How to make your product irresistible with lessons from behavioral economics

This article is based on Alex’s stellar talk at Product Marketing Off-Piste. PMA members can watch it in its full glory here.

At the time of recording, Alex was the Director of Product Marketing at Hims and Hers. He’s since taken on a fresh challenge as VP of Marketing at Titan. Congratulations, Alex! 

Welcome to the top 1%! Today, I'm going to share how to make your product irresistible using lessons from behavioral economics, so you can do what 99% of product marketers are missing.

Here’s what we’ll cover:

• First, I’ll walk through the key problem I see in how product marketers work – it’s a trap we all fall into.
• Next, I’ll share the three steps to supercharge your product growth using psychology. I use these all the time and can’t wait to share them.
• Finally, I’ll provide some case studies to show how you can put those three steps into practice.

The problem with humans

Before we dive in, a quick question for you: Humans are rational, right? We spend a lot of time carefully considering big decisions, like which school to send our kids to so we can set them up for a great future. And when we commute to work, we think hard about the best way to get there based on factors like the weather and the price. 

We think about these things rationally.

Now, imagine it's date night. You live on the Upper West Side in New York City and you and your partner are craving a great burger. As you're walking around, you get the idea to go to Shake Shack – their burgers are so good! You arrive and see a huge line that the staff says will take one to two hours to get through. Hmm, you don't want to stand in line that long, so what can you do?

Well, you’re smart and rational, so you might quickly search for other burger places nearby and find 20 to 30 pretty good options that could satisfy your craving. However, if you live anywhere from Queens to California to Korea, chances are you'd wait in that line! 

These are actual photos of incredibly long Shake Shack lines from around the world. 

Now Shake Shack is good, but it’s hardly a one-of-a-kind experience, yet people are still willing to queue around the block for it. And it’s not just Shake Shack – you can probably think of a restaurant in your neighborhood that always has a crazy wait time, while another similar place nearby rarely has a line. 

So what’s going on here? 

Think about how irrational we can be with finances too. 71% of Americans aren’t saving enough for retirement, even though we know we should be. On average, 46% of us have less savings now than we expected 5 years ago.

We see irrational behavior even in mundane things like booking flights. I’m sure you’ve browsed Expedia and seen a flight with a departure time and price that work for you, but you’ve kept looking. But then you’ve spotted the flight below it leaving around the same time, which is so much more appealing – even though it costs more – because there are only three seats left! “What am I missing?” you wonder.

The appearance of scarcity can make us behave in very irrational ways, and studies bear this out. One study found that Expedia’s messages, like the one above, increased the expected utility for an average traveler by up to 8%. 

So, are we really that rational? No, not at all, and that's totally normal. This is just how our brains work. But here's the good news: We can use this irrational behavior to shape better marketing campaigns and better products.

The problem with product marketing

Here’s a mind-blowing stat for you: 95% of new products fail, despite smart teams using research and competitive analysis to set them up for success. So why is this? 

The issue is that people often forget to start with people. There’s a whole world of human insight that we should be applying to our work. 

Now, imagine a world where your growth tactics are more effective, you don’t need more budget to scale, and you don’t have to use discounts that dilute your brand value. That’s the opportunity that behavioral economics offers.

I’m going to help you unlock that reality today with just three simple steps. 

Step one: Nudge 

This is all about deliberately designing the environment to shape behavior. Let’s take a look at a few different tactics you can use to nudge your target audience in the right direction.

Choice architecture 

Imagine a school cafeteria trying to get students to eat healthier. There are lots of temptations around, like cookies and soda, so what can the cafeteria do? Here are some typical tactics you might see:

• Restrictions (banning unhealthy items) 
• Money (discounts or taxes to incentivize or discourage certain choices)
• Information (ads and posters about the benefits of healthy eating)

However, these tactics rarely work and often backfire. Restrictions make people angry about losing choices, price changes lead to frustration, and information is ignored.

A better approach is to nudge students toward healthy options. For instance, you could make junk food harder to access, by putting it on higher shelves or keeping it behind the counter. Meanwhile, you could put healthy food right by the register where it's easy to grab.

