For any business to thrive, a good customer experience is essential. If you can create raving fans out of your customers, you’ll engage an organic marketing network that does more for your business than any social media campaign. The reverse of this, if customers aren't given good experiences, a bad review can be detrimental to your brand's reputation and lead customers to your competition.
To develop a stellar Customer Experience (CX) Strategy, an understanding of behavioural economics is crucial. Through learning customers' habits and preferences, you’re able to create an experience that caters specifically to them.
So, what do you need to do to better understand your customer’s behaviour in order to tailor their experience and create fans for your brand?
Step 1: Analyse the context in which your customers exist
A holistic understanding of the customer experience hinges upon understanding not just what consumers do but why. You need to know the influences impacting customer decision-making as well as your own contextual place in the market to best position your brand and CX? The external contextual factors affecting customer decisions could be anything from the physical environment, time of day and season, weather conditions and location. By ascertaining what these contexts are for your business, you can tailor your CX and strategy to best address your customer's needs and concerns.
For example, if a customer is deciding whether they should purchase a new car from a dealership, this decision will be influenced by many things: how they feel about their current vehicle; whether they want an upgrade; how much money they have saved; what kind of discounts are offered…etc.
Step 2: Reveal emotion-based motivations for decision-making
Emotions play a big role in decision-making; we are not as rational as we think we are. By understanding cognitive bias that influences how people evaluate options and make choices, you can learn strategies to better position your brand to benefit from these biases. You may have heard of these three examples of cognitive bias:
· Anchoring occurs when people rely too heavily on the first piece of information offered. Consumers will use it as a reference point and benchmark for other decisions from that point on, whether it makes sense or not.
·The decoy effect, often explained through a wine analogy – where three similar options are presented but differentiate in quality or price, we’ll often choose the middle option without sound reasoning.
·A halo effect – occurs when favourable experiences with a person, organisation, brand, or product impact one's thoughts or sentiments in other contexts, even if the positive impression is not backed up by reality.
The truth is that emotions are often more powerful than logic, but through understanding these emotions we can tap into our customer-psyche.
Step 3: Identify misconceptions that affect consumers
Misconceptions can affect how consumers make decisions, as well as their perception of your organisation and its products/services. A misunderstanding between what you want to convey and how your customers interpret it may lead to disappointing results or even lost sales opportunities.
Why are misconceptions important? Misconceptions can lead to problems in many areas of customer experience management, including marketing strategy; communication methods; service standards; product development; pricing structure; trade-off decisions (such as choice set size); and more!
How can you identify misconceptions? There are many ways to learn about customer perceptions of your organization's offerings, including surveys and focus groups that gather feedback directly from customers themselves—but it would be difficult if not impossible for one person alone to conduct such research on their own behalf—which means outsourcing this task might make sense if time constraints prevent doing so internally within company resources alone.
Step 4: Tie it all together
Using principles of behavioural economics to understand how people make decisions is a powerful tool for helping you identify emotion-based motivations for decision-making as well as misconceptions that might impact customer decisions. In addition, analysing the context in which customers are making their choices provides insight into the drivers of consumer behaviour. With this information, you’re able to take your brand and CX to the next level, to achieve your business goals.
If you’re looking for a more in-depth view, our Behavioural Decision Making microcredential draws on insights from psychology and economics to better understand how people make decisions in economic situations and what strategies can be used to develop targeted solutions for stakeholders.
