Thursday, 18 October 2012

Experience vs. Memory

Decisions are made based on MEMORIES of experiences and not the actual experiences according to behavioural economics Nobel Prize winner, Kahneman. This has important implications for the field of marketing, which is largely focused on creating the perfect customer experience.

A great example from the video below tells the story of a man who had been listening to a symphony, and it was absolutely magnificent music. However, at the very end of the recording, there was a terrible scratching sound, and he reported quite emotionally that it had ruined the whole experience. But it had not; what it had ruined was the memory of the experience. He had had the experience, 20 minutes of glorious music, which counted for nothing, because he was left with the memory. The memory was ruined, and it was all he had gotten to keep.

According to Kahneman’s Peak End Theory, when we evaluate past experiences, we tend to rely on the most intense part (Peak) and on how they ended (End). As both of these moments coincided in the above example with the unpleasant scratching sound, the memory of the person was of a negative experience. Practically all of other information appeared to have been forgotten.

This is one of the many fascinating cognitive biases we have been exploring in the Market Research for Decision Making unit of study of the Master of Marketing. This concept can be applied to areas such as customer service by getting bad news over with early, so that customers focus on the more positive subsequent elements of the interaction. A positive ending, such as complimentary desserts served with the bill at a restaurant, leverage this theory as the final elements of the interaction will stick in the customers' memory.

What other decision biases do you find play an important role in consumers’ experiences?

Adriana H. Current student in the Master of Marketing program at the University of Sydney Business School

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