How much do you think this could increase healthy item sales? 5%? 10%? Maybe even 20%?

In an experiment conducted in a real train station cafeteria, putting healthy food by the register increased sales by a whopping 78%!

This tactic is known as “choice architecture.” It allows you to shape your audience’s behavior by considering what the default action is.

Prospect theory

Now imagine you’re shopping for headphones online. One site lists them for $150. Another shows $145 on the product page but adds $5 shipping at checkout. It’s the same total price, so rationally it shouldn’t matter – but the second option is so much more annoying!

But why do these shipping charges annoy you? Well, this is prospect theory at work. Basically, losses feel worse than equivalent gains, and when you add shipping costs to the cost of an item, consumers experience a negative compounding effect. 

Prospect theory doesn’t just apply to costs though – it applies to gains, too. Finding a $10 bill feels great, but finding $5 one day and $5 the next feels even more valuable as the gains stack.

So, according to prospect theory, you should group pains but separate gains.

The endowment effect

The endowment effect is another quirk of behavioral economics. Imagine two groups – one gets plain white mugs, and one group doesn’t. How much would the mug group need to be paid to part with their mugs? Over $7. How much would the empty-handed group pay for them? Under $3. 

In short, we value what we already have more. Dan Ariely’s IKEA Effect validates this. He found that people value furniture they assembled themselves over pre-built pieces.

The endowed progress effect

Now I want you to imagine two car wash rewards programs. In the first program, customers get a blank eight-punch card; when they’ve paid for eight car washes, they’ll get the ninth wash free. In the second program, customers get a ten-punch with two pre-punched; again, they’ll have to pay for eight car washes before they get one for free, so it shouldn’t make any difference, right? 

Wrong. With 2 free punches, 79% more people completed the card. This is the endowed progress effect – free progress motivates us to do more. You can use this effect in your next campaign or feature to encourage your users to take further action.

The compromise effect

Now imagine a cafe selling 8-ounce, 12-ounce, and 16-ounce cups of coffee. Chances are, the 12-ounce cup is their best seller. But what happens if one day they stop selling the smallest size and add a 20-ounce cup to their menu? Suddenly, the 16-ounce cup becomes their new best seller. 

What’s going on here? Well, it’s not that we want exactly 12 ounces of coffee – it’s the compromise effect. When we have limited information, we pick the middle option. You see this play out in movie theaters and restaurants too.

Step two: Persuade

I love Cialdini. He wrote a wonderful book called “Influence” that I highly recommend to any product marketer. In it, he teaches the key principles of persuasion:

1. Reciprocity
2. Commitment and consistency
3. Social proof 
4. Liking 
5. Authority 
6. Scarcity 

Let’s go through a few of my favorites now.

Scarcity

For years, J.Crew exclusively sold the Nike Killshot 2 sneaker in limited batches through their stores. It’s a nice but unremarkable $90 shoe, not a celebrity collab like Kanye’s Yeezys. Yet aftermarket pairs go for double on eBay! J.Crew could clearly charge more and sell them in larger quantities but they don’t. Why?

It’s artificial scarcity. Limited supply makes us want to buy more. As one article put it, the Killshot is “white hot” and sells out instantly when restocked. J.Crew uses it as a “scarcity loss leader” – the hype draws eyes to jcrew.com and a footfall to stores where people buy other items.

Social proof

Remember the Shake Shack example? That’s social proof in action. We tend to get in line without knowing what’s at the end, just because others are there. We use others’ behavior to inform our own. Think about it: You’ve likely walked past an empty restaurant and felt unsure about the food. 

Products leverage this too. Airbnb shows “X people are looking at this place.” eCommerce sites say “X people have this in their cart.” Newsletters brag about subscriber numbers. Those “I voted” stickers are another classic example of social proof. Seeing others’ actions reassures us.

Authority

Here’s another scenario for you: Imagine you’re trying to cross the street but don’t have the walk signal. If someone else stepped out into the road, would you follow? 

In one study, somebody in ordinary clothes did just that and a few people did indeed follow. In a variation on the same study, someone in a suit stepped out into the road and even more people followed! Why? Because that person looked fancier. This is authority in action. 

