Spotting examples of irrationality in how people do and don’t spend their money can help you improve your business’s effectiveness in converting your customers.
Smoking despite the health risks, racking up credit card debt rather than dipping into our savings, refusing to subscribe to an online daily newspaper for $1 a week even though we used to pay more than that a day, or baulking at buying a sandwich on the plane even though the cheaper fare saved you more than lunch are all examples of irrational behaviour.
Now chances are that these behaviours wouldn’t have struck you as strange unless they were pointed out. Why? Because they are part of the normal way we go about life.
The problem is that if you can’t spot these irrational behaviours it becomes difficult to design your business around them. And why would you want to? Because everything we do in business (and in life) is about getting people to do something – read, listen, watch, stand up, walk, talk, click, read, buy, sell – and you can do it more effectively if you know what sits beneath our behaviour.
There are three places you need to start looking for irrationality; Me, Them and There.
1. The “Me” context: How your customer is naturally geared
These are the core behavioural tendencies that govern decisions even when we are by ourselves. That means your customer will have these tendencies even before they see your shop or marketing and even before they are influenced by what other people might be doing.
“Me” context irrationalities mean that even if you were alone on a desert island your decisions would still be impacted by things such as:
Questions to ask yourself about your customer
What are they using now instead of your product? What do they have to give up to change? How does this fit with their beliefs about themselves? Is it immediately gratifying? Can I create the right mood?
2. The “Them” context: How your customer is impacted by others
Thankfully we’re not often alone on a desert island. People usually surround us, and the “Them” context irrationalities are about how your customer’s behaviour is impacted by others.
The “Them” behavioural tendencies are shaped by:
Questions to ask yourself about your customer
What do they see others doing? How will doing business with you affect their status? Whose authority will be persuasive? How can you ensure they feel unique rather than just another number?
3. The “There” context: How your customer is impacted by their environment
Of the three domains, the “There” context is most obviously your domain – the marketplace. These are the behavioural irrationalities that are shaped by the environment in which the decision is being made – e.g. your website, office, shop – and how things like lighting, noise, packaging, shelving, point of sale, competitor proximity impact.
“There” context behavioural tendencies are shaped by:
Questions to ask yourself about your customer
How is your customer impacted by the environment in which they are deciding and consuming your product? For example, lighting, smells, noise, temperature, packaging, whether alternatives are available, your branding, your choice of typeface? Is there a different way you can describe your offer to frame it to advantage? What cues are you providing about whether you are a price sensitive shop (e.g. JB Hi-Fi, which makes everything look like it’s on sale) or high end (e.g. Apple, which is never on sale).
Three contexts can improve your effectiveness
By thinking through the Me, Them and There contexts you will start to paint a picture of how your customer is likely to behave and, therefore, can be more deliberate and assured in how you design your points of engagement to drive conversion.
This article first appeared on June 24, 2013. It has been slightly amended from the original.
Bri Williams runs People Patterns, a consultancy specialising in the application of behavioural economics to everyday business issues.
Bri Williams is an authority on behavioural economics applied to everyday business and personal effectiveness.
