A Look at Behavioral Economics: Don’t Overwhelm with Choices

July 26, 2011 2 Comments

Whatever you are selling, understanding your customer’s behavior is key to your success.

There’s actually a science called Behavioral Economics that seeks to explain why people behave the way they do. Behavioral Economics combines psychology and economics to understand the purchase decision. It looks at how customers make decisions and why they make them.

I’m sure many of you are wondering whether or not science done by some university Ph.D. is applicable to real world business– my answer to you is absolutely! (at least in this case)

Understanding why consumers buy what they buy is extremely valuable knowledge. In my next few blog posts, I am going to look at some interesting findings on consumer behavior and how you can apply them to your business.

Let’s get started…

Fewer Choices

Too many choices can overwhelm customers and make them less likely to purchase. A study done by Columbia University psychologist Sheena Iyengar found that too many choices can actually cause a type of “information overload” in the mind of consumers. The classic experiment offered grocery shoppers a selection of 24 varieties of jams one day and only 6 the next. 30% of shoppers who were faced with the limited selection of 6 made a purchase, whereas only 3% given the 24 variety selection made a purchase. That’s right—fewer choices led to 10 times more sales.

The Takeaway

Choice isn’t always good. In fact, too many options can actually reduce sales by forcing customers to think too hard. Because of this, offering fewer choices can be a huge differentiator. Apple, Trader Joe’s, and In-N-Out Burger are a few brands that have adopted this approach and made the purchase process easier.

If you enjoyed this article, you may be interested in some others from the Understanding Customer Thinking series:

Filed under Consumer Behavior, Customer Experience, Marketing Tagged with , , , ,

The Importance of Consistency: is Your Product ‘Like a Box of Chocolates’?

June 7, 2011 Leave a comment

My momma always said, “Life was like a box of chocolates. You never know what you’re gonna get.” –Forrest Gump

For the past seven days, the subject of consistency has weighed heavily on my mind.

In fact, I have been reminded of it every time I look in the mirror; that’s because last week I was the recipient of the dreaded “bad haircut”. Even though I pay the same amount every time, I never quite know what I’m going to get when I go to the salon…sometimes a great cut, other times a pretty bad one. Oh, what I would give for consistency.

This idea of consistency often gets lost in the shuffle, especially among small business owners. This is surprising because consistency really is the key to success. Even with a mediocre product, you can be tremendously successful if you are consistent and reliable.

Just look at McDonald’s. Their food is average at best, however they have found nothing but success over the past 50 years. Why? Because they are consistent. Whether in Tokyo, New York, or London, you always know what you are going to get when you eat at a McDonald’s.

More than a great product, customers long for a consistent product. They want the same quality, the same service, and the same experience every time they come to your business.

As a business owner, you should create processes so that you can deliver this consistency. Make it impossible to be inconsistent and make it impossible for your employees to make mistakes. This example from Andy Sernovitz sums it up best:

How do you prevent your dental assistant from frying herself with X-rays all day?

The “on” button is OUTSIDE of the exam room.

There is no way to do it wrong. You have to leave the room to turn the machine on.

Filed under Brand Touchpoints, Customer Experience Tagged with , ,

Doing More with Less: Fewer Product Options Can Be a Valuable Differentiator

March 16, 2011 3 Comments

In my last post Is There Really Such a Thing as Too Many Choices?, I looked at how too many product choices can leave customers frustrated and unhappy. Everyone says they want more product choices, but studies have shown that more choice equates to less sales, sometimes by a factor of 10.

Most brands ignore this simple fact and continue to pump out new variations to give consumers what they ask for – more product choices. Because of this, offering fewer product choices (resulting in an easier purchase decision) is a huge differentiator in this cluttered market.

Here are some examples of doing more with less product choices:

Trader Joe’s

Trader Joe'sMost grocery stores carry around 40,000 different items. Trader Joe’s takes a different approach and stocks about 4,000 items. With all of the different choices, choosing an item at a grocery store can be a stress-filled experience – brand names, price, size options, flavor differences, ingredients. At Trader Joe’s, instead of choosing between fifteen or twenty types of Italian salad dressing, you are given only a few options. This makes for a better shopping experience and shoppers are often much happier with their purchase decision.

