The gambler’s fallacy is a cognitive bias that leads people to believe that future outcomes are influenced by past events, even if the two are statistically independent. For example, a person might believe that a coin is more likely to land on heads after it has landed on tails multiple times in a row. However, in reality, the outcome of each coin flip is still a 50-50 chance, and previous outcomes do not affect future outcomes.
Let’s explore some ways to use this psychological quirk to your advantage in marketing, sales, branding, design, and advertising:
1. The Hot Hand Effect
The Hot Hand Effect is a cognitive bias that can be used in marketing and advertising to increase engagement and sales. This effect is based on the belief that success breeds more success, so if a product or service has been successful in the recent past, it is more likely to continue to be successful in the future. By leveraging this belief, marketers can encourage customers to engage with their product or service and increase sales.
Example: NBA’s “Player of the Week” or “Player of the Month” awards are given to players who have had exceptional performances in recent games, and are heavily promoted by the league and team social media accounts. By highlighting the recent success of these players, the league and teams encourage fans to watch future games in the hopes of witnessing another impressive performance. This can lead to increased engagement with the league and ultimately more ticket sales and merchandise purchases.
2. The Near-Miss Effect
Messaging like “Close to Winning”, “You were so close! Try again for a chance to win big!”, emphasizes the near-miss effect by focusing on how close the customer came to winning. It encourages the customer to try again, believing that they are more likely to win after a near miss. This can be used for anything from a lottery promotion to a mobile game app.
Example: A mobile game app that offers players a chance to win virtual prizes by spinning a wheel. The wheel has several sections, with one section labeled as the jackpot. When a player spins the wheel and lands on a section close to the jackpot but doesn’t actually win it, the app can display a message like “So close! You were just one step away from the jackpot. Try again for a chance to win big!” This message leverages the Near-Miss Effect to encourage the player to keep spinning and increase their chances of winning the jackpot in the future.
3. Create Winning Streaks
The idea of creating winning streaks in marketing is based on the Gambler’s Fallacy, where people believe that a winning streak will continue, leading them to make more bets or purchases in the hopes of continuing the streak. Brands can leverage this by creating promotions or loyalty programs that reward customers for making multiple purchases in a row or for a certain number of consecutive days.
Example: Starbucks Rewards program offers a “Star Streak” feature where customers can earn bonus stars for making consecutive purchases. By rewarding customers for making purchases on consecutive days, Starbucks is creating a winning streak that encourages customers to continue making purchases in the hopes of continuing the streak.
4. Multi-stage promotions
Multi-stage promotions are designed to leverage the Gambler’s Fallacy by presenting customers with a series of smaller “wins” that lead up to a larger reward. By breaking the promotion into multiple stages, customers are more likely to continue participating, as they feel that they are making progress and are closer to reaching their goal.
Example: Sephora’s Beauty Insider program has three tiers: Insider, VIB (Very Important Beauty Insider), and Rouge. Customers can earn points by making purchases, and the more points they earn, the higher the tier they reach. Each tier unlocks different rewards, such as birthday gifts and exclusive events. This multi-stage promotion encourages customers to keep making purchases in order to reach the next tier and unlock more rewards, creating a sense of momentum and excitement.
5. “Keep Trying, Your Luck Will Change” Messaging
This marketing idea is based on the Gambler’s Fallacy, which suggests that a customer’s chances of winning are higher if they continue to participate. The messaging “Keep Trying, Your Luck Will Change” encourages customers to keep participating in a promotion, even if they have not won yet. This messaging creates a sense of optimism and hope in the customer, and suggests that they will eventually win if they keep trying.
Example: Publishers Clearing House (PCH) is known for its “Sweepstakes” promotions, where customers can enter to win large cash prizes. The messaging of PCH’s campaigns often includes phrases like “keep trying” and “your luck will change”, which encourages customers to continue to enter the sweepstakes even if they haven’t won yet.
6. “Lucky/Unlucky Number” Game
Offer promotions that are tied to specific numbers, such as “7” or “13”. This can be used in various industries, such as lottery or gaming. Example: “Get a Free Scratch-Off Ticket When You Purchase $7 Worth of Products!” This strategy should be used when you want to create a sense of excitement and encourage customers to make purchases.
Example: A coffee shop may offer customers a free drink on their 13th purchase, with the slogan “Unlucky for some, lucky for you! Get your 13th drink for free.” This encourages customers to continue visiting the coffee shop in order to reach their 13th purchase and receive the reward.
