Whatever book you are reading right now, if it isn’t Dan Ariely’s Predictably Irrational, stop and switch. As a marketer interested in improving your online conversion rate you will be very glad you did.

Ariely is an economist focused on behavioral economics, a field concerned with the bounds of rationality (selfishness, self-control) of consumers, firms, the government, etc.

According to Wikipedia (OK, I admit, I had to brush up on this), “behavioral models typically integrate insights from psychology with neo-classical economic theory. Behavioral analysts are not only concerned with the effects of market decisions but also with the issues of public choice, another source of economic decisions with some similar biases towards promoting self-interest.”

In other words, behavioral economics is all about marketing in its true sense.

Or, as Ariely puts it on his website: “When we make decisions we think we’re in control, making rational choices. But are we?”

Precisely here is where what we do, Conversion Optimization testing for increased conversion rates, fits in.

After reading just the first chapter of Ariely’s book you will realize that what we all do, as Conversion-oriented marketers, is constantly test behavioral economics hypotheses (I just never knew to call it that!).

As Conversion Optimization marketers, we test hypotheses about the relative advantage of various products and service offerings to web visitors by presenting test variations. Web visitors themselves estimate the value of those products and services based on their relative merit. We then determine which test variation delivers the highest perceived value to customers – and hence highest conversion rate for our clients.

But how do web visitors estimate the value of products and services based on their relative merit?

In his book, and with great wit, Ariely convincingly presents the reader with a model of how we all make decisions and judgments which are often irrational yet we convince ourselves that they aren’t because we are evaluating data and information.

Ariely leads with an example from the online and print publication The Economist. This example reads remarkably similar to the work we do every day as Conversion Optimization marketers at WiderFunnel.

Here is an excerpt from Chapter 1 – “The Truth About Relativity”:

“One day while browsing the World Wide Web (obviously for work-not just wasting time), I stumbled on the following ad, on the Web site of a magazine, the Economist.

• The Economist.com online Subscription – $59.00
• Print Subscription -$125.00
• Print and Web Subscription – $125.00

I read these offers one at a time. The first offer-the Internet subscription for $59- seemed reasonable. The second option -the $125 print subscription-seemed a bit expensive, but still reasonable. But then I read the third option: a print and Internet subscription for $125.

I read it twice before my eye ran back to the previous options. Who would want to buy the print option alone, I wondered, when both the Internet and the print subscriptions were offered for the same price? Now, the print- only option may have been a typographical error, but I suspect that the clever people at the Economist’s London offices (and they are clever-and quite mischievous in a British sort of way) were actually manipulating me. I am pretty certain that they wanted me to skip the Internet- only option (which they assumed would be my choice, since I was reading the advertisement on the Web) and jump to the more expensive option: Internet and print.

But how could they manipulate me? I suspect it’s because the Economist’s marketing wizards (and I could just picture them in their school ties and blazers) knew something important about human behavior: humans rarely choose things in absolute terms. We don’t have an internal value meter that tells us how much things are worth. Rather, we focus on the relative advantage of one thing over another, and estimate value accordingly.”

This example perfectly exemplifies what Conversion Optimization is all about: testing behavioral economics hypotheses online to maximize sales conversions.

While it is quite possible that (based on our experience with publishers) “the Economist’s marketing wizards” weren’t really testing anything and it most likely was a typo (maybe because the Economist’s marketers didn’t know about Conversion Optimization and tools such as Google Website Optimizer and Omniture Test & Target), the message is nevertheless clear.

As Conversion Optimization marketers, we are blessed by having the internet as our playing field.

The internet is unique. It provides us with an ideal environment where to run controlled “social experiments” in presenting products and services for sale, testing hypotheses and coming up with statistically valid results.

As business people, we end up with more –and happier– customers who are making ‘buy’ decisions based on the relative advantages of your products and/or services, able to estimate value accordingly.

And, of course, as business people you also end up with better and more efficient websites that deliver improved profitability.

So, while Conversion Optimization may be ‘Predictably Irrational’ — your company’s improved profitability isn’t!