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Behavioral science: Why it’s critical to understanding how consumers make decisions today 

Simply put, behavioral science is the study of decision-making. While it is not yet broadly known as a critical component of customer engagement and risk management – this is changing rapidly. That’s because it provides a different approach to tailoring customer interactions. One that offers the insights needed to meet the complex demands and challenges consumers and service providers face today. 

After reading this article, you’ll walk away understanding what behavioral science is, and why it’s become critical to customer-provider relationships. We’ll break it down as follows: 

  1. Context that’s driving the need for a new way of thinking 
  2. Behavioral science 101  
  3. Why behavioral science is critical right now 
  4. A quick peek at key behavioral science concepts 
  5. The road to win-win customer engagement 

1. Context that’s driving the need for a new way of thinking 

Successful relationships, whether personal or professional, tend to be based on understanding and empathy. But today, companies looking to nurture their relationships with customers are facing an unprecedented set of challenges. And that’s because the landscape right now is complicated. Really, really complicated.  

For one thing, the extraordinary acceleration of digitalization in all aspects of life is acting as a barrier to empathetic engagement. Many consumers are struggling to adapt to the volume and variety of digital communications they’re faced with daily. Even well-intentioned service providers that reach out to help their customers run the risk of inadvertently adding to this digital fatigue. 

More broadly, consumer behaviors are being rapidly shaped and reshaped by the unsettled period we’re living through. Think about it. The fundamentals of everyday life are in flux, in doubt, or gone altogether: a stable economic environment, peace, health, energy, food, employment, travel. All of this impacts decision-making, it makes behaviors more volatile. It forms and fuels barriers to engagement.  

So service providers face a major headache. They need to understand what’s driving these behaviors before they can determine the best way to engage each customer with empathy. They need knowledge of how their customers make decisions, the motivations behind their actions and how to respond accordingly. In short, service providers need to put behavioral science at the heart of engagement strategies.   

2. Behavioral science 101

Behavioral science is a multifaceted discipline spanning psychology, sociology, social and cultural anthropology, economics, neuroscience, political science plus a healthy mix of other social sciences. But simply put, behavioral science is the study of decision-making

People don’t tend to base their decisions in pure logic or rationality. We’re emotional beings, shaped by our experiences. Our decisions are shaped by multiple intersecting perceptions, attitudes, needs, biases, personal circumstances and contexts. Behavioral science provides the ability to understand these influences, to analyze and quantify them. In the context of consumer behavior, understanding how your customers are likely to react to interactions enables you to shape this activity empathetically to get to that win-win outcome – happy customers and a competitive advantage for your company. 

3. Why behavioral science is critical right now

Changing times, changing behaviors

Behavioral science offers practical options for companies needing to keep pace with rapid, ongoing shifts that impact the way their customers behave and make decisions. Such options are increasingly important given the current period of extraordinary economic and social volatility, when exhausted and uncertain consumers are facing adversity across many aspects of their lives.  

Perceived and actual threats to life and livelihoods (such as health, job security, and / or financial security) are reshaping perceptions and motivations. This makes behaviors more volatile than ever. Consequently, it’s ever more difficult to engage with consumers in the right way (for example, customers under a perceived threat or crisis may expect rapid responses).  

In an increasingly digitalized world, there are also growing barriers to engagement such as: 

  • Digital fatigue – Mental and physical exhaustion caused by an excessive amount of time spent on digital devices.  
  • Decision fatigue – A state of cognitive overload that impedes a person’s ability to effectively evaluate and make decisions. 

These barriers to engagement, among others, can lead to avoidance of communications, impulsive choices or a failure to act in our own best interests. This type of behavior, in the context of a company-consumer relationship, is almost always damaging for both parties. 

Adaptability by design

Against this backdrop, it’s little surprise that behavioral science has become the go-to option for powering successful customer engagement. It’s also worth noting that legacy or static strategies are, by definition, substandard in the face of any consumer’s complex and changing behaviors. 

Static, legacy strategies are often defined by analyzing retrospective data – in essence, they’re defined by what happened yesterday. They are left trusting to luck that any behavioral shift since yesterday (which could compromise the strategy’s effectiveness) hasn’t been too significant.  

Using behavioral science, however, customer engagement can become more dynamic. It’s defined by what’s happening today and what could happen tomorrow. With the levers of individual decision-making at its core, an engagement strategy powered by behavioral science has adaptability baked into its DNA. 

This approach also allows outreach campaigns to be hyper-personalized – shaped by individual behaviors and expectations.  

Enterprises looking to address pain points along the customer journey can easily and unintentionally miss the mark if they’re not utilizing behavioral science. Successful outreach campaigns will look beyond surface-level indicators and address the root causes of suboptimal behavior by focusing on the biases, perceptions and motivations driving those behaviors.  

4. A quick peek at key behavioral science concepts 

Let’s unpack some of the main concepts at the heart of behavioral science. 

Action-intention gap: The divide between what we want to do and what we actually do 

We all have things that we’d like to accomplish. Maybe, for example, you want to get outside and exercise more during the day. That’s your intention. You may well understand and desire its benefits. But there are a variety of barriers, challenges and biases that can make it more difficult for you to achieve that intention through your actions. This can occur in the form of perceptual biases, which are errors in how we perceive and process new information, that can make it difficult to follow through on our intentions. People may also fail to follow through on their intentions because of competing needs or desires that distract them from their goal. For example, when you arrive home after a long day, you may feel tired or hungry and want to relax or make a snack. Without reminders of your intention to exercise, you may forget about that intention and act on your immediate needs or desires instead. This lack of alignment between intentions and actions ultimately prevents both the customer and the service providers from achieving their goals.

