Three places to spot your customer’s irrational behaviour

Last week I covered why it is hard to spot examples of irrational behaviour – in other words, those decisions we make that defy rational explanation.

This week is about where to go looking for irrationality so that you can then improve your business’ effectiveness in converting your customers.

Irrationality recap

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:

• Status Quo Bias: leaving things as they are rather than changing
• Loss Aversion: avoiding loss rather than seeking gain
• Short-term Bias: wanting instant gratification
• Mood Heuristic: how we feel impacts our decisions

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:

• Social proof: seeking evidence of what others have done or approve of
• Herding: when in doubt following what others have done
• Authority: being persuaded by others in authority
• Uniqueness: seeking to maintain individuality

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:

• Framing: we are persuaded by how information is conveyed (e.g. 2% fat vs 98% fat free)
• Choice paradox: we love the freedom to choose but get overwhelmed by it
• Relativity: value is relative not absolute, so $10 for a glass of wine at a restaurant is different to $10 for a bottle of wine
• Anchoring: we are persuaded by values that may not even relate to what we are looking to buy (e.g. Rolls-Royce seems a bargain when it is sold amongst multi-million dollar boats)

Questions to ask yourself about your customer

How is your customer impacted by the environment in which they are deciding and consuming your product? E.g. 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.

Bri Williams runs People Patterns Pty Ltd, a consultancy specialising in the application of behavioural economics to everyday business issues.