Understanding Aggressive Advertising and Cognitive Biases of Temu’s Business Model
Temu is an online marketplace operated by a Chinese e-commerce company launched in September 2022. It almost offers any product your brain can imagine at strikingly low prices. The online shopping megastore has rapidly gained popularity, attracting millions of customers worldwide, but despite its rapid rise, behind the appealing discounts and captivating ad campaigns lies a complex business model and sophisticated play on consumer psychology, leveraging cognitive biases that influence decision-making to drive sales. Temu’s aggressive approach to online shopping goes far beyond standard sales tactics.
Temu’s customer journey is expertly crafted to leverage numerous cognitive biases, nudging users toward purchases through subtle psychological pressures. First of all, as soon as the app is opened, it is possible to observe different countdown timers referring to limited-time offers and notifications about low stock, in order to create a sense of urgency. This strategy takes advantage of the Scarcity Bias and FOMO (fear of missing out). Scarcity makes a product appear more valuable simply because it seems limited (Cialdini, 2001). Coupled with FOMO, consumers feel pressured to buy immediately, fearing they might lose out on a good deal. This manipulation could encourage consumers to make hasty purchase decisions without thoroughly evaluating the product’s quality or their real needs, potentially leading to a future sentiment of remorse.
Immediately after entering the app, a shiny and promising wheel of fortune will appear on the user’s screens. All he is asked to do is to spin the wheel and immediately discover what he has won. But why should he get a $100 discount just by opening the app? Gamification is the use of game-like elements in non-game contexts to engage and motivate people to achieve specific goals (Wood & Griffiths, 2007). In this case, according to the Immediate Reward Bias, when users spin the wheel, the promise of a potential reward releases dopamine, the “feel-good” neurotransmitter, making the activity enjoyable and encouraging repeat interactions.Moreover, reports suggest that new users often receive the $100 jackpot upon their first spin, which may not be entirely random. What’s more, before the potential customer can use it, a signup wall will invade the screen and the user will be asked to provide his email or phone number to have the opportunity to use the voucher. This practice can be defined as gated rewards. It is a tactic where the promised reward (in this case, a discount from the wheel) is only accessible after the user completes an action beneficial to the platform, such as providing personal information (Thaler & Sunstein, 2008). This strategy leverages Regret and loss Aversion Bias, according to which people are motivated by the desire to avoid the unpleasant feeling of regret that can come from making a “wrong” choice or missing out on an opportunity (Kahneman & Tversky, 1979). For that reason, users could impulsively insert their information so as not to lose the rewards gained by the wheel. Furthermore, the user is subjected to the Reciprocity Bias: after having received a substantial reward he may develop a sense of obligation to give something back, such as filling out the registration (Cialdini, 2001).
However, at this point, the time to redeem the prize is yet to come. To finally get the coupon the user is asked to buy at least 20 items into a defined time horizon circumscribed by a countdown timer and to spend a minimum amount. The 20 items approach encourages bulk buying, even if users don’t actually need so many items, fostering overconsumption, while setting a high minimum spending requirement for premium discounts or offers nudges consumers to spend more than intended. This tactic exploits the sunk cost fallacy, once users start adding items to meet the threshold, they’re more likely to keep going to avoid “wasting” the potential savings. Temu’s approach encourages wasteful consumerism, steering users toward quantity over thoughtful purchases, often at the cost of environmental and financial sustainability.
Finally, Temu has recently developed a strategy called zero-dollar orders to hook new users. It is a promotional tactic aimed at attracting and incentivizing new customers to join the platform based on the same psychological traps analyzed for the wheel. In fact, Temu offers free or heavily discounted items as a welcome gift after the user has already ordered a specific number of items and has already registered. Furthermore, this strategy disproportionately targets younger audiences on platforms like TikTok through the use of influencer marketing. Tiktokers and public figures daily share engaging videos that make their unbelievable deals easy, and risk-free, adding a layer of credibility for younger consumers which could be considered the most vulnerable to the FOMO, urgency, and peer pressure.
In conclusion, Temu’s marketing strategies, while innovative and effective in capturing consumer attention, reveal a complex and often ethically questionable approach to consumer engagement. For consumers, understanding these tactics is essential to making informed, conscious choices and avoiding the trap of habitual or unnecessary spending.
References
Cialdini, R. B. (2001). Influence: Science and Practice. Allyn & Bacon.
Growth.Design. (n.d.). The psychology of Temu’s casino-like shopping UX. Retrieved November 6, 2024, from https://growth.design/case-studies/temu-onboarding-psychology
Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263-291.
O’Reilly Media. (n.d.). Behavioral Finance and Decision Making: Bias Description [E-book]. O’Reilly. Retrieved from https://www.oreilly.com/library/view/behavioral-finance-and/9781119801610/c21.xhtml#:~
Salvemini, S. (Ed.). (2017). Organizzazione aziendale. EGEA, Milan
Thaler, R. H., & Sunstein, C. R. (2008). Nudge: Improving Decisions About Health, Wealth, and Happiness. Penguin Books.
Wood, R. T., & Griffiths, M. D. (2007). Online guidance, support, and recovery services for online gambling. Journal of Gambling Studies, 23(4), 471-483.
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