Building awareness and interest is the first stage of every customer acquisition strategy. And behind every successful Customer Acquisition Strategy, there are essential psychological characteristics that need to be considered when building out an action plan generate awareness and leads amongst your target audience.
If you’ve read Customer Acquisition Strategy Basics, you’ve familiarized yourself with the customer acquisition strategy essentials and the stages of building awareness.
Now, we’ll dive into four psychological effects that you can take advantage of to design a smarter customer acquisition strategy.
The Endowment Effect
In simple terms, the endowment effect describes when people attribute more value to things merely because they own them. Numerous studies have been done in psychology to prove this. What is surprising is that even “near ownership” as much as outright possession of the object makes us value it more. For example, in a classic experiment, a scientist gave coffee mugs to half of the students but left the other half empty-handed. Students that received coffee mugs were unwilling to sell them for less than $5.25, while those that hadn’t received a coffee mug were unwilling to pay more than $2.75.
So how does this relate to a customer acquisition strategy? Providing access to a free trial or free version of your product can increase the value of your product in the eyes of your prospects.
Behavior Drives Attitude
Traditionally, marketers have believed that brand loyalty drives behavior. But some recent studies suggest that familiarity breeds liking, and that usage also breeds familiarity and brand knowledge (which in turn breeds liking) (How Brands Grow by Byron Sharp). In other words, prior knowledge of the brand makes a person slightly more favorable towards it—and that makes sense.
Continuously seeing a brand pop up on social media helps your brain recognize them quicker the next time you see them. You assume that they’re expanding, growing, or are successful in some way, and that success helps drive advertising. If a brand appears successful, that must mean people are buying it. It’s the social proof you need to make the leap.
Letting potential customers experience your product early in the buying process can increase familiarity and usage. Even better is when prospects can experience your product without having to talk to anyone. This enables the prospect to have a greater engagement with your product, and in the long term, makes it more likely for the prospect to convert into a paying customer.
We fear loss more than we value gain. A loss of $100 costs you more in happiness compared to the happiness gained by receiving $100. That’s why we often see marketing materials and messaging highlighting how customers can avoid negative outcomes instead of what can be gained from using the product. Like it or not, fear, just like sex, sells—and it sells very well.
That’s why so many companies gravitate to offering a free trial over a freemium — they know at the end of the free trial is a powerful incentive for prospects to buy the product. In other words, loss aversion is the primary argument in favor of a free trial.
Effort vs Impact
What kind of effort will your prospects have to spend to try your product and then to buy? And what kind of impact (or benefit) should your user expect in return? Whatever approach your company uses to design an initial product-prospect interaction, it’s critical to understand how different types of prospect efforts map to different benefits to your company.
The framework below shows how likely a prospect is to try / buy the product based on the level of effort it takes versus the perceived impact on them.
- High Effort + Low Impact = “No way will I try your product!”
- Low Effort + Low Impact = “Maybe I will try”
- High Effort + High Impact = “Maybe I will try”
- Low Effort + High Impact = “Yes please!” (Aka the “Shut up and take my money” category)
If you look into the fastest growing companies of the last generation of SaaS (e.g., Slack, Asana, Zoom), you will notice that they all fall under the Low Effort / High Impact category. But not all enterprise SaaS products fit the low effort category. Some are very complex and require significant effort on the part of customers to set up and integrate into their organization to realize product value. These would include companies like HubSpot that have a very extensive on-boarding process but also deliver high impact.
Where do you think your product fits in terms of the effort it takes to try and buy it versus the perceived impact it has?