ESP: Shaping the personal context to influence your customers

ESP: Shaping the personal context to influence your customers

You may have thought it impossible – a way to get into the minds of our customers from the comfort of your seat – but over the past few articles we have been peeling back the layers to see how behavioural economics can do exactly that.

So far we have looked at how behaviour is shaped by the environment you establish and who is around in your customer’s social context. Our final instalment in the Customer ESP series looks at how behaviour is influenced by the personal context.

Personal context

All behavioural biases and mental short-cuts are of course personal – we each have them. However, what I’m talking about here are those biases that impact us even if we live alone in a bubble.

For businesses, understanding the personal context is an important step in knowing how to influence behaviour. Sure you can design environment for your customer and use social cues to get customers hot and bothered, but unless you address the deep-seated personal biases, you are not really getting to the core of behaviour. Two of the key principles are loss aversion and short-term bias.

Loss aversion

Ever watched a TV game show like Deal or No Deal where contestants anguish over whether they should risk losing what they have won to go for a bigger prize? That’s loss aversion.

Like these contestants, your customers are more motivated to avoid loss than seek gain. Seems counter-intuitive, doesn’t it? However, as much as your prospective client might like your features and benefits, they will also be assessing what they have to lose by doing business with you. Money is the obvious cost, but your customer is also spending time, exerting mental energy and facing the prospect of embarrassment if it backfires on them. In other words, they are giving a lot up in order to commit to you.

Don’t worry; you can take steps to overcome loss aversion by providing anxiety busters like assurances and guarantees. The key is to minimise their fear of risk.


Figure 1: Hyundai guarantee a future trade-in value

One clever example is from car manufacturer Hyundai. Realising that customers were being put off buying their cars for fear of re-sale, Hyundai introduced their “Assurance Guarantee” for the future value of the trade-in.

And loss aversion is not all bad news. By being savvy you can use loss aversion in order to drive action. Techniques like limited time offers and restricted availability will incite your customer to get hopping so they avoid feeling the regret of missing out.

Short-term bias

Short-term bias is what drives us to seek immediate gratification. It’s why we buy shoes we probably don’t need instead of adding to our superannuation, and why we eat/drink too much and promise to make it up by being good tomorrow.

Short-term bias means your customers will be persuaded by what happens now more than what happens later. If they get hit with costs now for benefits much later, then that is a much harder sell for you (and why life insurance and superannuation are tricky businesses to be in).

The opportunity is for you to satisfy your customer’s need for immediate gratification by making them feel good right now about doing business with you. Most obviously this means providing value straight away (e.g. instant download, take home today), but it can also mean small reinforcements like confirming they’ve clicked a button in the right way or acknowledging their request has been received. The important thing is to give them something.

Getting personal

To my mind, the personal context is where you can make or break your business, and while we have covered two principles, there are a gaggle of others that it pays to know about (status quo bias, system 1 and 2 thinking, confirmation bias and ego depletion amongst them). You can always find out more by getting in touch.

The good news is you’ve made a start and can now more effectively influence your customer’s behaviour by shaping the environmental, social and personal contexts.



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