Bonus Content National Special Section

To Give Consumers What They Want, Retailers Must Understand Human Behavior

Dan Ariely
Dan Ariely

by Alissa Marchat/staff writer

As anyone who has ever struggled to market a product or a service knows, what consumers say they want and their behaviors are often two very different things, says Dan Ariely, a best-selling author and a professor of psychology and behavioral economics at Duke University. He shared some of his insights into human behavior as well as recommendations for how retailers and marketers can work with, rather than against, consumers’ natural tendencies at the FMI Midwinter Executive Conference in Miami earlier this year.

As Ariely pointed out, our general—but incorrect—assumption about how people make decisions is that we are motivated by our goals and aspirations.

If I asked all of you, you would tell me those things. You would say, here is my five-year plan or my 17-year plan. Here are my goals, my aspirations, but I want to tell you that, in fact, while people say those things drive us, they don’t,” Ariely said. “Objectives, goals and aspirations, while they exist, play very little role in what (people) actually end up doing.”

To prove his point, Ariely asked for a show of hands. Who had overeaten in the past month or had not exercised as much as they believe they should have? Or had ever texted while driving? Unsurprisingly, there were a number of raised hands, suggesting that we are not as motivated by our long-term goals as we would like to think. According to Ariely, it’s actually “the little details of life” that have the greatest influence on our behaviors.

Little details, big impact

He pointed to a 2003 paper that graphed the percentage of people in different European countries who were willing to be organ donors, an oft-cited example of how small details can have dramatic effects on human behavior. The rates for each country were either very high or very low, and the reason for the difference, as Ariely explained, was in the organ donation forms. The countries with a high participation rates had forms that asked people to check a box if they did not want to be an organ donor, while countries with low participation rates asked them to check a box if they did want to be a donor.

Now, we call this opt in and opt out…Usually, opt in and opt out is something that is buried on page seven of some form. In the organ donation, it’s not about page seven—it’s the front page. It’s the main thing. It’s the only decision you have to make,” said Ariely, but “it’s a complex decision. And what happens when we face these big, complex decisions? We don’t know what to do, so we do what? Nothing. And when we do nothing, we let the person who designed the form decide for us. This is the notion of ‘choice architecture.’”

Although the people who design forms play a significant role in the decisions people make, people still believe they make their choices independently. Everyone who has been influenced by a form like the opt-in/opt-out organ donation forms will have a story about why they made the decision they did, and according to Ariely, we believe our own stories.

For this reason, Ariely argues that focus groups are a very poor way to gather information about consumer preferences.

If you’re interested in fiction, it’s a wonderful thing to get people in the room and to tell you stories about why they’re making decisions. But it’s not necessarily telling you the truth about where decisions are coming from,” he said.

Sometimes choices have to be forced

Though this tendency of consumers to do nothing when asked to make a decision can pose problems for retailers and marketers, companies can work around it if they’re smart. Ariely pointed to Express Scripts, a pharmacy benefit management company that wanted to switch customers to generic medication, as an example. The company started by sending out letters explaining the cost-saving benefits of generics. When that didn’t work, it switched tactics, offering to waive consumers’ co-pay for one year if they would switch. When that didn’t produce the desired results either, Express Scripts approached Ariely, who suggested the problem was that Express Scripts was asking consumers to do two things: decide to switch to generic and decide to return the letter. “This is what we call a confounded design,” he said. “Is it about returning a letter? Or is it about generic vs. branded? So we said, what if we gave people a forced choice?”

With Ariely’s advice, Express Scripts sent its customers letters telling them that they must select either braded or lower-cost generic medication or the company would stop their medications. This time, 80 to 90 percent of its customers made the switch—without any of the previous incentives.

This is a result of consumers’ affinity for defaults, Ariely said. When faced with a choice, they will fall back on whatever option takes the least effort, even if that doesn’t always align with their goals. So if retailers want consumers to do something they weren’t already planning on doing, it’s up to the retailer to make that process as simple as possible.

Simplify choices for best response

A study on the influence of samples on jam sales at a Draeger’s Market in California illustrates the need for retailers to simplify customers’ choices, noted Ariely. Researchers at this store set up tasting booths with either six jams or 24 jams. Shoppers were drawn in greater numbers to the color and variety of the booth with more jams. After sampling, each customer was given a coupon that could be used on any of the 300 jams in the store—not just the ones available for sampling. Thirty percent of the consumers who had visited the stand with six options used that coupon to make a purchase. Of those that stopped at the larger booth, only 3 percent took advantage of the coupon.

What happened is people reverted to the default,” Ariely said. “People try jam, then they say…let me get some.’ But if we had 24 of them, they also said, ‘Whoa, which one?’ And that complexity got people to revert back to their default…It’s very hard to think about jams as a complex product. But it turns out that 24 jams are a bit too complex.”

Consumers are busy, he noted, and when they go to the supermarket, they have limited time and mental energy to make decisions about food.

Because of that, we need to think about people as being with very limited cognitive capacity as they make decisions about everything that we care about and we think they should spend more time on,” Ariely advised. “…. And every second that you can shave in making something easier, probably has a lot of benefit.”

In addition to making desired decisions easier to make, Ariely noted that retailers also are in a position to sway consumers’ by understanding that their preferences can be influenced.

The fact is that we don’t really know what our preferences are,” he said. “And because we don’t know our preferences, they are incredibly malleable.”

Asking the right questions can lead to different choices

Ariely participated in a study with an insurance company that demonstrated just how easily consumer preference can be influenced. The company in the study sold high-quality, expensive insurance, and when people called to get a quote, they heard the price and immediately lost interest. In an effort to get people to take quality into consideration as well, researches began asking consumers to rate how important it was for them to have insurance that would let them sleep well at night. Callers received a quote only after they answered the question, and since they had just reaffirmed to themselves why they were buying the insurance in the first place, they were much less price sensitive.

A main takeaway of much of all this research, said Ariely, is that education and logic are not effective in encouraging consumers to change their behaviors. If retailers want their customers to change their shopping habits or purchasing decisions, they need to look at removing the barriers to that behavior, even if those barriers seem insignificant.

It does involve being more paternalistic. It does involve basically saying we are the experts in how to make those decisions, and we will therefore make those decisions—the right decisions—easier for our consumers,” Ariely said, noting a number of studies in which this type of manipulation was used to help people eat more healthfully or to be more proactive about receiving health care. By leveraging knowledge about human behavior, retailers are in a position to increase their bottom line, as well as help their customers make better choices.

About the author

Avatar

Kristen Cloud

A former newspaper editor and publisher, she once enjoyed leisurely perusing the grocery store aisles but, since having a baby in 2016, she is now an enthusiastic click-and-collect shopper.

Featured Photos

Featured Video