When we visit our local store or sign up to a smartphone plan, what factors influence our decision? Belinda Aucott investigates how rational our habits really are, and gets a bit of advice from Ctrl-Shift's consumer expert Alan Mitchell.
Many people, including policy makers and regulators, believe that if consumers were presented with the right information, they’d automatically make, and carry out the best possible decisions.
This sits comfortably with economists’ theories about the ‘rational economic man’. But as behavioural economists have been discovering over the last decades, nothing could be further from the truth. There are multiple ways in which humans use – and fail to use – information, that bias the decisions they make. Pureprofile caught up with Alan Mitchell to chat about how we make informed decisions.
Why do we fail to make rational decisions, even when we have so much information at our fingertips?
One hugely powerful factor is inertia. We are highly likely to stick with the status quo, whatever that is, unless there are compelling, urgent reasons to put making a change to the very top of our priority list.
What does the typical consumer do when it comes to decisions?
Far from seeking to amass a comprehensive collection of relevant information about a decision, we often do the exact opposite – we tend to relay on a short cut rule of thumb or ‘heuristic’ such as buy the brand I know, buy what I bought last time, or not shift when it comes time to renew a subscription-style product.
Why is that behaviour so hard to shift?
The actual cost of decision making can be as important as the result - if the process of making a choice is boring or deemed a hassle to the end consumer, we are highly likely not to bother and take the easiest path.
What do businesses need to do to disrupt this ingrained resistance to change?
Next Generation Intermediaries can use insights about how we shop to help improve personal decision making processes to make them easier and more reliable.
For example the Cheap Energy Club (UK) turns inertia on its head by checking changing energy tariffs so the client doesn't have to bother. It takes the legwork out of getting the best tariff. So what we see from this example is that if an organisation or intermediary can design their services to address consumers' predictable irrationalities, services can not only improve, but also build trust with the consumer at the same time.
How does this impact brands?
Ctrl-Shift’s research and analysis shows that brands now need to compete not just in one long broad market such as their own category (cars, shoes)– they now need to compete in the market place for decision support. Every consumer wants high quality value for money products and services that are fit for a purpose – that ‘get the job done’. But every consumer also wants to make high quality decision at low cost – decisions that lead to the best value products and services.
In conclusion, Alan Mitchell says the rise of Next Gen Intermediaries should be a wake up call for brands and organisations trying to analyse and predict consumer behaviour.
“As time goes on the decision market place will become vital for all brands. The best brands are already being more helpful and looking for ways to build customer loyalty through relevance and value.”