How Consumer Psychology Impacts Customer Service

When it comes to marketing your product or your service, it pays to know your customer. Who are they? What problems keep them awake at night? How much do they make? And where do they spend most of their time online?

If you’re intrigued, it’s time to learn about the world of Consumer Psychology and how it can help you better serve your customers.

According to the Encyclopedia of Applied Psychology, the formal definition is “The study of the processes involved when individuals or groups select, purchase, use, or dispose of products, services, ideas, or experiences to satisfy needs and desires.”

Some examples of consumer psychology include topics like:

• How consumers choose brands
• The thoughts and emotions that drive consumer decisions
• What motivates people to choose one product over another
• How outside factors like friends and family, media, and culture influence purchasing decisions
• How businesses can use information about consumer behavior to more effectively service and service their clients.

If you put your consumer hat on for a moment, you can likely think of a time that you stood in a store aisle with two different products in your hands, and made a choice. You may not have known what influenced your decision, but it was probably applied consumer psychology at work.

Don’t worry, you aren’t alone in being influenced. Gerald Zaltman, Harvard Professor and author of the book, “How Customers Think: Essential Insights Into the Mind of the Market,” says that 95% of purchasing decisions are subconscious. Is your mind blown?

Let’s take a look at two areas where you can utilize consumer psychology principles to improve your business; customer service and pricing.

Consumer Psychology and Customer Service

One area of business where consumer psychology truly shines is customer service. When you have a solid understanding of how your customer thinks and behaves, it’s much easier to provide the service and support that wows them.

Let’s look at a few tips you can use to improve your customer’s experience with your brand.

1. Create an emotional investment.

Every company should have a strong brand story. Why do you do what you do? How did you get started? Why is providing your product and service so important to you? Explaining this story should be brief and to the point, but still leave customers feeling inspired and moved to do business with you.

Why this works: When consumers get to know you as a brand and learn what you stand for, and when they develop trust in who you are and what you do, they’re more likely to stay loyal and tell their friends about you.

2. Understand your customer’s needs.

When it comes down to it, your business is about the customers you serve.

Learn what your customers' needs are and work to deliver on them. To get this information, ask for feedback from your existing customers about their pain points, your products, pricing, etc. — anything that will help you better understand how to serve them and attract new customers.

Why this works: Positive testimonials will influence others to buy. In fact, 49% of customers trust online reviews as much as personal recommendations. Of course, when you receive negative feedback, provide a friendly and empathetic response. One of your customer’s needs is to feel heard even if you don’t like what they’re saying.

3. Understand your customer’s pain points and empathize.

While you should always strive to provide solutions as quickly as possible, fixing issues quickly could be even more essential depending on what problem your product or service fixes. For example, if you own an oxygen company that helps people with breathing issues, your resolution times must be immediate. On the other hand, if you run a video game company, you want to provide the best possible service, but it’s not life or death for your customers.

Why this works: When the priorities of your business and your customers are closely aligned, you can be sure that the products and services you provide will be valuable. This is important as your company grows, but even when your business is successful, your customers will still rely on you for the basics that they originally patronized your business for.

4. Respond quickly.

No one likes waiting, especially when they’re already angry or frustrated with a product they’ve purchased. This will just make customers angrier and more difficult to satisfy. Staff your customer service department generously and put systems into place where customers can easily reach an agent who has the skills, knowledge, and authority to remedy their issue.

Why this works: Proactively keeping customers satisfied with a full staffed service department is a smarter, less expensive way to reduce churn. Otherwise, you could shell out much more in refunds, returned products, and lost business due to poor reviews.

5. Hone your communication skills.

While you’d think that good communication skills are good communication skills across the board, that’s only partially true.

People have preferred methods of communicating with businesses that you should respect. In addition, formality can either be appropriate depending on your brand or can come off as condescending and offensive.

Why this works: Understanding your customer expectations ahead of time will allow you to communicate appropriately on their terms rather than yours.

6. Foster a customer-centric mindset.

Customer centricity isn't just about the customer always being right. It's a true commitment to serving the customer in every aspect of your business including the quality, reliability, service, and overall experience from brand awareness to a repeat purchase. This level of customer satisfaction is best done in collaboration with the service, sales, marketing, product, operations, and leadership teams.

Why this works: By training and rewarding your employees so they want to provide amazing service, encouraging empathy, and making sure they always live up to any promises made, your customers will feel special, and your employees will be happier.

7. Show them they’re special.

While it’s nice to offer “new customer” promotions, they can leave your existing, loyal customers asking, “What about me?” Show your loyal fans they are appreciated by providing early access to new products, inviting them to special events, offering them rewards or bonuses when they refer others to you, etc.

