We all understand what sunk costs and opportunity costs are. That is our rational being, which usually fails to show up when making everyday decisions. We are susceptible to many different biases that are rooted in emotions than rational reasons. This does not change when we are making purchases for our businesses. One such emotion is our response to buying experience and associating it with product experience.
In my previous articles I wrote about cognitive cost to customers in choosing a version from all available options. The effect of choice proliferation and the cost it imposes has been reported before. A more striking finding was*, the cost incurred at initial purchase remains sticky in the minds of your customers. Worse customers associate this cost with product experience. After a customer makes the purchase, the cost she incurred in making the selection is sunk and hence should have no impact on rest of the product experience. Unfortunately that is not the case.
In the recent Harvard Business Review article, Dan Ariely (Predictably Irrational) writes about his research on “The Long-term effects of short-term emotions”. Ariely and Andrade found,
“emotions could influence how people make decisions even after the heat or anxiety or exhilaration wears off.”
In their experiments, they found that those who had an emotional response carried that emotion even during later rational decision moments. This is because people tap into their memory of decisions made earlier. So if the buying experience is really painful with multiple options to choose from, multiple questions to answer and forms to fill out, your customer is bound to feel annoyed. When someone asks them about product experience, they tap into their memory and recall this annoyed state and give bad overall rating for your product.
The good news from Ariely’s findings is, it cuts both ways. If the customers had a great buying experience its effect is felt long after the initial purchase.
It is not enough for you to focus on product UI and product experience – your buying experience should be exhilarating as well or at least not annoying to the customers.
*The Optimal Number of Versions: Why Does Goldilocks Pricing Work for Information Goods? Journal of Management Information Systems / Winter 2007–8, Vol. 24, No. 3, pp. 167–191.