From 1942 to 1960 a radio and TV game show called People Are Funny asked contestants to carry out elaborate stunts such as trying to register a trained seal as a hotel guest or carrying on a prolonged phone conversation with a stranger picked at random from a telephone book. How people reacted to the stunts was, indeed, funny.

People have odd psychological characteristics that go much deeper than that, though, and they affect how people behave as customers. Consider:

In 1999 Adrian North, David Hargreaves and Jennifer Mckendrick of the University of Leicester staged a psychology experiment in a wine shop. They found that when French music was played in the shop 77% of the wine sold that day was French. When German music was played 73% of the wine sold on that day was German. The nationality of the music was changed on alternate days over a two week period. When questioned after their purchases 86% of the customers said categorically that the music did not affect their choice.

And

Bloomingdale’s in New York had a tie rack on the main aisle near a ground-floor entrance. During busy times, shoppers would approach the rack and start browsing, until they had been bumped once or twice by other shoppers moving in and out of the store. Most of the tie browsers would abandon their search. Underhill concluded that shoppers–especially women, but also men to a lesser degree–don’t like being brushed or touched from behind, and they’ll quit their shopping behaviour to avoid it. Bloomingdale’s repositioned the tie rack and sales from the rack went up quickly without making a single change in the merchandise.

And also

A blind taste test found 75 percent of New Yorkers preferred city tap water to bottled waters. The researchers then went to a trendy California restaurant that featured a water sommelier who offered elegant water menus to the patrons. All bottles were filled with hose water in the back of the restaurant. Nevertheless, the Aguaphiles who were willing to plunk down nearly $7 a bottle for Eau Du Robinet (French for “faucet water”), Agua de Culo (Spanish for “ass water”) and Amazon (“filtered through the floor of the Brazilian rain forest”) declared them all to be far superior to tap water.

The psychological underpinnings of consumer behavior is increasingly important to success in the rapidly changing modern marketplace. However, evidence-based approaches to understanding customer experience is relatively recent. Indeed, marketers paid little attention to individual behavior until about the middle of the 20th century, using instead impersonal campaigns that aggressively pushed products and tried to convince consumers to make purchases.

Underpinnings

In the early 1950s, however, marketers began to recognize the benefits of selling to customers already inclined to buy certain products. This discovery led to a shift in focus to specific details of who customers were and what they needed and desired.

Economist Alfred Marshall believed consumers buy goods and services based on what offers the most personal satisfaction. Some criticized the theory for being uninformative—it seems self-evident that people buy what they like, if they can afford it. But Marshall gave marketers several useful hypotheses:

Sigmund Freud revolutionized theories of human behavior, contending that unconscious psychological factors make it impossible for people to fully understand their own motivations. Consumers, in fact, respond to products as symbols (i.e success, virility)  as much as they respond to the value and function of a product.  In other words, characteristics such as age and income don’t fully account for consumer behavior, so marketing messages that contain an emotional appeal to consumers’ feelings, hopes, aspirations and fears are often more effective than rational appeals.

Even Paplov showed that conditioned responses could be used to create or change behavior. (You’re thinking of a bell, aren’t you. See what I mean?) Operant conditioning can be used to reinforce brand elements that are associated with positive customer experiences.

Another economist, Thorstein Veblen,  contended that humans are social creatures who tend to conform to the standards of the culture and subgroups in which they’re immersed—individual needs and desires are created and influenced by group membership. Critics argue that his theories may be overstated, but there’s no doubt that social influences have a fundamental impact on consumer behavior.

Biases

People are funny in many ways, thanks especially to their biases. Understanding them is key to providing an excellent customer experience.

Blind spots

All customers have biases, but they’re unaware of them.  No matter how hard you probe individuals won’t give a clear answer. Looking at aggregate behavior, however, can shed some light on what’s going on inside. For example:

Affect

Surveys show that consumers tend to be charged up, even impatient, in the morning and in the early evening, but are calmer and more patient around noon and late evening.

Cheerleader effect

Products look more attractive in groups than on their own. Products are promoted alongside known brands that, say, look sophisticated are more likely to be chosen over the same product sold alone.

Endowment effect

People value things more when they ‘own’ them, whether literally or psychologically. That is, they will ask a higher price for something they have but want to sell compared to what they’re willing to pay to buy the same object. That’s also true when someone mentally ‘owns’ a brand— they will excuse small mistakes. A small improvement in a product, on the other hand, will not please someone with low expectations.

Empathy gap

People respond differently when they’re angry, happy, hungry, a satiated. Treating all customers the same way, regardless of how they are feeling, is a great way to lose them.

One couple who paid for a flight with me in my open-cockpit biplane was clearly distraught. After takeoff, I realized they were contemplating jumping out. Managing their customer experience required an entirely different approach.

