Because we have frequent thunderstorms and power outages in my Florida home, I recently decided to buy an uninterruptible power supply for my electronics. I’ve had good experiences with Apple products so I first checked to see if Apple made that sort of thing. They didn’t, so I set about comparing and contrasting the models that were available.
I quickly got lost in technical specifications, so I decided that I would choose based on how long the power supply would last. This wasn’t because that was in fact the most important criteria, it was simply something I could understand!
My experience illustrates the nature of customers: irrational, intuitive, driven by past memories and factors that seem irrelevant. We need to consider these traits when designing a Customer Experience to create most value. There are, then, five behavioral economics practices that are essential if you want to improve your customer experience. We discussed these on a recent webinar I hosted for Freshworks, the second in a series titled ‘Five behavioral economics practices to enhance your customer experience’.
1. Embrace Your Customers’ Irrational Nature
Human beings are not rational. Because of this, you can influence customer behavior using a theory known as choice architecture. For example, a wine shop that played French music in the background reported that their sales of French wine went up by a ratio of 5 to 1.
In another instance, a Florida community that wanted to discourage homeless people from sleeping on park benches placed a divider midway down each bench. This improved the seating situation for park visitors while decreasing the number of homeless people sleeping there. When you recognize your customers’ irrationality, you can design an experience with irrationality in mind.
2. Understand Your Customers’ Conflicted Minds
Your customers’ minds operate on two levels: intuitive and rational. The intuitive system makes easy, automatic decisions. The rational system is slower and takes much more energy. I intuitively wanted to buy an Apple power supply. When I was studying other brands and models, that was my rational system at work.
The thing is, your customers’ intuitive system is always on, and they want things to be easy. In creating a customer experience, you need to be thinking about how you can help your customers make easy, intuitive choices.
3. Understand and Predict Customer Habits
We all have habits that save us time and make our lives easier. Think about a rat in a maze. The rat hears a click that triggers a gate opening and the rat runs the maze. At the end, the rat gets a piece of chocolate as a reward. Similarly, if I’m in an airport and I see people lining up at the gate, I’m triggered to do the same thing.
In a customer context, knowing your customers’ habits will help you understand how to trigger a desired behavior. I have a habit of buying coffee at Starbucks. If I pass one of their shops and smell the coffee, I’m then tempted to go in and make a purchase, although I had not wanted or needed a coffee!
4. Accept that Irrelevant Things Can Be Really Important
It’s important to understand the factors that are driving your customers’ decisions, because they may not be what you think. For example, when buying my power supply, I ignored all the specifications and talking points which I found overwhelming and bought solely on how long the power supply would last.
People also buy based on reviews and something we call extremeness aversion. This refers to the fact that people don’t like the most expensive option or the cheapest one—they go for something in the middle. Or they may buy a product from one company based on their past experiences with other products from that company—something we call the halo effect.
5. Create Memories that Build Loyalty
Once an experience is over, all we have left are memories. And those memories influence our decision about what to do in the future. If our memories are primarily good, we will develop loyalty to a brand, and that loyalty will persist even if there are some memories that aren’t as good.
How are memories formed? According to Professor Daniel Kahneman, we remember the peak emotion we felt during an experience. We also remember the final emotion. The key question, then, is what is the peak emotion that customers are feeling during an experience, when are they feeling it, and is it positive or negative? And the same with the end experience.
So these are the five essential behavioral economics practices—understanding your customers’ mindset and habits, embracing their irrationality, and creating the right kind of memories.
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Colin Shaw is the founder and CEO of Beyond Philosophy, one of the world’s leading Customer experience consultancy & training organizations. Colin is an international author of six bestselling books and an engaging keynote speaker.
Follow Colin Shaw on Twitter @ColinShaw_CX