He is one of the “Most Influential New Names” according to Bloomberg, a regular contributor at Wired magazine and the author of such bestsellers as The Honest Truth About Dishonesty and Predictably Irrational: The Hidden Forces That Shape Our Decisions. For anyone interested in behavioural sciences, Dan Ariely’s books and essays are a must.
Behavioural economist Dan Ariely sees underlying patterns in our irrational decisions
Some see his field of behavourial economics as being able to provide insights into how consumers make buying decisions and why they don’t behave in line with their stated brand or price preferences. “Our irrational behaviours are neither random nor senseless – they are systematic,” writes Ariely, who says we can become more aware of the patterns governing our decisions.
He started his talk with a simple question to get us in the right mindset: what is more painful, to pay with cash or a credit card? The audience’s answer was unanimous: cash. Behavioural economists call this the “pain of paying”; it feels “cheaper” to pay with the card because it’s not as tangible as paying by cash.
Now, imagine that you are going on a cruise to the Caribbean. How would you pay for it if you could choose? In advance or just after the trip has ended? The likely answer would be to pay just after you’ve arrived home from your trip, so you’re not paying for something in advance. But how would you feel about your cruise on the last day? Most likely, you wouldn’t be able to concentrate on enjoying it because you would only be thinking of the pending payment when you left the ship.
Therefore, a good exercise to increase the pain of paying and educate yourself to be a better, more self-aware consumer is to use cash and receive notification whenever money is spent. On the other hand, when you’d rather enjoy yourself and don’t want to think about paying, you should use your credit cards and ideally prepay before consumption.
This chimes with the findings of a study in the Journal of Marketing Research a few years ago about buying in a relaxed environment. Having shown hard-sell videos and more calming sales approaches to consumers, researchers at Columbia University found that their more relaxed subjects would pay about 15% more for a variety of goods and services than less-relaxed subjects.
Good customer engagement is all about creating that comfortable space between a brand and its customers. It’s about engaging with the consumer without dominating the conversation. As Ariely writes in Predictably Irrational: “Without constant suspicion, we can get more out of our exchanges with others while spending less time making sure that others will fulfil their promise to us.”
‹ all articles
