[WATCH] Chatting CX With Dr. Liraz Margalit: Understanding Consumer Behavior & Motivation Online

Retail is transforming at an extraordinary speed. Brands are managing both the challenges and opportunities that come with that. One of the most dramatic changes has been the meteoric rise of digital shopping over the last year. This jump has given way to a new breed of consumer behavior, and brands are now tasked with adapting online shopping experiences in kind.

To consistently keep ahead of consumers’ ever-changing wants and needs, brands need to understand that, now more than ever, shoppers are co-creators of their online experiences.

I recently sat down with Dr. Liraz Margalit, a digital psychologist and globally renowned speaker specializing in behavioral design and decision-making. Her consumer behavior research won the Online Business Excellence award for 2016 as well as the Best of Neuromarketing. She also writes an ongoing blog for Psychology Today called ‘Behind Online Behavior.’

We spoke about emerging trends in consumer behavior in the wake of COVID-19. In our conversation, we covered numerous factors that influence purchasing decisions, from context to our physical senses. Dr. Margalit also shared examples and strategies to optimize eCommerce discovery and conversion in light of new customer expectations.

Watch the video or check out highlights from our conversation below (edited for clarity):

Consumer Behavior and Purchase Decisions: How Context Comes Into Play

Syte: Many businesses have moved online, and brands are now dealing with the challenge of creating great customer experiences for a new breed of shoppers.

When people decide how, what, or when to shop, we see that we’re not as rational as we might think. Can you guide us through what really goes on in the decision-making process?

Dr. Margalit:  Traditional economic theory speculates that our purchasing decisions follow the principle of utility maximization. In other words, when we try to decide which item to buy, we measure each potential selection against the criteria most important to us. That may be cost, or warranty, or features, or safety. We then choose the option that most accurately meets our needs. But this model also assumes that our preferences are defined and constant all the time.

But this isn’t reflected in real-life decision-making, especially when talking about online consumer behavior. The psychological perspective suggests that each purchasing decision is quite dependent on the context in which it is made. So, the value that we attach to a particular option can vary significantly depending on our mood, our emotions, our previous experience, even the number of options available, or any of several other factors.

For instance, studies suggest that information processing is directed by what we call relative thinking. We think that we know our preferences, but we don’t know what we prefer until we see it in context. Let’s say, you enter a website and you see an amazing new bag that costs $1,000, and then, another purse that costs only $600. You suddenly feel that the latter purse is cheap because you first saw another, more expensive item. We don’t judge the item in isolation or objectively; we keep comparing one option to another. This is how we make decisions.

How Effort Factors Into Consumer Behavior Online

Syte: There’s a lot of room for design thinking in how you create eCommerce flows. How can you apply this to create better experiences and increase conversion?

Dr. Margalit: What we saw when we studied online consumer behavior is that people are more likely to engage in a given behavior or task based on the amount of effort it requires. Online visitors rely on the fluency of the information process to determine how they feel. People often misread the difficulty associated with processing information as indicative of their feeling about the product. So, this misperception directly impacts their willingness to purchase a product or a service.

Online users tend to choose the easiest route possible and try hard to avoid high-level processing. Consider identical instructions for a chocolate cake recipe. When presented in an easy-to-read font, readers assumed that the exercise would take 8.2 minutes to complete. But when the instructions were presented in a difficult-to-read font, readers assumed it will nearly take twice as long to complete. People equate the difficulty of reading instructions with the difficulty involved in the exercise itself.

Consumers in a store wearing masks.

New Consumer Behavior Trends & Preferences Have Emerged With the Pandemic

Syte: This is a challenging time. COVID-19 is shaping the new normal. It not only brings a lot of new shoppers online but also a new type of online shopping behavior. What do you make of that in terms of customer experience? Are there specific things that could make or break an experience for a first-time online shopper?

Dr. Margalit: We are right now in a very unique period in history. Of course, it affects consumer behavior and purchasing decisions. Although the pandemic’s impact has varied across regions, I found five themes that have become evident among consumers across the world.

