust their behavior based on perceived risk, a fact which has significant implications for your CRO. The first steps to implement upon reaching the end of this article can be summed up in two strategies: reducing the ‘risk’ users perceive when doing business with you (the lower it is, the higher your conversions shall be!), and by putting your money on social proof (‘If so many other clients have viewed and/or purchased this item, I’d better hurry to get mine before they run out!’).

The main takeaways from this edition of AB Tasty’s Mad CRO are:

  1. People will judge a book by its cover – just as users assess a business by its website: In a study of 2,000 consumers, Econsultancy discovered that a well-designed website attracts many more visitors; 32.2% of them study the quality of an e-commerce’s site design before deciding to trust it, even taking into account factors such as the page speed.
    Econsultancy survey                   (Source: Econsultancy)
  2. Ensure users can contact you easily: The simpler it is for clients to reach you, the more trustworthy you will become in their eyes. Numerous studies have proven that online shoppers regard any difficulty in finding a site’s contact details as a sign that the vendor isn’t trustworthy. Put your prospects at ease by making sure your contact information is visible and placed in easily accessibly locations.
  3. Employ a countdown timer: Show users the true urgency of the offer! Display the hours and minutes trickling down to the end of the offer. Ensure that they can feel the spectacular opportunity which is now within their grasp – leverage the scarcity principle!
  4. Promote limited-time offers: Create a sense of scarcity, encouraging users to commit to their purchasing decisions! By buying now, now, now, they’ll be able to enjoy fabulous offers – if they wait, not only might they miss out on the product… but they’ll also miss out on the extras!
    Exclusive offers  Drive conversions by inking limited-time offers to highly-rated products.
  5. Offer free trials and samples: Most consumers tend to form an emotional bond with a product when they’ve had an opportunity to try it out for themselves. Without this initial engagement, most will be scared away by the price, the uncertainty of a new product or service… or even the fact that their friends haven’t tried it yet (social proof)! On the other hand, when they have a chance to take it for a spin without risking any monetary loss, there’s a significantly greater chance users will get on board. Consider offering demos, free trial periods, and even free samples.

Remember that many a prosperous company has fallen under its own weight, and the excessive confidence its directors have in the way things have always been done. By avoiding change –and, thus, progress and evolution–, the best intentions can seal even the greatest company’s fate. On the other hand, we all know of a number of start-ups which have clawed their way to the top; relying not only on cutting-edge technology and dazzling talent, they’ve also maintained a continuous curiosity for innovation.

Each of the psychological biases we’ve seen can be applied to your strategy to help boost marketing and CRO efforts; but remember there can be too much of a good thing. Take care to avoid overusing these strategies, and always consider your users – and goals – when it comes to determining which tactics would work best for you.

Always keep an open mind towards trying new methods in your business and employ testing to find the best options. Tell us how it went at our next Mad CRO event – we’ll see you there!

Mad CRO event Madrid

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