THE CUSTOMER
DECISION
LOOP
CONSUMER BEHAVIOR PSYCHOLOGY CAN BE COMPLEX -
BUT UNDERSTANDING CUSTOMER DECISIONS DOESN'T HAVE TO BE.
00 | Intro
Any executive worth their salt knows that decoding the motivation behind customer’s choices – and being able to prove it – is the holy grail of market research. Everyone’s looking for that proof, but not many can find it.
Most modern-day companies have a way to measure customer emotions, as well as customer experience strategies to respond to those emotions. The problem is, traditional survey methods only measure emotions after a decision to buy has already been made.
The insights gained from post-decision emotions only paint part of the picture. They corner your business into being reactive to customers complaints or compliments. Companies should aim to be predictive. Anticipating customer needs increases your value to customers and investors alike.
01 | Casualties of the Experience Economy
We have recently seen countless examples of well-loved companies and customer favorites leaving the market. As much as we try, we can’t seem to understand why satisfied customers still leave.
The truth is, although customers may have had a great experience with your brand, are very satisfied and would recommend your company to others, if their lifestyle or the market shifts, it will affect their perceptions, expectations, and ultimately their decision to stay or leave you for your competition.
But what is going on in customers’ minds while they’re making decisions? The answer is a lot. And it’s both emotional and rational.
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02 | The Customer Decision Loop
We have recently seen countless examples of well-loved companies and customer favorites leaving the market. As much as we try, we can’t seem to understand why satisfied customers still leave.
The truth is, although customers may have had a great experience with your brand, are very satisfied and would recommend your company to others, if their lifestyle or the market shifts, it will affect their perceptions, expectations, and ultimately their decision to stay or leave you for your competition.
But what is going on in customers’ minds while they’re making decisions? The answer is a lot. And it’s both emotional and rational.
There is still so little we understand about behavioral psychology. Truth be told, most of the human mind is still a mystery. But there are a couple of things we have been able to map out, and one of them is the Customer Decision Loop. This concept describes the four stages that each customer goes through when deciding whether to make a purchase or not.
Let’s look at the factors that are directly tied into our buying decisions.
1. Need
A purchase decision is always sparked by a need. In Maslowe’s Hierarchy of Needs, there’s a good summation of every conceivable human need. The fulfillment of lower levels of the hierarchy open the door to the needs at the next level.
Physical needs like breathing, eating, and sleeping make up the bottom.
Next are security and safety; financial, health, and emotional security all belong here.
After this are psychological needs; feelings of belonging and friendship.
Then feelings of achievement and esteem; status, wealth, or personal accomplishments.
Finally, self-actualization, or achieving your full potential, is at the peak. This includes any creative activities like the arts, sports, invention, and other self-expression.
(Don’t forget about superficial needs, or wants. While these purchases are not essential to us, they definitely have their place in our wallets.)
Everything we do, every decision or purchase we make, serves at least one of those needs to some degree. Contrary to popular belief, the core needs that people have rarely change; new ways to address those needs simply arise, and there can be many different ways to fulfill the same need.
For example, let’s say I need transportation to get my kids to school and commute to work. The need has always existed, it’s how we fulfill that need that has changed. In the past, we traveled by horseback; now we use cars. In the future, perhaps we’ll teleport.
2. Expectations
There are certain expectations customers carry when shopping around. Those expectations can be low or high. Whatever the case, they have them and want them met at a minimum.
For example, since the technology is available, I may search for an electric, autonomous-driving car. In doing so, I expect to save money on gas, be ecological, and not exert energy driving. I immediately go into search mode to find a solution to fulfill my need while factoring in my expectations.
As you know, expectations can change at any time for a variety of reasons.
It’s important to remember that customers’ expectations are often shaped by factors outside of your control. Customers look to the competitive landscape around them to determine what they should expect from you. Likewise, industries that may not even intersect with your line of business can also shape customer expectations.
For instance, once Amazon Prime introduced 2-day delivery, customers began expecting shorter delivery times from non-competing industries, such as couriers and logistics. Therefore, it’s important to constantly keep tabs on what the entire market is pushing out. Equally important is seeking out the upcoming disruptors of your industry so you can identify and address future threats.
3. The “Worth It” Analysis
At this stage, customers weigh the costs vs. benefits of their forthcoming decision to arrive at the “worth it” conclusion: the last and most powerful conclusion in the decision-making process.
This is when they ask themselves that final question, “Is it worth it?”
Back to the electric, autonomous-driving car that I’d like to buy. I’ll assess whether it’s within my budget, the best relative price compared to other options, if the quality meets my expectations, etc.
This is also the point where I decide on what compromises I am willing to make. Does the car have to be autonomous? Can I live without those seat warmers or that nice sunroof?
At this part of the cycle, I must point out an external force that plays a strong role in this process: influencers.
Influencers are people and factors that influence you along the journey in the decision-making process. Influencers can talk you in or out of what you need or expect. This can come in the form of reviews and ratings that customers might encounter during our worth it analysis. Or it could be people in your customers’ lives who would either praise or judge the purchase decision. Influencers help us validate if we’re managing the decision correctly and add an element of social proof.
4. Customer Decision
Finally, we’ve arrived at the decision on what is worth it or not.
Based on the worth it analysis, customers make their best choice based on the intensity of their need, their expectations, their available budget, and the offers available in the market. It’s about finding the balance between all these elements, giving to priority to the drivers that matter most to the customers.
I’ve decided that instead of the electric, autonomous Tesla, I’m buying a Prius. I’ll still fulfill my expectations of saving gas and having an eco-friendly car and found it easy to compromise on the self-driving feature in order to meet my budget.
5. Continuous Cycle (Loop)
Our minds run through this cost-benefit analysis every time we make a purchase. As long as the need exists, the entire cycle from expectation to decision will continue in a loop. The urgency may decrease once the need is somehow addressed, but the expectations will inevitably change at some point, causing the decision cycle to restart. This is why we, as consumers are constantly switching up our gadgets, our cars, our clothing.
In order to reduce churn, it is crucial to continuously receive feedback and monitor your competitive landscape. After a customers’ initial decision to buy from you, the easiest option is to continue to do so. If you are able to keep up with their ever-changing expectations through your voice-of-customer channels, you will have right tools to retain your customers.
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03 | The One Conclusion That Matters
The Worth It Conclusion has long been overlooked, but it’s the last piece needed to round out your existing Customer Experience Management. This conclusion has the most impact on customer decisions and it’s the only one that leads directly to the source of what is causing the money flow from customers’ pockets to companies’ bottom-line profits.
With Worthix’s Cognitive Dialogue Technology, you can dialogue on-on-one with your customers and find out what makes you worth it to them – or not. Our AI-powered technology helps you produce self-adaptive dialogues that allows your customers to tell you what they care about, giving you actionable insight that can boost your bottom line.
Want to know more about using Worthix is measure how worth it you are to your customers?