In the first episode of this new three-part series, CEO Nicole Webb speaks to IMPACT’s behavioural insights consultant Kris White about the five phenomena dominating consumer shopping behaviours.
When times are good, Australians love to spend. Consumer sentiment is high, business confidence is up, and market competition is healthy.
During an economic downturn, and certainly since COVID, the landscape starts to change. Businesses begin competing on price, which can be a race to the bottom, and customers are more risk averse. Brand loyalty goes out the window and people wrestle with discretionary spend.
The result is a rise in ‘cart abandonment’ – when the pressure for a consumer to part with cash is too great and they desert their goods at the checkout.
With e-commerce brands experiencing a decline in sales, particularly those that are selling non-essential products and services, Kris and Nicole break down the consumer shopping mindset and explore what brands can do to counter these behaviours.
A classic of behavioural economics, loss aversion is when people are more sensitive to loss than they are to gain. In fact, according to research, losing feels twice as painful as winning feels good. In this environment, people take on a risk-averse, defensive mindset.
This theory can also apply to losing out on moments in time, events, or shopping discounts. Research Kris recently conducted with retail experience platform, preezie, shows the promise of a bargain will see up to 80 per cent of Australians participate in the upcoming Black Friday and Cyber Monday sales.
For businesses, focusing on opportunities to ‘surprise and delight’ customers with free delivery and or a gift with purchase work well in these times.
Remember the toilet paper panic buying of 2020? Scarcity bias is the value we place on things we perceive to be rare or difficult to obtain.
Think VIP tickets, special trading cards, collector editions, or even the last mangoes of the season. Whatever it may be, it will be something people covet, hoard or bulk buy if they can.
For e-commerce businesses, this concept can also be applied to time limits on sales, limited volume or editions and wait lists. Technology launches do this really well.
When in doubt or in the face of uncertainty, people look to their peers for reassurance in how to act or behave. In the world of e-commerce, we see this with reviews, testimonials, ratings and in today’s social media world, those ‘trending’ products.
By that same token, there can be a level of scepticism in terms of whether reviews are authentic and whether the number of reviews is statistically significant. This is why organisations like Choice exist.
This school of thought considers the two moments in an experience that people remember: the peak moments and the end. Ultimately, the way things end matters most.
This is where brands have an opportunity to maximise post-purchase engagement, whether that be a cross-promotion via when the customer receives their online receipt or email confirmation.
Coined after 9/11 when the sale of luxury lipsticks went up, but reaching all the way back to the Great Depression, the Lipstick Effect is a compensatory purchase of sorts to make people feel good during in tough times.
After COVID lockdowns, this manifested in the form of holidays, shopping and socialising when the masses sprang back into action after going without.
For businesses, it’s about tapping into the need for “magic moments” and how they can make customers feel good or provide simple things that they can enjoy.
The podcast continues next edition when Nicole will speak to Modibodi’s Chief Marketing Officer, Liana Lorenzato. Our final episode features Katie Eastment who will discuss brand building.
Do you work for an e-commerce brand? To understand more about the consumer mindset or how your marketing/communications strategy can best address these behaviours, contact email@example.com.