Functional fixedness

People won’t explore the full range of possibilities for interacting with a company or product that is available to them at each touch point. This isn’t a modern problem; Karl Dunker, a 1920s gestalt psychologist, defined the phenomenon as a “mental block against using an object in a new way that is required to solve a problem.”

Other biases

The list of cognitive biases is long. Thanks to Wikipedia you can ponder them all. There’s nothing funny about it!

Name Description
Ambiguity effect The tendency to avoid options for which missing information makes the probability seem “unknown”.[9]
Anchoring or focalism The tendency to rely too heavily, or “anchor”, on one trait or piece of information when making decisions (usually the first piece of information acquired on that subject)[10][11]
Anthropocentric thinking The tendency to use human analogies as a basis for reasoning about other, less familiar, biological phenomena.[12]
Anthropomorphism or personification The tendency to characterize animals, objects, and abstract concepts as possessing human-like traits, emotions, and intentions.[13]
Attentional bias The tendency of our perception to be affected by our recurring thoughts.[14]
Automation bias The tendency to depend excessively on automated systems which can lead to erroneous automated information overriding correct decisions.[15]
Availability heuristic The tendency to overestimate the likelihood of events with greater “availability” in memory, which can be influenced by how recent the memories are or how unusual or emotionally charged they may be.[16]
Availability cascade A self-reinforcing process in which a collective belief gains more and more plausibility through its increasing repetition in public discourse (or “repeat something long enough and it will become true”).[17]
Backfire effect The reaction to disconfirming evidence by strengthening one’s previous beliefs.[18] cf. Continued influence effect.
Bandwagon effect The tendency to do (or believe) things because many other people do (or believe) the same. Related to groupthink and herd behavior.[19]
Base rate fallacy or Base rate neglect The tendency to ignore base rate information (generic, general information) and focus on specific information (information only pertaining to a certain case).[20]
Belief bias An effect where someone’s evaluation of the logical strength of an argument is biased by the believability of the conclusion.[21]
Ben Franklin effect A person who has performed a favor for someone is more likely to do another favor for that person than they would be if they had received a favor from that person.
Berkson’s paradox The tendency to misinterpret statistical experiments involving conditional probabilities.
Bias blind spot The tendency to see oneself as less biased than other people, or to be able to identify more cognitive biases in others than in oneself.[22]
Cheerleader effect The tendency for people to appear more attractive in a group than in isolation.[23]
Choice-supportive bias The tendency to remember one’s choices as better than they actually were.[24]
Clustering illusion The tendency to overestimate the importance of small runs, streaks, or clusters in large samples of random data (that is, seeing phantom patterns).[11]
Confirmation bias The tendency to search for, interpret, focus on and remember information in a way that confirms one’s preconceptions.[25]
Congruence bias The tendency to test hypotheses exclusively through direct testing, instead of testing possible alternative hypotheses.[11]
Conjunction fallacy The tendency to assume that specific conditions are more probable than general ones.[26]
Conservatism (belief revision) The tendency to revise one’s belief insufficiently when presented with new evidence.[4][27][28]
Continued influence effect The tendency to believe previously learned misinformation even after it has been corrected. Misinformation can still influence inferences one generates after a correction has occurred.[29] cf. Backfire effect
Contrast effect The enhancement or reduction of a certain stimulus’ perception when compared with a recently observed, contrasting object.[30]
Courtesy bias The tendency to give an opinion that is more socially correct than one’s true opinion, so as to avoid offending anyone.[31]
Curse of knowledge When better-informed people find it extremely difficult to think about problems from the perspective of lesser-informed people.[32]
Declinism The predisposition to view the past favourably (rosy retrospection) and future negatively.[33]
Decoy effect Preferences for either option A or B change in favor of option B when option C is presented, which is completely dominated by option B (inferior in all respects) and partially dominated by option A.
Default effect When given a choice between several options, the tendency to favor the default one.
Denomination effect The tendency to spend more money when it is denominated in small amounts (e.g., coins) rather than large amounts (e.g., bills).[34]
Disposition effect The tendency to sell an asset that has accumulated in value and resist selling an asset that has declined in value.
Distinction bias The tendency to view two options as more dissimilar when evaluating them simultaneously than when evaluating them separately.[35]
Dunning–Kruger effect The tendency for unskilled individuals to overestimate their own ability and the tendency for experts to underestimate their own ability.[36]
Duration neglect The neglect of the duration of an episode in determining its value
Empathy gap The tendency to underestimate the influence or strength of feelings, in either oneself or others.
Endowment effect The tendency for people to demand much more to give up an object than they would be willing to pay to acquire it.[37]
Exaggerated expectation Based on the estimates,[clarification needed] real-world evidence turns out to be less extreme than our expectations (conditionally inverse of the conservatism bias).[unreliable source?][4][38]