7. “Double or Nothing” Deals
“Double or Nothing” deals are promotions that offer customers the chance to double their winnings or discounts if they make another purchase. This strategy leverages the idea of Gambler’s Fallacy, which suggests that a successful outcome is more likely after a previous successful outcome.
When using this strategy, it is important to clearly communicate the rules and conditions of the promotion to customers to avoid any confusion or misunderstandings.
Example: Dunkin’ Donuts ran a “Sip Peel Win” promotion, where customers who purchased a large or extra-large hot coffee received a game piece that could be peeled off to reveal prizes such as free food and drinks, discounts, and bonus points. Customers who won a prize could choose to redeem it or play again for a chance to double their winnings. This promotion leveraged the Gambler’s Fallacy to create excitement and encourage repeat visits to Dunkin’ Donuts.
There are several cognitive biases that are similar to the gambler’s fallacy in that they involve mistaken beliefs about probability and randomness,
The hot-hand fallacy: The belief that a person who has experienced success in a certain area is more likely to continue experiencing success in that area, even if success is based purely on chance.
The clustering illusion: The tendency to see patterns or clusters in random data, which can lead people to believe that certain events are more closely related than they actually are.
The availability heuristic: The tendency to rely on examples or information that is readily available in memory when making judgments or decisions, even if that information is not representative of the true probability of an event.
The illusion of control: The belief that one can control or influence the outcome of a random event through one’s own actions or behavior, even when that is not actually the case.
The sunk cost fallacy: The tendency to continue investing in a project or course of action even when the costs outweigh the benefits, because of the belief that the investment will eventually pay off.
Citations
“Leveraging the Gambler’s Fallacy: An Untapped Source of Marketing Advantage,” Marketing Science Institute, https://www.msi.org/working-papers/leveraging-the-gambler-s-fallacy-an-untapped-source-of-marketing-advantage/
“The Hot Hand Fallacy in Marketing,” HBR Ascend, https://hbrascend.org/topics/the-hot-hand-fallacy-in-marketing/
“The Clustering Illusion,” Psychology Today, https://www.psychologytoday.com/us/blog/brain-babble/201301/the-clustering-illusion
“The Availability Heuristic: How We Estimate the Likelihood of an Event,” Verywell Mind, https://www.verywellmind.com/availability-heuristic-2794824
“Illusion of Control: Definition and Examples,” Verywell Mind, https://www.verywellmind.com/illusion-of-control-2795809
“The Sunk Cost Fallacy: Why You Make Terrible Life Choices,” Wait But Why, https://waitbutwhy.com/2015/03/procrastination-matrix.html
“The Impact of the Near-Miss Effect on Customer Loyalty in Slot Machine Gaming” by Anjana Grewal and Brett L. A. L. S. Martin. https://journals.sagepub.com/doi/10.1177/1094670512452126
“The Illusion of Control: How to Use It in Marketing” by Jonathan Ruchti. https://www.bryan-karol.com/wp-content/uploads/2014/10/Illusion-of-Control-How-to-Use-It-in-Marketing.pdf
“Sunk Cost Fallacy in Marketing: How to Overcome It” by Michal Leszczynski. https://getresponse.com/blog/sunk-cost-fallacy-in-marketing-how-to-overcome-it
“The Power of the Clustering Illusion” by Kevan Lee. https://blog.bufferapp.com/the-power-of-the-clustering-illusion
“How to Leverage the Availability Heuristic to Improve Your Marketing” by Daniel Tay. https://www.wordstream.com/blog/ws/2018/05/23/availability-heuristic
“The Hot Hand Fallacy: How to Use It in Marketing” by Brian Clark. https://copyblogger.com/hot-hand-fallacy/
“Gambler’s Fallacy: How to Leverage It in Marketing and Advertising” by Drew Hendricks. https://www.inc.com/drew-hendricks/gamblers-fallacy-how-to-leverage-it-in-marketing-advertising.html
“The Near-Miss Effect: How It Can Boost Your Marketing Strategy” by Elyssa Respaut. https://www.entrepreneur.com/article/236112
“How to Use the Psychology of Winning Streaks to Keep Your Customers Engaged” by Nick Kolenda. https://www.nickkolenda.com/winning-streaks/
“Lucky Numbers in Marketing and Advertising” by Cheryl L. Coyle and Bruce E. Pfeiffer. https://www.researchgate.net/publication/259468163_Lucky_Numbers_in_Marketing_and_Advertising.
