How To Use Hyperbolic Discounting To Sell More
Are you familiar with hyperbolic discounting? You can use this phenomenon—people’s preference for small, immediate rewards over bigger, delayed rewards—to increase your sales.
Hyperbolic discounting shows up in many ways, from retailers offering free shipping on a certain amount to coffee shops offering a free pastry with a coffee purchase. You might not need all the extra items to qualify for free shipping and you could grab a coffee at home or at work, but most of us will choose the short-term reward anyway.
This psychological, or cognitive, bias is defined as the tendency to make decisions or take action in an illogical way, notes Meredith Hart, a writer for the Hubspot Sales Blog. Even if a future reward is better or more valuable than an immediate reward, people are more likely to choose the short-term reward anyways due to psychological bias.
So, how can you incorporate hyperolic discounting into your sales strategy? Keep reading this issue of Promotional Consultant Today, where we share Hart’s ideas on how to use this phenomenon to increase your sales.
Loyalty programs. Rewarding customers who buy from you regularly can significantly boost your sales. Think about how you can celebrate your repeat clients with promotional gifts, rewards or new-release products. These rewards incentivize your customers to purchase from you, says Hart. Remember that smaller, short-term rewards play into consumers’ psychological bias and gives them the instant gratification they're looking for. Hart adds that loyalty programs increase the likelihood people will recommend your product or service. In fact, 70 percent of consumers would be more likely to recommend a brand with a good loyalty program.
Limited time offers. Nobody wants to miss out a great deal. With this example of hyperbolic discounting, reach out to your clients or prospects with an offer like, “[Product] is back for a limited time only” or “Flash sale! X% off [product].” According to Hart, these offers create a sense of urgency and makes your clients or prospects think if they don’t buy now, they’ll never see a deal like this again.
Delayed payments. This example of hyperbolic discounting is especially helpful now, with many businesses still struggling with cash flow amid the pandemic. If you can offer your customers a way to buy from you now but pay incrementally, you can often appeal to those clients or prospects with tight budgets. Those who delay payment are interested in the short-term reward of purchasing the product when they want it, says Hart, and the almost immediate satisfaction they get from buying the product outweighs the financial cost they need to address in the future.
Remember that your clients and prospects are people just like you—they want things now. You can use hyperbolic discounting to help them fill an immediate need and make their life simpler. Whether you reward repeat clients with special gifts, you create urgency with limited time promotions or you create some flexibility in how your customers pay you, there are many ways to make hyperbolic discounting work for both you and those you serve.
Compiled by Audrey Sellers
Source: Meredith Hart is a junior staff writer for the Hubspot Sales Blog.