Consumer Behaviour Online: A Playbook Emerges
IN THE NOT-TOO-DISTANT PAST, the term ‘consumer’ triggered images of people in brick-and-mortar stores, touching products, physically making comparisons and receiving face-to-face assistance. Back then, product and price comparisons entailed physical transportation costs, and the act of purchasing often involved waiting in queues and using payment mechanisms such as cheques or cash.
To state the obvious, the shopping experience has dramatically changed. Consumers everywhere are embracing ecommerce options and expanding the variety of products they purchase online. At the same time, the in-store shopping experience now includes elements of technology — either offered by the retailer (in-store shopping kiosks or information display screens) or by third parties (recommendation apps or product-comparison tools).
Today’s omni-channel reality is evident well beyond the retail sector. Banks, credit card companies and insurance providers are using digital channels for various purposes including sales, marketing and customer relationship management. At the same time, ‘pure play’ digital companies — those that rely solely on digital channels — are cropping up in the financial sector.
In this article we will attempt to answer some of the questions that are vexing service providers in finance and elsewhere: Why do consumers become paralyzed in the face of abundant choice online? How does the consumption of online information differ? And how and why do the choices of other people matter in decision making?
Behavioural Patterns
In their book Nudge, Nobel Laureate Richard Thaler and Harvard Professor Cass Sunstein make a distinction between two types of agents: ‘Econs’ and ‘Humans’. Econs are the mythical beings that inhabit Economics textbooks. Perfectly rational in the economic sense, they can process infinite amounts of information, are forward looking, unemotional, and always act in their complete self-interest. Humans, on the other hand, procrastinate, are cognitively lazy, freeze in the face of complexity and are highly influenced by context.
The problemup confusing the consumer. This common misunderstanding often results in programs and policies that do not produce the desired behavioural change.
