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Base rate fallacy (base rate neglect)

Reviewed by expert Scientifically proven

Sometimes we tend to estimate the likelihood of something only by taking some data into consideration, without considering every piece of relevant data. This tendency of psychology is referred to as the base rate fallacy or base rate neglect. As a result of only focusing on some specific information, but not the all, we make inappropriate decisions as they were misguided. Base rate fallacy acts as a disaster when it comes to digital marketing. If you are a digital marketer, you must be aware of the misery that this cognitive bias can bring you for Conversion Rate Optimization (CRO).

Table of contents:
  1. How to avoid base rate fallacy affecting CRO?
    1. Follow the 'Test and Learn Process'
    2. Stage 1 - Data analysis
    3. Stage 2 - Hypothesis
    4. Stage 3 - Develop test content
    5. Stage 4 - Test
    6. Stage 5 - Evaluate
  2. Wrap up

How to avoid base rate fallacy affecting CRO?

Follow the 'Test and Learn Process'

The test and learn process consists of all the major elements to be considered before jumping into conclusions blindly, to optimize conversions. If you follow this process, you won't be missing a single piece of data that is vital. Let's see. Assume that you want to learn if a new piece of content is going to work well with more conversions. Without blindly jumping into conclusion with limited information, follow the following stages and come to the final conclusion.

Stage 1 - Data analysis

In this stage you should gather as much as data on the main source that generates the biggest traffic towards your website. Also, you should be able to track the weakest point in your conversion funnel. Don't let any piece of information go missing!

Stage 2 - Hypothesis

Based on the final output of the above stage, you should agree on page objectives. To come up with a page objective, every wee bit of the information from the first step should be used. Remember, missing data means poorer decisions and poorer decisions means less conversions.

Stage 3 - Develop test content

Developing test content too should be done with care. Here, your first concern should be on what are you looking to test. Then the desired outcome of the test should be determined. It's not enough. How are you going to assess the success? Pay your attention to the key performance indicators you're going to use to assess the success such as revenue, customer retention rate, profit margin etc.

Stage 4 - Test

In this stage, you test whether the variants meet the hypothesis. You can test which variant meets the objective of the test the most. Also, you can see how the different traffics respond to the test.

Stage 5 - Evaluate

Finally, see if the new content meets your goals or if it is required to test further towards modifications. Other top tips to avoid base rate fallacy towards conversions

  • Research! Always do researches with due diligence to trap every important information before making a decision
  • Predict rightly. It's important that you understand that past performance is not a valid indicator for the future behavior of your business
  • Focus on the entire audience - Never come to conclusions or critical decisions only based on that group of customers who always complain. Remember, the silent majority too contains important information.
  • Use A/B testing to segment ensuring that the segments are optimized for base rate information. This can help you a great deal by driving more qualified leads followed by successful Conversion Rate Optimization (CRO).
  • Do not completely bias to statistical implications on campaigns to come up with decisions. The reason for this is not that every visitor is patient enough or has time to be involved positively. Also, some may have difficulties interpreting data. Such interference will lead you towards misguided data.
  • Avoid automatic ways of thinking. Always try to think through logic. After all, your decisions should reflect the logic you used in order to put it into correct use.

Wrap up

Base rate fallacy, known as the base rate neglect, speaks about our incompetence in decision making in cases where we use only a specific amount of information, not all. The conclusions derived, or the decisions made based on this bias tend to be less successful. As a result, digital marketers can suffer a great deal towards Conversion Rate Optimization (CRO). However, you can be safe from this harmful bias to generate more conversions if you follow the 'test and learn' method to come to a conclusion. Furthermore, by doing quite sufficient research work, focusing on the majority in decision making, incorporating A/B testing for segmenting and by avoiding automatic ways of thinking, you can drive your marketing campaign towards success followed by more and more conversions. Buckle up and be ready for the change!

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The references contain experiments and studies that prove this bias is there.

1. The Base Rate Fallacy in Probability Judgments
2. Seeing is believing: Priors, trust, and base rate neglect

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