Helping consumers overcome barriers, challenges and biases 

Behavioral science helps you identify and understand the specific barriers, challenges and biases that are creating a gap between intentions and actions. This understanding can then be leveraged to empathetically bridge the gap between the consumers intentions and actions, using specific behavioral tactics to validate what motivates the consumer and drive the desired action at that particular moment in time. Thus, effective behavioral strategies set out the optimal means to achieve desired outcomes for both the consumer and service provider.  

5. Behavioral science in action

To bring these ideas and principles to life, consider the following scenarios:  

Behavioral science in everyday life

The brain processes information in different ways, and there’s a hierarchy to it. Think of a technology you use so regularly you essentially operate on ‘autopilot’ – i.e. without thinking much about your actions.  
 
Now think of a time you had to switch to a new technology – maybe from Apple to Android, or Gmail to Outlook. While the core functions are the same, some elements are different. Think of how it felt diverging from your usual routine, taking longer to complete simple tasks. Frustrating? Irritating? Did you even avoid learning the new system altogether or switch back because you felt exhausted by it? 
 
These are examples of what happens when you are forced to shift from fast, automatic processing of information – what Daniel Kahneman in Thinking, Fast and Slow calls System 1 thinking (your autopilot) to System 2 thinking (your analyst), which involves slower, conscious, more deliberate, more logical processing of information (i.e. the adjustment period while you get to know something new).  

In this instance, you may want to accelerate the shift from System 2 to System 1 thinking to help reduce the burden on your customers. You may also want to help the customer avoid needing to use System 2 thinking altogether. Let’s take a look at our second example for answers on how this could be addressed.  

Behavioral science in customer engagement  

In this example, a service provider has introduced a new way to process your bill payment via their digital, web-based payment portal. With the number of potential complexities this might entail, you’re skeptical from the outset.  

How this scenario plays out depends on the unique customer and provider. Here are a few possibilities of what could occur: 

  • Confirmation Bias: As you go through the process, you start to mentally confirm the assumptions you had at the beginning (“I knew this would be difficult…”) and feel frustration and resentment towards your provider. 
  • Ostrich Effect: Your level of frustration hits its peak and you just want to go back to the old way. Rather than fighting through the new process, you choose to metaphorically bury your head in the sand to avoid this situation or action you need to take. 
  • Status Quo Effect: You choose to abandon the process in favor of a more familiar interaction, abandoning the digital path to engage with a real person. You may even change providers to gain back a sense of familiarity.  

Each scenario has the ability to drive a different behavior based on a variety of factors, including the biases and barriers the customer experiences and how the provider navigates the scenario. Ultimately, this type of scenario can create a variety of challenges including a lack of digital adoption and therefore an operational burden (at best) for the service provider by increasing their call-center volume. At worst, it might increase the likelihood of an dissatisfied customer and significantly reduce the chance of the customer switching providers.  

Let’s look at an example of how we could work to gain more information about the customer, while also helping reduce friction: 

Here, behavioral tactics are being applied interdependently to discover and better align what motivates each individual customer. 

Firstly, the customer’s perception of the process are addressed using a tactic called ‘Implementation Intentions’. With the creation of a concrete plan to do something, the customer is more likely to actually do it. There is a clear path to achieving a goal. 

Second, employing a quick checklist activates the ‘Goal Gradient Effect’. By ensuring the customer feels they are closer to achieving the end goal (which is visualized in the three steps), they will accelerate towards achieving it. 

Thirdly, highlighting that this item belongs to the customer (“Ready to check this off your list?”) encourages both ‘Ownership Bias’ and ‘Self Agency’, which can guide them towards a greater level of accountability to complete that task.  
 
Finally, the inclusion of response options provides the service provider with a feedback loop to validate assumptions about the customer, to help better understand customer challenges, and to tailor future interactions.  

6. Behavioral science: the road to win-win customer engagement 

Employing behavioral science methodologies in customer engagement delivers clear benefits for consumers and companies alike. 

Benefits for consumers: 

  1. Consumers make positive decisions, faster.  
  2. Consumer behavior is positively shaped over time.  
  3. Consumers receive options that are truly helpful/desirable. 
  4. Consumers feel understood and confident that their provider knows how to meet their needs, thanks to highly personalized experiences.

Benefits for companies: 

  1. Companies get a competitive edge with insights that are tailored to overcoming specific barriers and challenges.  
  2. Companies become inherently more empathetic. By demonstrating a greater understanding of the customer and their unique needs and motivations, personalization is significantly improved. 
  3. Companies gain the ability to solve challenges and convert customers more efficiently by understanding what’s driving behavior so pain points can be identified and addressed at the root of the problem.  
  4. Companies can apply insights across the entire customer journey to dramatically improve business outcomes and make strategies more scalable.  

Download our 2022 consumer report, The Great Shift in Billpayer Behavior, to discover more about what’s driving consumer behaviors. Find out what support service providers can offer customers to overcome the impact of exhaustion and uncertainty, and to engage with them more effectively.