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8 min read

The way we buy: Leveraging Behavioural Economics in Paid Social Advertising

In this blog post, we’ll be looking at how, as an advertiser, you can tap into behavioural economics to shape your paid social advertising campaigns, and which aspects of this infinitely fascinating element of human psychology can be leveraged to drive better, more efficient performance.

What is behavioural economics?

Behavioural economics is a field of study that examines how people make financial decisions, and the way in which psychological and economic factors can influence those decisions. The goal of behavioural economics is to understand how people think about money and how (and sometimes, why) they make the financial decisions that they do.

A variety of methods are used to study human decision-making processes, including surveys and brand studies, field studies (in which researchers observe real-world behaviour), archival data analysis (looking at past transactions) and A/B testing.

How can Behavioral Economics influence marketing strategy?

Behavioural economics has a variety of investigative areas of study, but here are the key facets which can influence your marketing strategy:

  1. People can be rational, but are not always interested in acting in their best interests – they sometimes act against their own instincts because of biases or other factors that can lead them astray from subjectively optimal outcomes.
  2. Individuals have limited cognitive abilities – we as humans don’t always have all the necessary information for optimal decision-making at all times.
  3. We are creatures of habit – we as humans will typically continue doing something out of convenience or because we have become so used to doing the same thing on repeat.

Behavioural economics can help you create more successful ads by understanding what makes people tick–and then using that knowledge to craft messages that resonate with them on an emotional level. By leveraging these insights into human behaviour, you can make your advertising more effective.

Why do we spend so much time online?

As of January 2023, one of the main reasons people aged 16-64 use the internet is to stay in touch with their friends and loved ones. As many as 47.1% of global internet users list this as one of their top uses of social media.

Another main, perhaps unsurprising, reason people use social media is to combat boredom — 36.2% of internet users say they use social media to fill up their spare time when they don’t have anything better to do. This reason is closely followed by reading the news and staying up to date with current events at 34.2%.

However, the star of the (advertising) show is the seventh most popular reason internet users go on social media: to find purchase inspiration through the research of brands and products. This is a powerful statistic to pay attention to – 25.9% of people use social media to browse for purchases. That’s more than one in four!

How do social media platforms use behavioural economics to keep users engaged?

This may sound like it has a complicated answer, but in reality, there are three key reasons why users keep coming back to social media platforms, rooted in cognitive bias:

  • Other people’s opinion matters: we take great interest in what others think or do. We don’t usually get informed on economic topics. We usually copy behaviour and decisions. Why? First of all, we are a social species. We want to be socially acceptable and we can do that easiest by mimicking. It’s also easier.
  • As mentioned earlier, we are creatures of habit: even if what we do is economically wrong we will continue doing it out of convenience or because we have a habit that forces us to do what we do.
  • We want to do the right thing: we have an innate sense of justice that leads to our behaviour. Most of us pay our fines not because we might go to jail but because ‘it’s the right thing to do’. We help others because it makes us feel good, not because there is any financial incentive in it. Such incentives may actually be counterproductive as they take out the primary motivation – doing the right thing.

What’s the role of cognitive bias in advertising?

We are more loss averse than gain interested

Think about how often you see messages like “don’t miss out on this amazing offer!” Why? Because they work. Groupon cashed in on the feeling people have regarding limited-time discounts, as did Wowcher. Using loss aversion works well in online retail.

We are not very good with data

Buying a discounted supercar driving experience or a new pillow when we already have six already doesn’t make much sense economically, however, social media goes hand in hand with presentation bias. For example, say we see a 75% off promotion on pyjamas that have already been bought by 500 people. The information has been neatly framed (75% off, a deep discount) and enhanced by other people’s behaviour (500 other people have bought this, what if it goes out of stock?). We don’t focus on whether we need new pyjamas or not, or whether it is an economically sound action. We see the discount, we see that many others have already bought this (see point number 1) and we “need” to buy it, immediately.

We need to feel empowered to take action

There are millions of products on Amazon, and billions of web pages indexed by Google. If we were to browse rather than search we would probably get frustrated and quit. However – we still use both. Why? Because of targeting! Custom machine learning digs through millions of terabytes of data about other people’s shopping and internet browsing behaviours in order to serve products and results that are most likely to be bought or opened. This makes our choices easier and we feel empowered to act.

Examples of how cognitive biases can be leveraged to create effective Paid Social campaigns

Loss aversion

In content marketing and advertising, language is key: someone is much more likely to avoid a surcharge than they are to go for the equivalent presented as a discount. They are also more likely to want to save £5 than gain £5 cashback. This is something to consider in your pricing communications and conversion-focused content. Other great marketing tactics include loyalty programs that accrue points or status, time-bound deals, and trial offers.  

The bandwagon effect

The bandwagon effect is a mental shortcut that helps us overcome the sense that something lacks meaning. Instead, we will assume that if everyone else is doing it, it’s the right thing to do.  

In your content marketing, you can play into this bias by leveraging influencers across different social circles, or including ratings, reviews and testimonials on landing pages and content hubs. You could also curate user-generated content to add an extra dimension to your campaigns. At the end of the day, it’s about amplifying an idea or belief so that it feels culturally significant.  

Mere-exposure effect

The mere-exposure effect is a mental shortcut that helps us avoid becoming overwhelmed by too much information. Instead, we develop a preference for the things that we see around a lot.  

This concept, which is also known as the familiarity principle, is 101 in advertising and marketing. In fact, it’s what the whole idea of advertising is built on – repetition. When brands are consistent and deliver high-frequency communications across relevant media, they stick in people’s memories and prime them to feel positive about a product, service or idea just through mere exposure. 

Now that you understand cognitive psychology and how you can utilise it in campaigns, here are some more strategies for you to try that use the principles of behavioural economics:

The power of free

One of the most powerful words you can use in marketing is “free”. It’s the reason why you’ll see brands advertising “buy one, get one free”, not “buy two, get 50% off”. Consumers have been proven to get a hit of dopamine when they see the word “free”, which will be reinforced when they take advantage of that offer. 

Social proof

Social proof is one of the most powerful tools in behavioural economics, particularly in online marketing. People are more likely to buy products or services that are popular to gain social standing amongst their peers, which is one of the reasons why so many consumers read online reviews in order to gauge how trustworthy a company is – in fact, 81% of consumers trust a company with lots of positive reviews.

Creating scarcity

If you’re familiar with limited edition products, then you’re already familiar with the power of scarcity in behavioural economics. Put simply, people tend to put more value on a product if they think there’s only a limited amount available, or if there’s only a limited window during which they can buy it before it becomes unavailable. 


Once you know about the anchoring principle, you’ll start seeing it everywhere. Anchoring is the practice of giving customers the most expensive option first in order to make all subsequent options seem cheaper. It’s a clever little gimmick that works more often than you’d think!

Final thoughts

In this article we’ve covered cognitive biases and how they work, the psychology behind social media platforms, how we can influence consumer behaviour through Paid Social and the top advertising strategies to leverage the principles of behavioural economics.

From tweaking existing copy to engineering a brand-new full-funnel strategic approach to your marketing that involves new creative and additional UGC assets, there are countless ways you could incorporate behavioural economics into your daily online activity.

Which strategy will you try first?