If you’ve been watching the Australian Open tennis you will have been enjoying a serving of behavioural economics in action. Here’s what a couple of fuzzy balls can teach us about decision-making and getting customers to buy.
Tennis is an interesting sport—wacky scoring (love-15-30-40-deuce), confusing court positions where you face your opponent diagonally, and, perhaps strangest of all, a “do-over” whereby the server gets another go if their first serve is out. Is there any other sport that let’s you try again?
It’s these two serves and the difference between them that I want to focus on. A player like men’s world number two Novak Djokovic, for example, gets around 65% of first serves in at an average of 188 km/h and wins 73% of first-serve points. His second serve, by contrast, is in 90% of the time but slower at 154 km/h, and he wins only 55% of points.
As these and stats across the tennis rankings attest, when players have nothing to lose on their first serve they can risk more, hitting harder and closer to the service line. On their second serve, the risk is greater because a double fault will see them lose a point.
The behavioural result? Second serves are usually slower and aimed more conservatively within the service box.
The behavioural principle underlying this human reaction to risk is loss aversion: avoiding loss is more important than seeking gain. If loss aversion was not at work, tennis players would hit their second serve as hard as their first, and care more about winning the point than losing.
This reminds us about the importance of perceived risk when it comes to customer behaviour. When it comes to doing business with you, what does your customer stand to lose?
You can address loss aversion by breaking your customer’s perceived risk down into four main categories.
This is perhaps the risk that looms largest because it is so tangible. Your customer will likely be paying you for your product or service and that means they are risking not generating a return on this investment. They don’t want to blow their dough.
How to address: To reduce your customer’s sense of financial risk consider offering them money-back guarantees, staggered payments by instalment, and/or waiving shipping or administrative fees.
Doing business with you takes time—time your customer could be using on other things and something they cannot get back if things go badly.
How to address: To reduce your customer’s fear of wasting time: simplify your sign-up processes; tell them all the things you will do on their behalf to save them time; and keep communications and meetings brief and to the point.
Anything new requires mental and physical effort. Your customer will have to think about you, which chews up their mental reserves, and they may have to expend physical effort like meeting you, travelling to your store, clicking buttons or filling out forms. Are their exertions going to be worthwhile?
How to address: To reduce consumer effort make sure you: eliminate friction (think Amazon’s one-click shopping); reduce data entry required by them; have a website and store that is easy to access and navigate; keep your communications jargon and acronym-free so they are easy to understand; and be clear in what steps your customer needs to follow.
The risk your customer will talk least about is that to their credibility. What will they look like if this all goes wrong? How will they hold their head up to their boss, colleagues, friends and family?
How to address: To reduce risk to their credibility, you need to develop their confidence and trust in you. This means including your own credibility markers like media coverage, testimonials and case studies, maintaining appropriate and relevant accreditations and affiliations, and ensuring you do what you say you’ll do.
You can also help customers by arming them with reasons for doing business with you so they can explain their decision to their stakeholders and get collective buy-in.
Bri Williams deletes all buying hesitation and maximises every dollar of your marketing spend by applying behavioural economics to the patterns of buying behaviour. More at www.briwilliams.com.au.
Bri Williams is an authority on behavioural economics applied to everyday business and personal effectiveness.