Businesses often use this tactic to appeal to customers. Think about those ads for sugar-free gum ads saying “4 out of 5 dentists recommend” or all those pet food brands using phrases like “vet-approved.” They’re all leaning on a greater authority to lend credibility to their product.

Reciprocity

Now, I want you to imagine you just finished eating at a wonderful restaurant. It was a lovely meal. You had French onion soup, and it tasted delicious. It warmed your soul! 

When the waiter comes around with the check there are a few possible scenarios.

1. You just get the check – you’re not a monster, so you’ll probably leave at least a modest tip 
2. You get the check and a mint – tips increase by 3%. 
3. You get the check and two mints – tips go up 14%. 
4. The waiter puts the check and a mint on the table, starts to leave, and then turns back saying "Here are some more mints for you wonderful people!" As a result, tips increase by 23%

This is reciprocity – giving something to get something. Maybe you’ve tasted a free sample at the mall food court and then gone on to buy something. Now, that could be because the free sample was so good, but reciprocity likely played a role here too. Even a tiny gift makes people want to return the favor.

Step three: Get them talking

The last step is getting your audience to talk about your product and spread the word. Here are the six principles for word of mouth from Professor Berger’s STEPPS framework:

1. Social currency
2. Triggers
3. Emotion
4. Public
5. Practical value
6. Stories

Let’s explore a few of these elements together.

Social currency

Look at popular Instagram hashtags – #fashion has 744 million posts, #travel has over 450 million, and #foodie has 137 million. But less glamorous tags are less popular, like #lazy with only 11 million posts and #binging with just 67,000 posts.

Is this because we spend all of our time traveling the world’s gourmet restaurants while dressed in high-fashion attire? Of course not. We’re far more likely to be binging TV shows and potato chips on the couch. 

The popularity of these hashtags is the effect of social currency – we share things that make us look good. Even though we may spend hours binge-watching the latest Netflix series, it's not "aspirational" so we don't talk about it. People talk about the things that build their status and image.

Triggers

When you hear "peanut butter" the first thing that comes to mind is probably jelly – that's an associated cue or trigger. Brands can create triggers like this to get people to talk about and use their products.

For example, KitKat ran a campaign linking their candy bar with coffee breaks. By encouraging people to take a KitKat from the vending machine during their office coffee break, they created a mental connection. After a year of ads, their sales increased over 30%, from 300 million annually to 500 million.

Beer brand Michelob did something similar. Their slogan used to be "Holidays are made for Michelob," but, well, the holidays don’t come around all that often, so they changed it to "Weekends are made for Michelob," and sales increased.

By linking your product to existing habits and cues, you too can make it easy for people to talk about your brand.

Emotion

Emotions really inspire people to talk. Of course, the spectrum of emotions humans experience is vast – they could be positive or negative, and they might be high-arousal or low-arousal. It’s important to carefully target the right ones.

Positive, high-arousal emotions like excitement are effective for virality. Think of the exhilaration of riding a rollercoaster or bungee jumping – you want to tell everybody all about it. Low-arousal positive emotions like contentment don't spark as much word of mouth. A happy, relaxing Sunday afternoon is nice, but you’re probably not going to rave to your co-workers about it on Monday morning.

High-arousal negative emotions also inspire word of mouth. Think about political rants that you’ve seen online – people get really fired up, and when they’re fired up, they're more likely to share their opinions.

So, use high-arousal emotions – both positive and negative – to your advantage. Excitement over new features or amusement at clever branding spreads word of mouth. Outrage over an injustice or danger also spreads rapidly.

Consumer psychology in action

We’ve explored a lot of different concepts from consumer psychology and behavioral economics. You might be wondering how you can apply these concepts to your work. Let me share a few examples. 

Case study: Lyft rideshares

Let’s start with a real-world example of how I used these viral marketing strategies during my time at Lyft.

In one campaign, we targeted customers who’d used our shared rides feature to save money. We sent them emails saying, “Hey! We noticed you used shared rides last month and saved some cash – nice work. What goal are you working towards with those savings? A relaxing spa weekend? A fun night out? Let us know!” We then had them pick a specific savings goal in their reply.

