How to overcome your customers' 'irrational' choices and boost sales

YOU MAY HAVE scratched your head at some point, wondering why a potential client decided to stick with their current provider, even though you offer the same service at better value.

Or why people aren’t taking up a generous offer because of the few moments it will take to fill in a form. You’ve possibly engaged in the very same behaviours yourself.

An economist would tell you that these behaviours don’t make economic sense. They’re not rational behaviours, financially. But anyone working in the field of behavioural economics would instantly recognise this ‘irrational’ behaviour as absolutely predictable.

Instead of assuming that consumers make perfectly rational decisions all of the time, behavioural economics – which brings together the disciplines of economics and psychology – recognises that consumer decisions are influenced by a whole range of factors.

Every day, people’s decisions, big and small, are influenced by a range of simple factors that they are almost unaware of themselves.

Meanwhile, there may be steps you can take, or simple interventions you can make, to encourage people to make what you believe is the ‘better’ or the ‘obvious’ decision.

Here are some simple examples of how using behavioural economics can drive customer engagement:

Text reminders

Your customers, even with the best of intentions, may often forget to show up for a consultation, take action on their overdue account, or to remember to bring items with them that they need to fully enjoy your service.

Text reminders are an incredibly cost-effective way to improve these type of behaviours. Studies show that sending a text reminder to those overdue on accounts can increase repayment and improve attendance at appointments.

Text reminders can also increase customer satisfaction. My bin company sends me a text reminder on Sunday evenings to remind which bins need to be put out this week.

I’m not always thrilled about moving from the couch, but I am always thankful when the bins aren’t overflowing later in the week.

Personalised notes

As an SME, you may have some customers who are ‘hard to reach’. How do you communicate with a customer overdue on an account if you sense they may not even be opening their post?

A personalised note like, “John, you really need to read this…” on letter envelopes, and softening the tone of these communications has been shown to be incredibly effective. One study found that writing personalised notes on envelopes increased repayment by more than 10%.

Reducing ‘hassle factors’

It’s important to remember that seemingly small hassles can significantly reduce conversions. For example, we may figure that giving people more choice is automatically better.

A study by two Stanford researchers showed that people were much more likely to make a purchase when they were presented with six options – in this case, of jam - than when presented with 24.

Reduce ‘decision fatigue’ by reducing the number of decisions your customer has to make and avoid information overload by presenting customers with only the most relevant options.

Improve the customer’s environment

Some of the most interesting findings in behavioural economics come from examining how small changes to the customers’ environment can ‘nudge’ their behaviour and help people make better decisions.

A study by researchers at New Mexico State University found that adding a yellow strip to shopping trolley baskets with a suggestion that this portion of the basket should be filled with vegetables doubled sales of those items.

Karl Purcell is a behavioural economics consultant with Carr Communications’ behavioural economics and sciences team. He will be speaking at the Sales and Marketing Summit in the RDS on 31 May.

If you want to share your opinion, advice or story, email opinion@fora.ie.