The Peak End Rule

There is a belief that customers want outstanding experiences, yet the Peak End Rule reveals that what we actually want is outstanding memories of those experiences. Research by Nobel laureate and psychologist Danny Kahneman demonstrates that our memories are based on peaks and endings, rather than on the average of how we felt throughout them. Ultimately, the way that we remember an experience is far more important than how we felt when we lived it. It’s the memory, not the experience, that determines how likely we are to talk about, repeat or recommend it.

Therefore, while it’s fashionable to think about creating outstanding, seamless, end-to-end experiences, retailers would be far better served thinking about how to create one or two highly memorable “peaks”, especially towards the end.

We have a moment in time where we can be very deliberate in thinking about how consumers will answer the question, “How was your first trip back to the shops?” What is the one thing that we want them to remember? What’s the single, memorable peak we can purposefully create?

The Licensing Effect

The Licensing Effect speaks to our innate desire to balance out virtuous acts with our indulgent ones to retain equilibrium. It’s why we’re more susceptible to being tempted by a burger for lunch if we’ve worked out in the morning, or why we feel good treating ourselves to a couple of glasses of red on a Friday if we’ve worked hard all week. In the pre-Covid world, this heuristic was a staple to sell luxury goods and cars. The majority of luxury car advertising has, at least, a faint element of, “Isn’t it about time?” or “You deserve it!”

Since the emergence of Covid-19, our ledgers have been well and truly stacked in the virtuous camp: civil obedience, frugality and general conservatism with nothing but wine subscriptions and the daily brownie at the cafe to reward ourselves. As soon as we’re allowed back to relative normal, consumers are going to be looking for treats big and small.

Retailers should be contemplating how to position themselves as that big or small treat. For most, it won’t be as obvious as a billboard proclaiming “Treat yo’ self!” but rather tapping into the emotion that comes from treating yourself while tastefully acknowledging what we’ve endured. In a post-Covid world, the “You deserve it” sentiment apt to luxury cars and handbags will apply to more people and more products than ever before.

The Choice Paradox

Choice Paradox is the idea that we love the idea of having options, but are quickly overwhelmed by having to make a decision. When presented with too many options, we end up feeling less satisfied with what we end up selecting, as our brains cruelly fret about all of the wonderful things we didn’t pick. And that’s if we end up making a selection in the first place.

Believe it or not, people will be thankful for having fewer but better options to choose from. This could be done with tighter ranging, breaking large categories into smaller ones by tier or style, more directive layouts, or attentive retail staff. Anything that breaks up that wall of choice and makes choosing simpler. 

With these three biases in mind, we have a once-in-a-generation opportunity to redefine the retail experience, at a time when consumers worldwide will be craving it the most.

Author: Behavioural science expert Dan Monheit is cofounder and strategy director of creative agency Hardhat. His behavioural economics podcast, Bad Decisions, attracts many thousands of listeners in over 90 countries.

This story appears in the August 26, 2020, issue of Inside Retail Weekly.