Secrets of the Irrational Consumer

We know more about how consumers shop and make decisions today than we ever have. The information age has been a mother lode for insights that can help brands really connect with and better serve consumers. But this aura of precision has also created a misleading view of a very logical and linear progression of rational decisions that consumers make.

The reality is that many consumers can be quite irrational when it comes to their shopping behavior. This is the foundation of the field of behavioral economics (BE), which looks to understand how various factors – often completely unrelated to the purchase decision process – influence how consumers buy. We know that the answers people provide in surveys is actually often different from they actually do. (The Behavioral Economics Summit jointly hosted by Yale and McKinsey on March 4 is going to take a deeper look at this issue).

What that means is that brands should think about developing more nuanced views of their customers. For all the data available – and the incredible insights analytics can provide – the process of behavioral insights about consumers is old fashioned: observation. There really is no substitute for going out into the field and see what’s going on where people shop and live.

This may seem like an obvious point, but the truth is that executives are often divorced from the realities of the shopping experience. They are surrounded by reams of data, metrics, and reports about consumer behavior; they look at ever more sophisticated models and algorithms; they watch over an endless battery of surveys and focus groups; they’re caught in the frantic pace of work and meetings, which leaves little time for leaving the office behind.

Observational research is critical to see what the realities of life are. For example, consumers will make very different decisions about product based on whether they are under time pressure. The manufacturer of an iconic consumer product was considering a substantial product redesign and observed customers as they “shopped” for this product in a controlled setting. Every single customer, it turned out, chose a competing lower-priced product. In reality, however, shoppers in this product category choose quickly because they were under massive time constraints. They generally started with the iconic product and considered others only if their first choice proved poor.

So get off of your smartphone, get out from behind your desk, and get out into the real world to see what your customers are actually doing. You’ll probably be surprised by what you learn.

In what ways do you learn about how you customers really shop?

Learn more about the consumer decision journey and other topics on our McKinsey on Marketing & Sales and site. Keep up with our latest insights by signing up for our newsletter and following us on Twitter @McK_MktgSales. And please follow me @davidedelman.

[Image, Susan Sermoneta, Flickr]