Cookie Cons

We are all familiar with Internet cookies. Recall when you’ve been browsing on retail websites, potentially unsure of whether to make a purchase, so you leave the web page - only to spot the item you were just looking at advertised at the side of a different website later on.

The term ‘cookies’ refers to how websites can store information about your Internet browsing habits, such as what links you click on and how long you spend on each page. This information can be used to tailor advertisements to what you’ve previously shown an interest in. After criticism of ‘spray and pray’ approaches to marketing (over-advertising without targeting – the ad is seen popping up everywhere!) it is not surprising that brands want to utilise Internet cookies to tailor their advertisements to individual users.

It’s easier to understand how the use of cookies for Internet ads may have worked when they were relatively new. If cookies remained a secret, seeing them could make superstitious consumers believe “it’s a sign”, or even simply remind less superstitious consumers to make that purchase they were considering making earlier. However, there’s more behind why this data collection can be a successful tool for Internet advertisement. One theory that could explain the effectiveness of cookie ads is the availability heuristic to decision-making, which was first suggested by Tversky and Kahneman (1983). This heuristic is typically understood to lead to errors either through the underestimation or overestimation of risk. However, by definition the availability heuristic arises through the increased ease of retrieval of certain information. Internet cookies could be successful because they allow their brand to be brought to mind easier when a consumer thinks about buying that particular item in the future. Tversky and Kahneman’s research suggest that the ease with which a particular concept comes to mind is related to how much value an individual associated with that concept, or in this case, brand.

A different example of how cookies have been used as a sneaky marketing tool to increase profits comes from reports that airlines or hotel websites have used cookies to manipulate their prices, depending on whether customers have previously visited that site or not. For example, if you view a particular hotel and return to the website later, the price will have increased since the last time the hotel was viewed. However, after wiping your Internet history and cookie data from your browser, the price drops back down to what it was originally.

This could be an illustration of manipulating behaviour via commitment. If someone has already committed to the idea of booking a hotel, but returns to the site to find the price has increased, their sense of commitment is likely to encourage them to comply with the higher price. This is much like the sales strategy of low-balling, when customers commit to something while they think they are getting a good deal, but when they’re told it’s actually not that cheap, they still make the purchase because they are already committed to it. The low-balling technique has been shown to be more successful than simply selling for the advertised price, as shown in three experiments by Cialdini et al. (1978). In addition, this so-called ‘cookie con’ creates a time pressure in the mind of the customer, which can lead to the belief that a purchase must be made before the price increases any further. In fact, research suggests that time pressure increases the effectiveness of retail promotions (Aggarwal & Vaidyanathan, 2003).

More recently, laws have been introduced to restrict the use of cookies for online ads. You will even notice a request for permission to use cookies at the top of this blog! Despite these legal restrictions, it is interesting to observe how older sales techniques such as low-balling have still been employed with more modern marketing methods as technology has evolved.

References

Aggarwal, P., & Vaidyanathan, R. (2003). Use it or lose it: purchase acceleration effects of time‐limited promotions. Journal of Consumer Behaviour, 2(4), 393-403.

Cialdini, R. B., Cacioppo, J. T., Bassett, R., & Miller, J. A. (1978). Low-ball procedure for producing compliance: commitment then cost. Journal of personality and Social Psychology, 36(5), 463.

Tversky, A., & Kahneman, D. (1973). Availability: A heuristic for judging frequency and probability. Cognitive psychology, 5(2), 207-232.