Exploring product decisions of customers

Exploring product decisions of customers

10 January 2017

When is the best time to approach shoppers with details of a new product?  And when are people most receptive to breaking with habit and trying new things?  These are questions many businesses would love to know the answer to. Just imagine how much time, effort and resource could be saved in the new product development (NPD) process if you could predict when people are interested in exploring…

In collaboration with dunnhumby, through my PhD at the Psychology department of University College London (UCL), this is precisely what we set out to do: to understand the decision making of customers, specifically when they are most likely to choose a different product over the one they chose on recent shopping trips. We wanted to determine if there was an ‘optimum’ time in the purchase cycle to reach out to customers with an offer to try something different.

Some established research in the field of psychology suggests that people tend to explore environments systematically and explore whenever it’s more likely for them to learn something new. For example, people would regularly check different investment strategies in order to see if one of these improved. Since the returns of different investments are comparable, people adopt a systematic approach to exploring new investment opportunities ('uncertainty-minimising'). However, when choices require subjective interpretation (e.g. taste), it's much harder for people to do this. In these cases, research has shown that people often strengthen current habits and come to like things more, the more often they choose or use them ('coherency-maximising').

Through our study, we tested both of these exploratory decision-making approaches using anonymised shopper data and our analyses showed that people are less likely to explore the longer they’ve stayed with a current product. In other words, trying something new becomes less likely because people strengthen their preferences with every additional purchase. Based on this finding, brands or retailers might be forgiven for thinking that product-loyal and brand-loyal customers are not worth approaching with new offers.

However, what we also discovered through the research was that preferences were reset once people terminated a purchase streak. So shoppers who had recently switched brands, were twice as likely to try a new product, resetting their preferences back to a baseline level. Through the mechanic of a targeted coupon campaign, we were able to identify customers that were more likely to redeem coupons to explore products, based on their recent choices.

There are many ways these findings could be applied within the retail industry and beyond. A great example could be helping consumers adopt healthier eating habits. As the observed behaviour from our study is thought to happen somewhat unconsciously, people who would like to stick to a healthy diet could benefit from timely recommendations of interesting options to keep them on track.

So although previous purchases are a strong determinant of future preferences, consumers do explore with some predictability, representing an opportunity for brands and retailers to help customers make better choices.

 

For more information, the full study "Coherency-maximizing exploration in the supermarket" findings are now available.

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