{"id":21530,"date":"2019-05-31T13:17:47","date_gmt":"2019-05-31T17:17:47","guid":{"rendered":"https:\/\/beyondphilosophy.com\/?p=21530"},"modified":"2020-04-09T15:46:02","modified_gmt":"2020-04-09T19:46:02","slug":"why-uncertainty-can-destroy-your-customer-experience","status":"publish","type":"post","link":"https:\/\/beyondphilosophy.com\/why-uncertainty-can-destroy-your-customer-experience\/","title":{"rendered":"Why Uncertainty Can Destroy Your Customer Experience"},"content":{"rendered":"

Uncertainty influences a lot of our customer behavior. We buy products to reduce the risk in our lives, like insurance. Insurance buys us peace of mind if something bad happens to us or our property. We also buy lottery tickets because, well, someone has to win, right?<\/span><\/p>\n

The fact is we are not fantastic and predicting the likelihood of unlikely events in our lives. We prepare for what we see is inevitable and put our hopes in the most unlikely of positive outcomes. This behavior is how we react to uncertainty. <\/span><\/p>\n

We discussed some of the psychological theories behind our need to placate uncertainty as customers <\/span>in a recent podcast.<\/span><\/a> In psychology and human behavior<\/a> there exist many different approaches to thinking about risk. One of the most worthwhile for us to talk about is Prospect Theory and its implications for customer behavior. <\/span><\/p>\n

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Prospect Theory and Why We Fixate on the Extremes<\/b><\/p>\n

Prospect Theory<\/span><\/a> was part of a Nobel-Prize-winning idea published in the 1970s by the team of Professor Daniel Kahneman and Amos Tversky and explains how we make decisions when we perceive there is risk or uncertainty. Prospect Theory is made up of a couple of essential idea areas, the Value Curve, and Probability Estimation. <\/span><\/p>\n

The Value Curve addresses how people evaluate things subjectively. This part of Prospect Theory deals with <\/span>Loss Aversion<\/span><\/a> (how we hate losing more than we like to win) and Diminishing Marginal Returns (we are highly sensitive to changes in the status quo) and <\/span>Reference Point<\/span><\/a> (or our standard for evaluating things) effects, a couple of subjects I have written about in the past.<\/span><\/p>\n

The second part is Probability Estimation. Probability Estimation describes how likely we think something is to happen. Probability Estimation and our feelings of uncertainty are linked and drive our behavior as customers more than we probably think. <\/span><\/p>\n

Probability Estimation is why people tend to overestimate the likelihood of improbable events and underestimate the possibility of events that could happen. For example, one of my team members hates flying because she worries she is unsafe in an airplane. However, it is doubtful that she will ever be in an airplane crash. It is far more likely that she will be in a car crash on the way to the airport. (This fact provides little comfort to her by the way; now she is a wreck for the entirety of the travel day.)<\/span><\/p>\n

However, it isn\u2019t just her. We all worry about implausible events. \u00a0There is a phrase I love about this: \u201cI’ve had many crises in my life, but few have actually happened.\u201d<\/span><\/p>\n

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It Isn\u2019t Just Doom and Gloom Though\u2026<\/b><\/p>\n

We don\u2019t always fixate on the negative. Sometimes we are over-optimistic, too. For a variety of reasons, we tend to overemphasize the extremes in both directions. It\u2019s a little like this clip from <\/span>Dumb and Dumber<\/span><\/a>:<\/span><\/p>\n