Experimenter’s or expectation bias The tendency for experimenters to believe, certify, and publish data that agree with their expectations for the outcome of an experiment, and to disbelieve, discard, or downgrade the corresponding weightings for data that appear to conflict with those expectations.[39]
Focusing effect The tendency to place too much importance on one aspect of an event.[40]
Forer effect or Barnum effect The observation that individuals will give high accuracy ratings to descriptions of their personality that supposedly are tailored specifically for them, but are in fact vague and general enough to apply to a wide range of people. This effect can provide a partial explanation for the widespread acceptance of some beliefs and practices, such as astrology, fortune telling, graphology, and some types of personality tests.
Framing effect Drawing different conclusions from the same information, depending on how that information is presented
Frequency illusion The illusion in which a word, a name, or other thing that has recently come to one’s attention suddenly seems to appear with improbable frequency shortly afterwards (not to be confused with the recency illusion or selection bias).[41] This illusion is sometimes referred to as the Baader-Meinhof phenomenon.[42]
Functional fixedness Limits a person to using an object only in the way it is traditionally used.
Gambler’s fallacy The tendency to think that future probabilities are altered by past events, when in reality they are unchanged. The fallacy arises from an erroneous conceptualization of the law of large numbers. For example, “I’ve flipped heads with this coin five times consecutively, so the chance of tails coming out on the sixth flip is much greater than heads.”
Hard–easy effect Based on a specific level of task difficulty, the confidence in judgments is too conservative and not extreme enough[4][43][44][45]
Hindsight bias Sometimes called the “I-knew-it-all-along” effect, the tendency to see past events as being predictable[46] at the time those events happened.
Hostile attribution bias The “hostile attribution bias” is the tendency to interpret others’ behaviors as having hostile intent, even when the behavior is ambiguous or benign.
Hot-hand fallacy The “hot-hand fallacy” (also known as the “hot hand phenomenon” or “hot hand”) is the fallacious belief that a person who has experienced success with a random event has a greater chance of further success in additional attempts.
Hyperbolic discounting Discounting is the tendency for people to have a stronger preference for more immediate payoffs relative to later payoffs. Hyperbolic discounting leads to choices that are inconsistent over time – people make choices today that their future selves would prefer not to have made, despite using the same reasoning.[47] Also known as current moment bias, present-bias, and related to Dynamic inconsistency.
Identifiable victim effect The tendency to respond more strongly to a single identified person at risk than to a large group of people at risk.[48]
IKEA effect The tendency for people to place a disproportionately high value on objects that they partially assembled themselves, such as furniture from IKEA, regardless of the quality of the end result.[citation needed]
Illusion of control The tendency to overestimate one’s degree of influence over other external events.[49]
Illusion of validity Belief that our judgments are accurate, especially when available information is consistent or inter-correlated.[50]
Illusory correlation Inaccurately perceiving a relationship between two unrelated events.[51][52]
Illusory truth effect A tendency to believe that a statement is true if it is easier to process, or if it has been stated multiple times, regardless of its actual veracity. These are specific cases of truthiness.
Impact bias The tendency to overestimate the length or the intensity of the impact of future feeling states.[53]
Information bias The tendency to seek information even when it cannot affect action.[54]
Insensitivity to sample size The tendency to under-expect variation in small samples.
Irrational escalation The phenomenon where people justify increased investment in a decision, based on the cumulative prior investment, despite new evidence suggesting that the decision was probably wrong. Also known as the sunk cost fallacy.
Law of the instrument An over-reliance on a familiar tool or methods, ignoring or under-valuing alternative approaches. “If all you have is a hammer, everything looks like a nail.”
Less-is-better effect The tendency to prefer a smaller set to a larger set judged separately, but not jointly.
Look-elsewhere effect An apparently statistically significant observation may have actually arisen by chance because of the size of the parameter space to be searched.
Loss aversion The disutility of giving up an object is greater than the utility associated with acquiring it.[55] (see also Sunk cost effects and endowment effect).
Mere exposure effect The tendency to express undue liking for things merely because of familiarity with them.[56]
Money illusion The tendency to concentrate on the nominal value (face value) of money rather than its value in terms of purchasing power.[57]
Moral credential effect The tendency of a track record of non-prejudice to increase subsequent prejudice.
Negativity bias or Negativity effect Psychological phenomenon by which humans have a greater recall of unpleasant memories compared with positive memories.[58][59] (see also actor-observer bias, group attribution error, positivity effect, and negativity effect).[60]
Neglect of probability The tendency to completely disregard probability when making a decision under uncertainty.[61]
Normalcy bias The refusal to plan for, or react to, a disaster which has never happened before.
Not invented here Aversion to contact with or use of products, research, standards, or knowledge developed outside a group. Related to IKEA effect.
Observer-expectancy effect When a researcher expects a given result and therefore unconsciously manipulates an experiment or misinterprets data in order to find it (see also subject-expectancy effect).