Apple

Apple's iMacWhen discussing the topic of simplifying the customer experience, Apple has to enter the conversation. They integrate this approach in all of their touchpoints, including the purchase process. They offer limited varieties of their products to minimize the amount of buyer confusion. Looking to buy a new desktop computer? Apple offers four variations of the iMac. Compare that to other computer manufacturers whose vast number of options can drive customers away; Dell currently offers 119 different types of desktop computers.

In-N-Out Burger

In-N-Out Menu Variety vs McDonald’sThis West coast burger chain offers only four food items on their menu; three burger varieties (hamburger, cheeseburger, and “Double-Double”) and French fries. This minimalist menu is the polar opposite of McDonald’s endless menu choices. (Click here to see a comparison). Limiting product choices has enabled In-N-Out to beat the almighty McDonald’s in average sales per store.

Google

The world’s most popular search engine has always been about simplifying the complexity of search. Their homepage doesn’t distract users and offers them a clear choice. There is power in simple.

Google Homepage vs AOL

These are some examples of brands that make the purchase process easier by limiting choices. There is a difference between listening to what customers want (more options) and truly understanding what it is they want (fewer options). Choose wisely.

Filed under Branding, Customer Experience, Marketing, Strategy Tagged with , , , , , ,

A Speed Camera Lottery? Bake a Little Fun into Your Customer Experience

December 13, 2010 Leave a comment

Everyone hates traffic cameras, but how would you feel if you got paid for driving the speed limit?

Let me introduce you to the Speed Camera Lottery, where law abiding drivers have a chance to win money contributed by speeders.

This initiative is the latest idea from the Fun Theory. The Fun Theory was started by VW with the thought that fun is the easiest way to change people’s behavior for the better.

The challenge for this project was can you get more people to obey the speed limit by making it fun to do? The answer, as it turns out, is yes. The average speed before installing the Lottery Camera was 32 kilometers per hour. During the Fun Theory experiment, 24,857 cars passed the speed cameras with an average speed of 25 kilometers per hour, a reduction in speed of 22%.

I have written about the Fun Theory before, but I don’t think this question can ever be asked enough:

What are some “fun things” your brand could be doing to influence your customer’s behavior?

Oftentimes these are simple…even silly ideas. For instance, the toy store Imaginarium has a double doorway, one for grown-ups and the other for the little ones.

Though many of us adults might not think this is a big deal, you better believe that kids get excited. This small gesture prepares kids for a great experience that is tailored toward them. An excited child equals good news for the toy store and bad news for parents checkbooks.

Never underestimate the power of building fun into your brand and appealing to your customers emotions. People buy with their hearts, not their minds.

Filed under Branding, Customer Experience, Marketing Tagged with , , , ,

Does American Express Make the Connection with Conan?

November 10, 2010 Leave a comment

After his much publicized separation from NBC, funnyman Conan O’Brien returned to late-night television last Monday. The comedian’s talk show drew 4.2 million viewers, soundly beating Jay Leno and The Tonight Show. (who had 3.5 million viewers)

In an effort to capitalize on the buzz surrounding Conan’s return, American Express has tapped the comedian as its pitchman.

The new ad follows Conan − who is famously obsessed with details − as he sets out to find the finest materials to make curtains for the set of his new show.

This marks a shift to corporate branding for AmEx, who have been pushing specific products and services during the recession. It is also an interesting angle for the credit-card company − that American Express provides its members with unique entertainment experiences.

Street Insider — “Just like Conan O’Brien, American Express takes entertainment seriously and consistently delivers unique and relevant entertainment experiences – whether at a live event or streamed content for viewing at home,” said John Hayes, Chief Marketing Officer, American Express. “American Express offers so much more than secure payments and great service, we deliver a gateway to memorable entertainment experiences across film, music, sports, fashion and theater alike.”

Bravo to American Express for selling more than a credit card…they are selling an experience. AmEx has always done a great job of appealing to the emotions of its consumers, and this sponsorship with Conan is no different. The extent that a brand can create an emotional connection with customers determines their brand strength.

Filed under Advertising, Brand Message, Customer Experience Tagged with , , ,

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