What is Hyperbolic Discounting? How Marketers using "Instant Gratification" as a tool?

How about one more episode of Brooklyn 99 (or Lucifer?) on Netflix? one more plate of butter chicken? one more pint of Heineken? one more Marlboro?

These are the question we ask ourselves & knowingly end up making bad life choices.

But why do we do such things?

The answer is "Instant Gratification" which releases a cocktail of endorphins, dopamine, and serotonin hormones or in other words "Happiness".

This phenomenon has coined by psychologist Richard Herrnstein as Hyperbolic discounting. Hyperbolic discounting is a cognitive bias, where people choose smaller, immediate rewards rather than larger, later rewards — and this occurs more when the delay is closer to the present than the future.

People generally want rewards sooner rather than later. Thus, options that delay a reward appear less attractive and people discount them.

If we give you 100 Rs. today or 120 Rs. next week, which the option will you choose?

It is very likely that you will take 100 Rs. It is not just you; most of us will choose the first option.

Now, let us tweak the timeline; what if we give you 100 Rs. after a year or 120 Rs. after a year & a week.

Chances are high that in this case, you will choose the second option.

(Image 1: Time delay makes our choices rational)

What has changed? Although the time difference in both cases is the same, we choose differently.

(Image 2: Time delay makes discounting less attractive)

Reward realization drops steeply as we move away from “NOW”. We consider instant as a premium & ready to pay more (here scarifies more).

When we were animals, we valued today’s food, today’s comfort, today’s pleasure because in such times there was no future safety. Now, we have a moderate level of food & accommodation safety but still, our primal nature is taking the charge in decision making.

Our brains are wired for “Instant” & “Now”. Neuroscientists have discovered that our brains light up like a Diwali night when we get stimulated by the power of instant gratification. The brain uses hyperbolic discounting as a learning mechanism. The basal ganglia contain a responsive portion that learns by receiving immediate reward-based feedback.

(Image 3: Basal Ganglia activated for instant gratification in MRI Image)

That’s enough theory, now let’s move to the marketing side of Hyperbolic Discounting.

How companies take advantage of this primal cognitive bias?

The strategy is to create a perception of Immediacy: They know consumers value “Right Now”. This psychological (Primal) instinct of instant gratification is the building block of companies' Go-to-marketing strategy.

Below are the tactics to achieve the above-mentioned strategy:

Tactic 1: No-cost EMIs by Ecommerce

The Idea of not paying now + no interests kick dopamine in consumers. When such a situation comes, we simply feel the urge to take it; we overlook the need; we overlook the price; we overlook our ability to afford it; we overlook the utility of the purchase. Marketers simply short-circuit the entire cognitive process & bring us right next to purchase decision.

As a consumer, you don’t care about the pricing as long as you don’t have to pay now. Still wondering why eCommerce giants brought this benevolent No-cost EMI plans; they are no saints & we shouldn’t be making the mistake of thinking them otherwise.