Omission bias The tendency to judge harmful actions as worse, or less moral, than equally harmful omissions (inactions).[62]
Optimism bias The tendency to be over-optimistic, overestimating favorable and pleasing outcomes (see also wishful thinking, valence effect, positive outcome bias).[63][64]
Ostrich effect Ignoring an obvious (negative) situation.
Outcome bias The tendency to judge a decision by its eventual outcome instead of based on the quality of the decision at the time it was made.
Overconfidence effect Excessive confidence in one’s own answers to questions. For example, for certain types of questions, answers that people rate as “99% certain” turn out to be wrong 40% of the time.[4][65][66][67]
Pareidolia A vague and random stimulus (often an image or sound) is perceived as significant, e.g., seeing images of animals or faces in clouds, the man in the moon, and hearing non-existent hidden messages on records played in reverse.
Pessimism bias The tendency for some people, especially those suffering from depression, to overestimate the likelihood of negative things happening to them.
Planning fallacy The tendency to underestimate task-completion times.[53]
Post-purchase rationalization The tendency to persuade oneself through rational argument that a purchase was good value.
Pro-innovation bias The tendency to have an excessive optimism towards an invention or innovation’s usefulness throughout society, while often failing to identify its limitations and weaknesses.
Projection bias The tendency to overestimate how much our future selves share one’s current preferences, thoughts and values, thus leading to sub-optimal choices.[68][69][59]
Pseudocertainty effect The tendency to make risk-averse choices if the expected outcome is positive, but make risk-seeking choices to avoid negative outcomes.[70]
Reactance The urge to do the opposite of what someone wants you to do out of a need to resist a perceived attempt to constrain your freedom of choice (see also Reverse psychology).
Reactive devaluation Devaluing proposals only because they purportedly originated with an adversary.
Recency illusion The illusion that a word or language usage is a recent innovation when it is in fact long-established (see also frequency illusion).
Regressive bias A certain state of mind wherein high values and high likelihoods are overestimated while low values and low likelihoods are underestimated.[4][71][72][unreliable source?]
Restraint bias The tendency to overestimate one’s ability to show restraint in the face of temptation.
Rhyme as reason effect Rhyming statements are perceived as more truthful. A famous example being used in the O.J Simpson trial with the defense’s use of the phrase “If the gloves don’t fit, then you must acquit.”
Risk compensation / Peltzman effect The tendency to take greater risks when perceived safety increases.
Selective perception The tendency for expectations to affect perception.
Semmelweis reflex The tendency to reject new evidence that contradicts a paradigm.[28]
Sexual overperception bias / sexual underperception bias The tendency to over-/underestimate sexual interest of another person in oneself.
Social comparison bias The tendency, when making decisions, to favour potential candidates who don’t compete with one’s own particular strengths.[73]
Social desirability bias The tendency to over-report socially desirable characteristics or behaviours in oneself and under-report socially undesirable characteristics or behaviours.[74]
Status quo bias The tendency to like things to stay relatively the same (see also loss aversion, endowment effect, and system justification).[75][76]
Stereotyping Expecting a member of a group to have certain characteristics without having actual information about that individual.
Subadditivity effect The tendency to judge probability of the whole to be less than the probabilities of the parts.[77]
Subjective validation Perception that something is true if a subject’s belief demands it to be true. Also assigns perceived connections between coincidences.
Surrogation Losing sight of the strategic construct that a measure is intended to represent, and subsequently acting as though the measure is the construct of interest.
Survivorship bias Concentrating on the people or things that “survived” some process and inadvertently overlooking those that didn’t because of their lack of visibility.
Time-saving bias Underestimations of the time that could be saved (or lost) when increasing (or decreasing) from a relatively low speed and overestimations of the time that could be saved (or lost) when increasing (or decreasing) from a relatively high speed.
Third-person effect Belief that mass communicated media messages have a greater effect on others than on themselves.
Triviality / Parkinson’s Law of The tendency to give disproportionate weight to trivial issues. Also known as bikeshedding, this bias explains why an organization may avoid specialized or complex subjects, such as the design of a nuclear reactor, and instead focus on something easy to grasp or rewarding to the average participant, such as the design of an adjacent bike shed.[78]
Unit bias The tendency to want to finish a given unit of a task or an item. Strong effects on the consumption of food in particular.[79]
Weber–Fechner law Difficulty in comparing small differences in large quantities.
Well travelled road effect Underestimation of the duration taken to traverse oft-traveled routes and overestimation of the duration taken to traverse less familiar routes.
“Women are wonderful” effect A tendency to associate more positive attributes with women than with men.
Zero-risk bias Preference for reducing a small risk to zero over a greater reduction in a larger risk.
Zero-sum bias A bias whereby a situation is incorrectly perceived to be like a zero-sum game (i.e., one person gains at the expense of another).

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