If there's one thing you shouldn’t overlook when it comes to consumer behavior, it’s the decision-making context. When you understand it, you can dramatically improve your marketing, sales, and even customer experience.
In this article, you'll discover:
- What happens in your customers’ heads when they’re making decisions;
- Why context is a marketing superweapon and how to use it to your advantage;
- How a simple menu redesign increased restaurant sales by 13 pence per head; and
- How making customers walk six-times farther actually improved their experience.
InsideBE is the largest behavioral economics and consumer psychology hub for marketers, sales people, and business professionals alike.
Despite all of our desperate wishes, there is no magic bullet, no simple solution that will skyrocket sales, customer experience, and business as a whole to another dimension. That’s a great start, isn't it?
But ... there is one thing that comes pretty close. And if you don’t consider it, all of your efforts could be in vain. Not only that, it’s an absolute cornerstone of behavioral economics. What is it? Let’s illustrate it with a story.
Once upon a time, there were two sisters - Chris and Nicole. They grew up together, went to the same school, lived together, did everything pretty much in the same way. One day, they found themselves facing important purchase decisions - each one on her own.
It took a while, but Chris finally found the most beautiful dress she had ever seen and was ready to pay $150 for it. When she took it to the cashier, he told her: “You know what? At our branch on the other side of town, we have the same dress with a $50 discount!”
She disappeared in a blur. Within an hour, she owned the dress and still had $50 in her pocket. What a perfect day!
And Nicole? On the same day, she found herself in an almost identical situation and the seller told her the same thing: “You know what? If you go to our branch on the other side of the city, you can save $50.”
“Nah, I’m good, thanks,” said Nicole and refused the discount.
But why would she walk away from $50? And how could two sisters doing everything in the same way, end up making completely different decisions? What was different? Context - the pillar of behavioral economics. Nicole wasn’t buying a $150 dress; she was buying a $25,000 car.
Wait a minute, you might think. So what? $50 is $50. Context shouldn’t matter - at the end of the day you end up saving the same amount. True, that’s the rational point of view. But the fact is, it couldn’t be farther away from the truth. As you’ll see, it can have a major impact on your customers’ perception and purchase decisions.
As Rory Sutherland says in the online course Introduction to Behavioral Economics in Marketing, quoting his colleague Dan Smith: “Context is a marketing superweapon.”
Context shapes our decisions. And once you understand it, you can change it. Often with just a slight change of context, you can get the same result as if you had changed the product itself. But at a much lower cost.
But first things first. To understand why context is such a powerful tool, you need to know what is going on in your customers’ heads.
Often with just a slight change of context, you can get the same result as if you had changed the product itself. But at a much lower cost.
The majority of decisions are non-conscious
Try to remember the last time you bought milk. Did you read all the information about all of the nutrients on every milk in the supermarket? Look at the expiration dates, and compare prices to make sure your purchase decision was as rational as it could be?
No, you just grabbed the one that you always drink. Automatically, without thinking about it much.
That’s how the human brains work - we automatize certain decisions based on past experience and when we find ourselves in the same situation again, to save time and energy we subconsciously read the cues from the environment (I’m in the store, in the alley with milk) and decide intuitively. Such intuitive shortcuts are called heuristics.
That’s why we automatically grab the milk with the red box - we’ve bought it multiple times in the past and the decision turned out to be a good one, so we automated it.
As the use of heuristics depends on the cues we subconsciously read from the situation, our decision-making depends greatly on the environment and the context in which it is made. That’s true whether it’s saving 50 bucks, buying groceries, or investing in shares.
Consider the context your product is in
So, let’s get to the practical stuff. As seen from the example of Nicole and Chris, how we perceive things can be quite subjective and context-dependent. How do we leverage this in marketing? The first thing is, consider the surroundings your customers will see the product in and the options they will compare it to.
In his online masterclass, Rory Sutherland speaks about the yogurt company Danone, who were desperate to put their yogurt drink in the milk aisle, which had the highest traffic in the supermarket. That’s a very rational approach - the more people who see it, the more people will buy it, right?
The problem was it was about twice as expensive as regular milk. That means that customers would see it alongside the much cheaper milk and would compare the prices of these products, making the yogurt seem far too expensive.
Let’s think about that for a second. The product itself or its price didn’t change, however, the perception of it did.
Luckily, someone who knew about the basics of behavioral economics suggested that this wasn't such a good idea and recommended changing the context in another way - by putting the product in the premium yogurt section instead. Suddenly, it didn't look like expensive milk, but rather a well-priced yogurt.
In case you don’t know, that’s exactly why Rolls-Royce and Maserati don’t sell their cars at car shows. They know the cars look expensive there. What they do instead is sell them at yacht and plane shows, where, among their bigger and pricier brothers, cars are more of an impulse buy.