5 New Themes in Consumer Behavior

  • Shift to value and experience: This trend has begun even before COVID-19 but now, it’s as if people have decided that they know what matters. What matters is not the product itself, but the value and actual experience.
  • Move to the digital and omnichannel experience: Consumers go out to the physical store only to feel the product, but then buy it online. The store is not for purchasing. Most categories have seen more than 10% growth in their online customer base. Many consumers also say that they plan to continue shopping online, including the elderly, even when brick-and-mortar stores reopen.
  • Growth of the health, caring, and homebody economy: We know that people, suddenly because of the pandemic, started to care about their health. We see a high percentage of consumers buying healthy products. People also realized that they don’t know when the pandemic will end. So, shoppers are preparing to spend a lot more time at home. More than 70% of consumers don’t yet feel comfortable resuming their normal out-of-home activities.
  • Loyalty is in flux: For certain products and brands, COVID-19 caused supply chain disruptions. When consumers couldn’t find their preferred product at their preferred retailer, they changed their shopping behavior. Many consumers have tried a different brand or shopped at a different retailer during the crisis—especially when they didn’t have a choice. The value, availability, and quality of products were the main drivers for consumers to try a different brand.
  • Gravitating toward clean UX: Consumers are so concerned about the pandemic that they’re looking for a cleanliness online, a clean, neat design that can re-assure and encourage them to purchase from a website. Conversely, people prefer not to buy from a website with UX that doesn’t seem clean.
consumer behavior insights for online shopping

Multisensory Experiences & Retail’s New Reality

Syte: Can you speak to the impact of our senses on how we shop, and how brands can leverage that to improve the customer experience?

Dr. Margalit: Yes. Our understanding of purchasing decisions is based on both emotional and rational considerations. We consider rational information such as price, or product quality, or reviews, or ratings; as well as emotional information such as the feeling of a new iPhone or the excitement over an upcoming vacation, or how we feel when we find a dress in a shop.

Yet, new research reveals that other surprising variables can significantly affect our decision-making process. This might include things like where we are standing in the moment of purchase, which scent our noses detected, what music is playing in the background, or whether we happen to be drinking a hot drink, or eating ice cream. So, while we like to think that we know why we make the decision we make, we are controlled by hidden, biological forces more than we would like to admit.

For example, one study found that the smell of cinnamon is subconsciously linked to the feeling of warmth, which in turn, increases the attractiveness and the perceived effectiveness of a heat cushion. Another study found that the smell of leather in a shoe store, even from a spray can, leads to more purchases.

A woman shops online, displaying new consumer behaviors.

Predictions for a New Type of Personalization

Syte: Can you give us some predictions for retail as an industry or eCommerce as a market? Which significant changes or innovations you think we should expect in the next three years?

Dr. Margalit: I think we will see a turning point from the field of UX to what I like to call PX, delivering personalized experiences. More and more businesses are discovering the value of customization.

It’s the opportunity to deliver a customized experience and the additional revenue potential that can be generated from it. Whenever I talk about personalization, people feel stuck in the past. They think personalization is about using a customer’s first name—but that’s automatization.

Many brands today already rest their entire business strategy on their ability to customize their products. Customization, the ability to deliver a product as a service and fit it into customers’ own needs, has become increasingly significant to brands. It’s now a part of a broader trend that shifts from viewing shoppers as recipients of value to co-creators of value. Rather than being passive, shoppers are now becoming a crucial part of the experience. We can witness the same shift in the field of UX, from designing an experience for the user to providing the user an opportunity to become an integral part of the experience.

The key to success here is adjusting the experience to meet the user’s personal needs and state of mind at any given moment. My research has found that the ability to influence the experience automatically generates emotional involvement. Companies that will be able to adjust to a personalized experience—not only say my name as I entered the website—are going to be the leaders of tomorrow.