Are Customers Predictable?

Dan Ariely is a professor of psychology and behavioral economics at Duke University. He is also the author of two best selling books: Predictably Irrational and The Upside of Irrationality. As part of his research, he runs hundreds of experiments on how people make decisions – especially financial or purchase decisions.

Classical economics suggest that people make purchase decisions rationally after weighing all the potential upsides and downsides to the decision. His findings suggest otherwise.

One of the chapters in his book covers the irrationality of free. When people are given multiple choices, including a free choice, the free option was the one most commonly exercised even though it had an obvious downside. Getting something for free gave people such an emotional charge that they perceived what was being offered as a lot more valuable than it actually was.

Experiment after experiment, he found that people picked the poorer choice and were indeed irrational. But here’s the kicker: They were predictably so.

“… these irrational behaviors are neither random or senseless – they are systematic and predictable.”

– Dan Ariely, Predictably Irrational

So even though people may act irrationally, their behavior can be modeled. You don’t need lots of numbers to do this either. In qualitative experiments, like usability tests, it has been shown that just 5 tests uncover 80% of all the issues. Similarly, after just 10 customer interviews, you can often predict how the rest of your prospects will react to your offer.

Not only is this kind of repeatability to be expected,

it is a requisite pre-condition for pursuing growth.