Why this works: When you make customers feel like they mean something to your company after they spend their money, you’ll have a customer for life and could even see a referral as a result.

8. Provide personalized service.

No one wants to be considered “one of the masses,” but rather an individual with their own personality, desires, etc. You can foster this personalization in a number of ways, like using names when interacting, creating touch points on special occasions like birthdays or anniversaries, personalized loyalty programs so they get more of what they want, and providing recommendations tailored to who they are.

Why this works: The benefits of personalization are plenty, but this tactic makes all the difference in a decent customer experience vs a remarkable customer experience.

9. Focus on the value you provide.

Remember earlier when we said that customers will rely on you for the original products or service you offered when they originally became customers? That's still at play in this tip for providing value. Even as you expand your offerings and broaden your target market, stay true to the value that your customers have grown to love you for.

Why this works: When you focus most of your attention on the value you provide to your customer, the price will become less important. Your customer wants what you have, and because you’ve created an emotional investment, showed them appreciation, and fostered loyalty, their decision (whether they know it or not) will have less to do with the price tag.

10. Be honest about mistakes.

One of the most important things you can do in a customer service situation is admit to shortcomings. While it may seem counterintuitive, people appreciate it when you take ownership of a situation and acknowledge that your company has made an error.

Why this works: Social psychologist Fiona Lee found that when it came to stock prices, admitting to missteps and faults made test subjects see a company in a more favorable light than blaming external events or forces.

Putting yourself in your customer’s shoes will go a long way to provide the kind of customer service that has consumers lining up to do business with you.

Consumer Psychology and Pricing

Put your consumer hat back on for a few moments and consider the signage at the most recent store you visited. Did you notice price tags ending in 9? Or bright, bold posters saying you only had one day to save money on a sale?

You may not have considered it before, but the store was priming you to make a specific purchase, and marketers have been using consumer psychology to guide their pricing decisions for years. Here, we’ll take a look at four pricing strategies that are rooted in consumer psychology.

1. Charm Pricing

Researchers at MIT and the University of Chicago have proven that when prices end in 9, consumer demand for those products increased. This is because we read from left to right, so lowering the first number in the price, despite only being minimally different, makes our brains convince our wallets that we’re getting a deal.

“It’s interesting to note that when dealing with high-quality products, they do the opposite,” says Mark Stiving, Ph.D. and Chief Pricing Educator at Impact Pricing. “Stroll through a mall shoe store, and you’ll find that less expensive shoes end in 9, while the prices of expensive shoes are round numbers. Consumers have been trained to see 0’s as higher quality.”

2. Innumeracy

A study conducted at the University of Minnesota found that, when offered two options, “Buy one, get one free,” or “50% off two items,” most people would opt for the former. Even though they’re the same offer, consumers are more attracted to the appeal of BOGO. This strategy is often utilized in coupon design and double discounting.

3. Artificial Time Constraints

Remember those loud posters we mentioned earlier? These are time constraints at work, creating a sense of urgency that makes customers feel they’ll miss out on something special if they don’t buy now.

These can look like one-day-only type sales or early bird specials you see on Black Friday that tout the lowest prices ever…but only if you arrive at 6:00 AM.

4. Price Appearance

The numbers in a price are important, but so is the presentation of that price. As it turns out, a price that includes a decimal point and cents (even if it’s .00) is perceived as more expensive because there are more digits. In addition, seeing a dollar sign before a number creates a stronger association between the money spent and a consumer’s wallet, making them think twice about spending the money.

When designing your signs, marketing materials, menus, etc., consider using a whole number (no cents) and leaving off the $. If you are using Charm Pricing, make sure your .99 is a considerably smaller font than the rest of the price.

“Although buyers are not rational, they try to be,” says Stiving, “They try to determine how much value they will get and is the value worth the price. The more value they perceive, the more they are willing to pay. To increase their perception of value, you must appeal to the problems they are trying to solve or the results they hope to achieve. People only buy products to solve problems and get results.”

Applying Consumer Psychology to Your Business Strategy

As the Peter Parker Principle states, “With great power comes great responsibility.”

Now that you have this knowledge, use it for good. If your customers ever feel tricked, duped, or otherwise taken advantage of, they won’t be your customers for very long.

Use consumer psychology to both your benefit and the benefit of your customers, creating top-notch products, pricing them fairly, and then providing phenomenal customer service.

This post was originally published in February 2021 and has been updated for comprehensiveness.