I’ve gotten accustomed to taking my car to the Jiffy Lube near my house. Over the 30 years that I’ve been driving, I’ve had the full range of good and bad experiences with auto service shops. However, this Jiffy Lube has a distinctive and effective way of interacting with me regarding the cost of my service. At the end of each visit, they bring me over to a terminal that we can look at together – side by side; they walk me through each of the service elements that were performed along with the cost of each service; then they apply a series of discounts to the individual services, as well as, loyalty discounts that consistently bring my total cost down to about 60-70% of sum of the individually itemized costs. I have always walked out of that particular Jiffy Lube feeling like I’ve saved money and that they appreciate my business. I’ve also always walked out feeling like many of the companies I advise could learn a lot from that relatively simply but very well designed and deliberate interaction.
This interaction is an example of category of experiential design levers called framing effects. Rather than just presenting the price, Jiffy Lube framed it in a way that highly influenced my experience of saving money. There are a wide set of framing effects that influence how people interpret and evaluate their experiences. For example, consider the following two scenarios:
- You live around the corner from an electronics store that carries the new computer speakers you’ve been looking at for $100. You also learn that a discounter, located ten miles from your house, has a special on the same speakers for half price: $50. Do you drive the 10 miles?
- You live near an electronics store that carries the new computer you’ve wanted for $2000. Ten miles from your house, another store is carrying the same computer for $1950… a savings of $50. Do you drive the 10 miles?
As you might guess, research has shown that many customers who would make the drive for scenario 1 might not for scenario 2. On a rational level, this makes little sense since the value of the drive is identical: $50. However, a $50 savings on a $100 item is framed differently than a $50 savings on the much more expensive item.
If you consider how we process the experiences we have, it’s easy to see that it’s far from rational or logical. Our experiences are highly influenced by subconscious shortcuts that have an enormous influence on how we think, feel, and act. Many of these shortcuts lead to apparent contradictions with what you’d expect from a more rational decision maker. This post will cover some of the tools for positively influencing both the quality and profitability of the customers’ experience.
Pioneering behavioral economists Daniel Kahneman and Amos Tversky conducted extensive research into framing effects. One of the other frames they studied involves loss aversion. For example, if you were offered a gamble with a 10% chance of winning $95 and a 90% chance of losing $5… would you take it? Most people would not. Now suppose you were offered the chance to buy a $5 lottery ticket for a 10% chance of winning $100. Many of the people that rejected the first alternative would accept the second despite the fact that the expected value of each alternative is exactly the same: $5. However, the alternative that involves voluntarily paying $5 rather than taking a chance of “losing” $5 is framed differently.
Loss-aversion framing also contributes to the fact that many customers do not make purely rational decisions regarding insurance. For example, the expected value of many insurance policies is generally in the neighborhood of 50-60%. You might compare this to the return on putting your money into a slot machine… an expected value of 90%. In general, the most economically rational decision is to self-insure to the extent possible and only buy insurance as necessary to cover catastrophic events.
In addition to framing effects, another influence lever in the design of the customer experience is priming. Priming involves activating an association in memory just before a person completes an action or task. In an interesting experiment, also conducted by Kahneman and Tversky, subjects were asked to provide the last four digits of their social security number. They were then asked to estimate the number of doctors in Manhattan. Very surprisingly, the estimates that subjects gave were positively correlated with the last four digits of their social security number; people with high social security numbers gave higher estimates and people with lower social security numbers gave lower estimates.
In a similar experiment, subjects were asked the last two digits of their social security number and then asked what they would be willing to pay for a consumer product (e.g., bottle of wine, wireless computer keyboard, video game). Similarly, the price customers were willing to pay was positively correlated with the (random) digits of the customers’ social security number. For example, subjects with social security numbers in the bottom 20% priced a bottle of Cotes du Rhone wine at $8.64 versus subjects with social security numbers in the top 20% who priced the same bottle at $27.91. (See: “Tom Sawyer and the Construction of Value” by Dan Ariely, George Lowenstein, and Drazen Prelec).
Good sales people understand how priming creates an “anchor point” that affects a customer’s subsequent decisions. If I’m selling men’s suits, the first suit I’ll show a customer will be well above the price I’d expect the customer to pay. As I show the customer that suit, I’ll make sure the customer knows that I’ll find something that meets their needs, so as not to scare them away. However, in most cases, the higher the price of the first item I show, the higher the customer will end up paying for the item they eventually choose.
In working with a leading retailer, we looked at the impact of signage on drawing customers into the store and influencing their eventual purchase. We found that signs signaling a lower price at the store entrance would draw customers into the store while progressively higher priced signs as the customer moved further into the store increased the chances that customers would be willing to pay for higher priced items.
Several years ago, I had the chance to work with Christine Boskoff, who was one of the most successful high-altitude mountain climbers in the world and the owner of the leading outdoor adventure travel company named Mountain Madness. Her question was how to improve word of mouth about Mountain Madness in order to attract new clients. The recommendation I developed with her was that, on the last day of each trip, there should be a final celebration involving a ceremonial round of “storytelling.” In this storytelling ceremony, each participant would have a chance to share the personal story of their adventure, what it meant to them, and what their most positive takeaways were. The act of telling their own story, in addition to listening to the stories of others, has a powerful effect to prime and prepare clients with the “personal legends” they’ll share with others when they get home. In the course of telling and retelling these legendary stories the most compelling aspects are typically “sharpened” while any of the less positive or inconsistent aspects are “leveled” in order to fit with a more compact storyline.
Framing and priming effects operate at a predominantly subconscious, reactive level and can have a significant impact on the perceived quality and actual profitability of the customer experience. For more information on how customer process the experiences they have see: Designing for Customers’ Reactive, Deliberative, and Reflective Experiences.
Before I go, I’ll leave you with one final priming example:
You have exactly five seconds, not a second more, to multiply:
2 x 3 x 4 x 5 x 6 x 7 x 8
Write down your answer. Now, ask a friend to multiply, again in exactly five seconds:
8 x 7 x 6 x 5 x 4 x 3 x 2
Now, compare the two answers. Besides the fact that you both got the answer wrong (the answer is 40,320), you should notice that your answer is smaller than your friends. If you’re like most people, you started out multiplying 2 x 3 x 4 to get 24… x 5 to get 120… then ran out of time and had to quickly estimate the rest… but didn’t multiply by enough. Your estimate was primed by the 120. On the other hand, your friend probably started multiplying 8 x 7 to get 65… x 6 to get 390… before running out of time and having to quickly estimate the rest… but he too didn’t multiply by enough. His estimate was primed by the 390.
Filed under: Cognitive Ergonomics, Customer Experience, Neuroeconomics | Tagged: ariely, behavioral economics, christine boskoff, cognitive ergonomics, consumer psychology, Customer Experience, framing, jiffy lube, kahneman, lowenstein, mountain madness, Neuroeconomics, prelec, priming, tversky |