A Guide to Understanding How Customers Make Decisions

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People are confronted with thousands of decisions every single day. Some are important and others are relatively insignificant. From a business perspective, it’s helpful to understand how customers make decisions regarding the products and services they purchase.

How Customers Make Decisions

People are innately lazy. Sure, some people exhibit ambitious traits in particular areas of their lives, but on a cognitive level we are biologically programmed to be lazy in how we process information and make decisions. If we weren’t, our brains would be so over stimulated that they would explode (at least figuratively).

In order to process the millions of signals we’re exposed to on a daily basis, our brains use mental shortcuts, called heuristics, and flawed decision making to choose between one option and another.

The brain literally has hundreds of heuristics and decision-making patterns it uses to reach conclusions. Take, for example, something psychologists call “explanation-based decision making” (also known as the “story model”).

“The idea is that people encounter situations. When they do, they recognize important parts of the situation from past experience. They then create a story (or explanation) about what’s going on and what will happen,” explains Dr. Winston Sieck, a cognitive psychologist and founder of Global Cognition. “They make decisions based on their story, and how things have turned out in similar stories past.”

While this might sound good in theory, it actually isn’t a great heuristic. The stories we have recorded in our brains are actually far less complete and consistent than we think. Thus, even though we think we’re being critical, we’re actually jumping to conclusions.

People – and, in the context of this article, customers – also tend to place too much emphasis on the recommendations of people they know. If a customer’s friend recommends a product to them, they’re much more likely to purchase that product (even if the friend has no expertise or experience to qualify their recommendation).

For indecisive people, there’s something empowering about putting forth effort – i.e. weighing all possible options – that instills confidence in a choice. Even if the effort does nothing to answer the questions the individual had, the sheer fact that they “took control” makes them feel less dissonance.

Entire books have been written on heuristics and decision making, but this at least gives you a couple of examples of ways the human brain addresses choices and attempts to make sense of the world.

4 Ways to Influence Customers

From a business perspective, it’s helpful to study some of these common approaches to decision making. Here are a few techniques and strategies you may want to try:

1. Use Customer Testimonials

As previously mentioned, people tend to place a lot of weight on the recommendations of others. You can use this to your advantage by providing lots of social proof on your website. Customer testimonials and reviews are one of the more effective options.

2. Offer Quizzes

Remember how indecisive people like to feel like they’re putting forth effort in order to reach a conclusion? One way you can appease these customers is by offering quizzes that attempt to match them with the right product. (Here’s a good example from Pedigree.)

3. Provide Educational Content

Whether you realize it or not, the content you craft, publish, and share has a significant impact on how your customers feel about your products. By offering educational content that addresses their biggest questions and concerns, you can help them overcome friction and make more educated decisions that keep their own best interests in mind.

Educational content also has the added benefit of ranking better in the search engines. So when you make an investment in teaching your customers, you’re also enhancing your website and making it more appealing to the algorithms that crawl your site.

4. Be Strategic With Pricing

If you sell a service – or even products with different price levels – spend some time researching various psychological hacks that make pricing irresistible.

For example, the simple act of pointing out which pricing level is most popular with your customer base primes most people to choose it as well. This is called the “bandwagon effect,” and it’s rooted in groupthink theory.

Another clever strategy is to place three options together, with your best (or most profitable) one in the middle. The “center-stage effect” says most people will perceive the middle option as the most logical choice.

Outthink Your Customers

While there are certainly some intricate aspects of consumer psychology, you don’t need an advanced degree to understand how your customers make decisions. After all, you’re a person and are bound by the same mental shortcuts, cognitive constraints, and processing frameworks.

Use this to your advantage and try to stay one step ahead.

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