Pricing is fundamental to your business. It also has an enormous influence on Customer Experience outcomes. You should understand Mental Accounting as it pertains to customer behavior before you set the price and before you ruin how your customers feel about your experience. This was a great topic of discussion in our recent podcast.
So, What is Mental Accounting?
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Businesses are in a rut. Speed, efficiency and convenience are all rational factors companies focus on when they think about customer experience. But good experience isn’t that simple. It involves more than you think.
For years, research has indicated that the future of success for business is in customer experience. But recent PwC research shows that businesses have a customer experience disconnect. People are increasingly loyal to the retailers, products, brands and devices that consistently provide exceptional value with minimum friction or stress.
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Can you tell me the average length of a rain poncho without Googling or asking Alexa?
Don’t worry, few people can. Nonetheless, it is a critical piece of information when you want to buy a rain poncho and need to choose a size. Without it, however, you can still make a decision—and as customers we often do this—by simply substituting in another question and answering it. It’s called a substitution heuristic, and it is how customer make up their minds about you.
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Recently, Lorraine and I re-evaluated some of our long-term subscriptions – like cable TV, magazines and travel insurance. If you’re like us, once you sign on for something, you tend to renew without thinking much about it. Who on earth would want to deal with a new cable company or shop for insurance every year?
You might expect to be rewarded for this long-term loyalty. Yet it seems just the opposite.
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A difference exists between what people say they will do and what people do. People say they want salads in theme parks but order hamburgers. People say they want to save the planet but then ignore the recycling bin. People say they want many choices but then complain that there were too many choices to decide. In short customers are irrational! We recently enjoyed debating this in our podcast Why Are Customers Irrational?
Barnes and Noble is learning this concept the hard way. People say they want major brick and mortar bookstores nearby, but then they don’t buy anything there!
I was texting with my daughter the other day and there was a pause in the conversation. I could see the three little dots. Surely she was typing a clever response to the remark I’d just made. I couldn’t wait to see it, so I sat there, phone in hand, staring stupidly at the little dots.
I went on like this for maybe a minute and a half before I realized I was being silly. My phone would alert me if she responded, so why was I glued to the screen?
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