Customer Experience Strategy: Business Processes Designed by Consumers
by Matt Gamerman, on Nov 4, 2021 1:30:00 PM
In an attempt to explain the irrational decisions that consumers make when deciding if, how, and what to purchase, we turn to behavioral economics.
If a company -- no matter its size, product or service offering -- can leverage strategic consumer insights, it can dramatically improve its sales. Much has been written about this emerging field that examines the intersection of consumer behavior and psychology. This blog is not intended to offer deep insights into the intricacies and theory of behavioral economics, but rather, explore how companies can use these strategic consumer insights to better align their people, processes, and technology and employ them in process model design.
A company must first understand its customer’s approach to their decision when making a purchasing. Often called a customer journey, this series of touch points maps the way in which a customer interacts with the business. When a company fully considers the customers’ journey it's created, it can address consumer behavior and design its operations strategically to meet the needs of its customers.
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In the Real World, How Do You Apply Behavioral Economics in Your Customer Experience Design Strategy?
Often, behavioral economics is described as the study of how consumers behave irrationally when making decisions as they fall prey to any number of biases, influences, and forces along the customer journey. In some situations, consumers make choices that are antithetical to their best interest.
For example, at many restaurants, the second cheapest bottle of wine is the best seller. Many consumers want to enjoy wine at dinner, but do not want to spend a lot of money. Yet, to avoid appearing overly frugal by just purchasing the least expensive wine, consumers opt for the second least expensive bottle to avoid judgement from their dinner guests and/or server. It’s been proposed that some restaurants, knowing this, inflate the margins on the second least expensive wine to increase their profits.
Let’s assume that some restaurants do in fact boost their margins on the second cheapest bottle. While this could be labeled as deceptive, it’s a prime example of a business understanding consumer biases and reacting to this phenomenon. Setting aside one’s possible disdain for this seemingly predatory practice, the business should not be written-off for understanding consumer behavior and leveraging this quirk.
Here’s another way to think about this tactic.
Companies who leverage consumer behavior are aware of and thoroughly familiar with their customers’ journey. Such a business will design its processes, actions, and communications to influence consumers at the appropriate decision-making point in the customer’s purchasing process. This business, knowing their customers’ goals and desired outcomes, will use process model design to meet the customer at the end of this road. When done right and tactfully, this approach is mutually beneficial. The customer gets what they ultimately want- whether it be value, quality, or speed; and the company gets what they want- a sale and hopefully a loyal customer.
What Part Does Process Model Design Play in Customer Experience Strategy?
Identifying, developing, and implementing processes is essential for the success of any organization. Ideally, processes should be designed prior to a company’s launch; however, many organizations grow organically and fall victim to their own success. As a result, things get done by any means necessary to ensure that products or services are delivered on time and on budget. Unfortunately, this reactive approach often leads to bad habits and inefficient tactics. This approach to process design also ignores consumers’ needs, behavioral tendencies, and the customer journey.
Developing a robust and dynamic process map, which proactively addresses consumer needs and will ultimately benefit both the company and its consumers.
By first understanding certain elements of behavioral economics, and then applying these strategic consumer insights to the process model design, an organization can align the way it sells with the way its consumers buy. Building a process model requires a methodical approach in which an organization identifies and catalogs its functions, not only those that it currently utilizes, but also the processes that it needs to achieve its future goals.
Wine and Design: The Bottom Line
Let’s revisit our “wine list” example introduced earlier. By understanding that customers are looking for value, especially when it comes to alcohol, a restaurant may design its marketing to promote a wine and dinner pairing. Those familiar with the restaurant industry would acknowledge that appetizers and desserts carry a high margin, whereas the entrees are less profitable. Alcohol, by far, generates the largest margin. So, a savvy restaurant, understanding the needs of their consumers and their own internal processes may package a mid-level bottle of wine with a high-margin appetizer, a low-margin entrée, and a high-margin dessert. It’s the combined margin of the meal that matters the most, not the margin generated by each course. If done tactfully and appropriately, customers will feel as though they are getting a value, and the restaurant will realize its desired margins.
It goes without saying that this “wine list” example is simplified to illustrate a point. Most businesses have a highly complex supply chain, product offering, and service delivery model. Therefore, it’s advantageous for an organization to develop a process model to ensure that its capabilities match its needs and the needs of its customers. Process model design is the first step in deciding how to invest time, money, and personnel.
Through process model design, and thus your business, on a foundation of consumer needs and behavioral economics, you will better align the way you create, market, and sell your products and services. Click here to read more about "How to Design an Elevated Customer Experience" that will help you and the customer both achieve ideal outcomes.
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