The 3 Ways Irrational Customer Behavior Benefits You

With four defenders crowding the receiver, why does the QB throw the ball anyway? Why do people often pay more for an item on eBay than from another store? In Sway: The Irresistible Pull of Irrational Behavior, the Brafman brothers investigate why all of us occasionally make these and other irrational decisions.

What Sway Teaches Us About
Customer Behavior

The book by Ori and Rom Braf­man con­sider why each and every­one of us makes deci­sions that, look­ing back, defy all ratio­nal thought. People lose money, power, and some­times lives as a result of these irra­tional choices. The Braf­man broth­ers point out three major “traps” people fall into when making irra­tional choices and offer some insight into over­com­ing them.

The three major ratio­nal­ity traps dis­cussed are loss aver­sion (how we sink our­selves in deep and take great risks to avoid a pos­si­ble loss), value attri­bu­tion (our per­cep­tion of the value of an item is often no where close to it’s real value), and the diag­no­sis bias (our blind­ness to any­thing that con­tra­dicts our first impres­sions). Let’s take a look at each of these and how they could apply to our mar­ket­ing strategy.

Loss Aversion: Customer’s Hate Losing

The Braf­mans explain it is through loss aver­sion that we all over­re­act to per­ceived loss. We tend to “experience the pain asso­ci­ated with a loss much more vividly than we do the joy of expe­ri­enc­ing a gain.” If we see the price in gas move down $.10 a gallon, we think of it as a good thing. If gas goes up $.10 a gallon, our reac­tion is much stronger. It makes the news. We begin chang­ing travel plans and con­sid­er­ing alter­nate plans. In fact, we’re still react­ing to the higher prices even after gas goes back down. Loss aver­sion also tells us the more we have on the line, the easier it is to get swept into an irra­tional deci­sion. This is what gets gam­blers and to some extent, eBay­ers in trou­ble. The more we lose on the craps table, the more apt we are to risk bet­ting more the next time to cover our losses. eBay­ers who come in second at an auc­tion often pay than more for the same item in the next auc­tion. They don’t want to lose again.

Under­stand­ing a customer’s ten­dency to avoid the pain of loss can help improve your mar­ket­ing strat­egy. Rais­ing prices or remov­ing fea­tures from prod­uct and ser­vices can be offset by cam­paigns that focus on longer-​term ben­e­fits and over­all value. While prices might be going up, the over­all expe­ri­ence can be improved by show­ing how the cus­tomer ben­e­fits over­all. Regard­less of whether or not you agree, you can see Exxon­Mo­bil doing a good job with their recent green cam­paigns. They may be one of the most prof­itable com­pa­nies in the world, but their cam­paigns talk about the long term ben­e­fits of green technologies.

Value Attri­bu­tion: Guin­ness Tastes
Better In Ire­land

I have heard this state­ment most of my drinking-​age life. I’m sure you have as well. How­ever, chem­i­cally Guin­ness is the same in Amer­ica as it is in Ire­land. “It is our expec­ta­tions that change the real­ity we live in”, the Brafman’s explain. Guin­ness tastes better in Ire­land because we think it should. Value attri­bu­tion means that we some­times make irra­tional deci­sions by judg­ing a book by it’s cover. Sway pro­vides a great exam­ple of a world renown violinist receiv­ing little atten­tion when he put on a ball cap and played his 3.2 mil­lion dollar Stradi­var­ius in a Wash­ing­ton DC subway. Our ten­dency is to place “a person or thing with cer­tain qual­i­ties based on our ini­tial per­ceived value” and then it’s very hard to change that opin­ion once it’s been cast.

Offer­ing your prod­ucts and ser­vices at a huge dis­count during the eco­nomic down­turn may not be the right approach. Customer’s place a lower value on dis­counted items and there­fore may feel they aren’t get­ting some­thing of good quality. What if some­one were to offer you a plat­inum Rolex for $5000? What about $50? Chances are you’d pass over the real Rolex at the lower price for fear it wasn’t genuine.

Diag­no­sis Bias: Customer’s Rarely Change
Their First Impres­sions

The last major trap that con­tributes to our irra­tional behav­ior gives weight to the axiom, “You never get a second chance to make a first impression.” Our diag­no­sis bias means that once we’ve pigeonholed something or some­one into a par­tic­u­lar slot, it’s extremely difficult to change our minds. In our first encoun­ters, we tend to dis­miss facts, focus on irrelevant items, and assign arbi­trary labels to our sub­jects. Per­haps our date has ugly shoes, or the prod­uct brochure has a misspelling, or the cus­tomer ser­vice rep comes from a dif­fer­ent coun­try. Regard­less of the details, people tend to make an ini­tial diag­no­sis of the sit­u­a­tion and ignore any­thing to the contrary.

Under­stand­ing this ten­dency in our cus­tomers under­scores the impor­tance of the cus­tomer expe­ri­ence as a whole. All parts of the brand must be syn­chro­nized to pro­duce a con­sis­tent mes­sage. The web­site can’t look like a teenager built it on an ille­gal copy of Pho­to­shop. The cus­tomer ser­vice reps need to under­stand the prod­ucts. The email must respect the customer’s opt-​in requests. If these aren’t aligned to pro­duce an over­all enjoy­able expe­ri­ence for the cus­tomer, the com­pany gets lumped in with all the other medi­oc­rity out there and the cus­tomer slips away.