In this short article consumer behaviour specialist Philip Graves takes a look at how insurance aggregators can use the psychology of choice to improve their businesses.
The unconscious mind is an efficient mind
Energy efficiency may be a relatively recent phenomenon when it comes to the power supplied to people’s homes, but evolution has ensured that we humans automatically work in a way that means we conserve our reserves.
As a result, and despite what we would like to believe, we don’t make many conscious decisions in day-to-day life. Conscious thought burns glucose the way a Bugatti Veyron gets through fuel; the unconscious processes that we rely on to make most of our decisions are like free-wheeling bicycles in comparison.
This realisation has led to a reappraisal of consumer decision-making and, in forward thinking organisations, a seismic shift in how consumer insights are gathered. However, it has also led to people taking important insights from academic studies that have very narrow applications and generalising them inappropriately.
One example of this was a US supermarket that tried to emulate the success of a competitor who offered much more limited ranges in each category. What worked in the competitor’s context – where price was everything and brand names were marginalised – backfired completely with shoppers who were used to being able to visit one massive store and find all their favourite products. Each time an habitually purchased brand wasn’t available the shopper was forced to make a decision; a difficult, energy-depleting, anxiety that it’s “not going to be as good” decision at that!
The Paradox of choice – consumers can have too much !
All of which gets us to the so-called ‘paradox of choice’ and what this might mean for businesses like insurance aggregators who want to maximise their appeal to consumers.
The problem with choice is that, whilst we like the idea of it, the reality can be overwhelming. Away from a store people will say they want a wide range to choose from because they don’t factor in the potential difficulty of making a selection when they idealise about the moment of purchase.
Studies have found that a wider choice can result in both fewer people making a purchase and those that do feeling less enamoured with the choice they have made. That wider choice means that there is less chance of one option clearly distinguishing itself on whatever heuristic (rule of thumb) is being used to make the choice. The reaction to this is that the choice feels more difficult and consumers can confuse the negative feelings that arise from the difficulty of the process with negative feelings for the product itself. This mis-attribution is extraordinarily common, but very poorly understood by most marketing people (despite the fact that it is the very process they are seeking to influence positively through most of what they do).
A strategy for insurance aggregators
So how should aggregators balance the need to offer choice, which is arguably their point of advantage, with the fact that in offering a wide choice they might be making things harder for customers?
The answer lies in design. It is one thing for a customer to know that you have searched through 200 companies to find the right product for him; quite another to make him live through the pain of seeing all of the resulting data.
The challenge is two-fold:
1. The aggregator must provide enough of a choice so that the customer can make a selection with relative ease.
2. The information provided must allow the customer to evaluate the set of choices on the criteria that matter most to him (without having to tune out too many of the criteria that don’t).
Google learned that they achieve more by showing less on a page. Relatively early on in their existence Google made the mistake of asking users how many search results they wanted on a page. Predictably, they said, “Lots”. However, when Google put more results on a page the amount of traffic actually dropped.
Google’s experience also illustrates an important point about how to arrive at the ‘sweet-spot’ that is the right amount of information. Consumer psychology can get you some way there, but ultimately live experiments are likely to be necessary. Away from the context of the moment of making a decision consumers are hopeless at recognising how they will think.
In the first instance, the biggest challenge for aggregators is likely to be getting consumers’ attention. Next they must deliver an experience that allows a customer to feel that choosing well is easy: a large part of this is fine-tuning the way that choice is conveyed.
The final and often biggest challenge is becoming the aggregator of choice – or more accurately the aggregator of habit. New behaviours find it hard to take root in our unconscious mind (which is why dieting is so hard to do). For an infrequent action, like buying insurance, to become a habit the experience either has to deliver considerable pleasure or help the customer avoid something that would otherwise be painful.
Aggregators that attempt to specialise in one product niche are almost doomed to fail; however good the experience they deliver it’s likely they will be forgotten about the next time a purchase is made. Even if providing more frequent solutions for customers means directing them through your site elsewhere, it is better from a customer psychology perspective to find ways to be used by your target audience as frequently as possible: the aim should be to build an association in your customers’ minds between your website and ‘easy usefulness’.
Ultimately habits are vital because they epitomise action without conscious effort and we humans will almost always choose the energy-conserving path. So the good marketing specialists at aggregators will spend a lot of time working out how to “sear” their brand and offering in the minds of consumers !