How Customers Make Complex Decisions In A World of Constraints

We often discuss the Intuitive and Rational System and how they work together to help customers make decisions. The Intuitive System is automatic and emotional, and the Rational System is deliberate and logical.

What we don’t usually share is that by academic standards, this concept is relatively new. An older theory also explains why we act the way we do as customers, and you need to know about it to promote customer success.

This episode of The Intuitive Customer Podcast explores the concept of bounded rationality first introduced by Nobel-Prize winning professor Herbert Simon in the 1960s. We also discuss how this concept applies to your customers’ behavior and your CX strategy.

 

People Make Decisions within Constraints

Herbert Simon was a polymath, which means he was a genius in several fields.

He contributed a lot to a lot of different areas. Simon was a city planner, a professor, a psychologist and one of the first computer science professors. In fact, many of the theories that we use today in computer programming are the brain-child of Simon.

Simon’s concept of bounded rationality is an essential concept in modern behavioral science. It means that people are rational, but they do not have infinite amounts of rationality. They are logical within constraints.

The constraints that Simon refers to are common to all people. We have a limit to our attention span and memory capacity. We only have so much energy to devote to thinking. Often, we don’t have all the information and cannot forecast future events with a ton of accuracy. However, if we were rational all the time, none of these limits or shortcomings would matter.

To put it another way, people are not computers. They don’t make rational decisions all the time, but they also don’t make random decisions based on emotional whims either. We use rationality but within the boundaries of the circumstances of the decision-making environment.

An example of bounded rationality influencing customer behavior could be opening an email from a retailer you like and seeing a special sale that is going to end in a short amount of time. When you are sorting through the details of the offer, which leave a little to be desired regarding clarity, your work calls to ask if you can come back to the office for an emergency. The decision-making environment you are experiencing, which includes a limited-time offer with murky details and a big crisis at the office that needs your immediate attention, will affect how you make a decision.

 

Listen to the podcast in its entirety to learn more about how customers make decisions using bounded rationality.

 

The Intuitive Customer podcasts are designed to explain the psychological concepts behind customer behavior.  

If you would like to find out from one of our CX consultants how you can implement the concepts we discussed in your organization’s marketing to improve customer loyalty and retention, contact us at www.beyondphilosophy.com.

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