We also created a little progress bar showing how much money they’d saved so far. All this tapped into the principle of endowed progress and got them thinking about what they were saving up for. 

Next, we put them into a multi-touch email campaign that displayed a progress bar visual, with their goal amount and savings updated over time as they kept using shared rides. The progress bar motivated them, as research shows we’re more likely to complete goals when we see ourselves moving closer to the finish line. At the end of the campaign, our riders got a recap email celebrating how much extra money they’d saved towards their goals.

So what were the results? Well, it was a great engagement booster. But more importantly, it drove real business impact – shared rides usage increased, as did the number of monthly active riders. 

Case study: Lyft ride passes

Another example is how we promoted ride passes, which locked in a discount on a month of rides. Our email subject lines promoting these passes leveraged the scarcity principle. They’d say something like, “93% of passes sold! Last chance to score $5 rides.” Not only that, but we’d include a little visualization of the number of passes sold.

This was highly effective at triggering more purchases from a limited supply and it helped drive adoption of ride passes.

Case study: Small Batch Scent

Since joining Hims & Hers, I've had the chance to leverage consumer psychology in our product marketing strategy here too. 

Take our cologne, for instance. We introduced a limited-edition scent. Instead of just describing its fragrance and saying it's a pleasure to wear, we tapped into a key psychological insight: Scarcity drives demand. So, we branded our cologne as "Small Batch Scent." This branding leveraged the appeal of exclusivity and set our product apart from the myriad of other colognes on the market.

Case study: Leveraging authority to sell 

As we’ve discussed, authority and credibility can significantly sway consumer behavior. Let me share how we leveraged this at Hims and Hers. 

When we were revamping our hair loss page, which offers both prescription and non-prescription products for thicker, fuller hair, we initially had a straightforward approach: "Here are our hair loss solutions. It's time to act." 

But we soon realized that authority can make a difference, so we updated the headline to "Doctor-trusted hair loss treatments," and started talking about "FDA-approved treatment options." 

The message here? We're not just another brand; we have the endorsement of experts. And guess what? It made an impact. When we tested this new approach, we saw a big uptick in the number of people booking medical visits compared to our previous strategy.

Closing thoughts

So, how can you leverage all this knowledge in your own ventures? It’s simple: Each time you’re launching a new product or campaign, I want you to assess to what extent you're nudging your audience, persuading them, and inspiring word of mouth. 

Your aim shouldn’t be to use every single one of the tactics we’ve discussed today, but rather to thoughtfully evaluate how you might apply them. I can't emphasize enough that pulling more levers doesn’t always yield better results. What's crucial is being deliberate, taking the time to think about human behavior, and strategizing accordingly. 

That said, remember the wisdom of Uncle Ben from Spider-Man: "With great power comes great responsibility." In the realm of behavioral economics, there's a fine line between effective and unethical. Always aim for a win-win approach. 

For instance, in the Lyft shared rides scenario, we promoted more product adoption and simultaneously nudged users to opt for shared rides – a choice that saved them money, reduced congestion, and benefited urban areas.

If there's one key takeaway for today, let it be this: While market research, UX studies, consumer insights, and competitive analysis are all invaluable, always start by understanding people. When you start with the mind, growth invariably follows.

And the next time you spot a long queue outside a diner, a picturesque travel post on Instagram, or those trendy Nike Killshot sneakers, you'll know exactly what’s going on.

Hungry for even more behavioral insights?

Enroll in Alex’s course and get Consumer Psychology Certified today.

By the end of this course you'll:

💪 Better understand how to group pain and gain.

💰 Understand how personal factors and individual differences affect people's buying choices.

📖 Be able to identify what your customer’s default action is.

🧠 Understand how environmental variables such as friends, family, media, culture, and competitors influence buying decisions.

🤝 Understand what motivates people to choose one product over another.

🗣️ Know how to identify what’s going to get your customers fired up and talking.

"The course provides a bunch of templates, guides, and resources to give PMMs a huge jump start to implement their own programs and consequently drive product growth." 

– Iman Bayatra, Director of Product Marketing at Coachendo