Top brands build authentic connections in unpredictable times. Learn how.

Close Notification Bar

Behavioral Economics Is Key to Customer Experiences

Understanding How Customers Make Decisions Helps Brands Curate Memorable Interactions

By Rob Duboff and Jesse Epstein

What do your customers think of when your brand comes to mind? How do your customers feel at the end of your experiences? Are your marketers and experience managers aligned?

Pictured: two women in a room talking about a product. The image symbolizes consumers talking about brands and the experiences they have with them.

In our related article and recent workshops, we discussed the impact (or lack thereof), that behavioral economics is having on our marketing and research practices. In our follow-up conversations with marketers and researchers, one of the key questions they keep asking is how behavioral economics impacts a marketing practice increasingly focused on customer experiences. Today, where products are often replicated and technology limits the differentiating power of many services – think Snapchat vs. Instagram or Verizon vs. AT&T – often value propositions are built around enhanced curated experiences.

Much of what behavioral economists have discovered is what smart retailers have been doing for years. Grocery stores put impulse items that taste good at checkout, liquor stores place brands they want to sell at eye level and shoe stores place socks as far away from the sneakers as possible, so shoppers have to walk by attractive pairs of chukka boots, heels or sandals as they pick up must-have items.

The Key to Effective Experiences is to Keep the End in Mind

The key to effective experiences is to understand what a customer thinks of when your brand comes to mind. In the book Thinking Fast & Slow, Kahneman shares how people recall peaks and valleys of experiences and – in the absence of an extreme – tend to call to mind the end of the most recent encounter. For brands, it means that the end of each experience is likely more impactful than the beginning. Yet, most customer experience teams spend far more time engineering a greeting and onboarding, and often much less time on the dismount.

Consider hotels, one of the most experiential business models. When one arrives as a guest, you experience a warm smile from friendly staff, an immersive check-in and overview of the amenities and few things match how relaxed you feel when you get to a clean room for the first time after a typically harrowing travel experience.

Now think about checkout. It is usually a low-touch experience, often culminating in a satisfaction survey, delivered via email a few days later. While we know that guests just want to get home, hotels should consider ways to personalize the last touchpoints – perhaps a goodbye gift, easy transport or even a follow-up call from management for VIP guests. All of these touches personalize the final encounter, which is what will likely be called to mind in the future thinking about that hotel brand.

Even vaunted retailers, who excel at using behavioral economics in the layout of spaces, may have additional opportunities. Take Walmart: the visit may start with a friendly welcome from a greeter, but what about the experience when departing? The visit may end with a wait at checkout and leave with little fanfare… perhaps, there’s a better way.

Richard Thayer, the other Nobel prize winner in the field and co-father of the “nudge” theory, has also contributed many findings pertinent to customer experience. By knowing how people think, nudging is a way to steer consumers towards behaviors you want them to choose. Effective nudges are educative, such as informing customers about the number of calories or fat content, or choice-driven, when you directly impact decisions by changing the “default” option. In the latter case, tactics may incentivize the desired action or make life simpler for customers. For example, Capital One has long benefitted from its “no hassles” approach to its reward cards.

Regardless of which principles you apply, leveraging behavioral economics to influence customer experience ensures that customers are left with a positive feeling from the experience (or “available” association in behavioral economics’ terminology). Marketers and experience managers need to ally so that marketing messages align with customer experiences and leave the customer desiring their next experience with the brand.

Reach out to Rob Duboff and Jesse Epstein to discuss the impact behavioral economics has on experiences