Competing on Customer Experience with Behavioral Science

By viewing the client journey as linked decision-making touchpoints, advisors can improve the client's experience.

Renée Richardson Gosline is a Senior Lecturer in the Management Science group at the MIT Sloan School of Management and the head of the Human-First AI Group at MIT's Initiative on The Digital Economy. Dr. Gosline is an expert on the intersection between behavioral science and technology, and the implications for human decision-making.

Each year, our SPDR® MasterClass program draws on the expertise of top researchers like Dr. Gosline to help advisors grow their businesses, keep pace with change, and better satisfy clients’ evolving needs.

Behavioral science can help us better understand how clients think, feel, and behave — insights financial advisors can use to design a more compelling client experience.

Here we share key takeaways from the research of Renée Richardson Gosline, Head of the Human-First AI Group at MIT's Initiative on The Digital Economy. Her actionable advice empowers advisors to become “choice architects,” ready to apply behavioral science for competitive advantage.

How Humans Make Decisions

Traditional neoclassical economics would say people make choices to optimize their benefits or utility. As humans, however, we make decisions based on feelings, expectations, cognitive load, and a host of other factors that may lead us to sub-optimal choices.

This is where behavioral science comes into play, helping us understand the dual-processing we all use, as described by Daniel Kahneman in his book, Thinking Fast and Slow. We may engage the wrong system at the wrong time. Even though your clients are intelligent and have clear financial goals, they may make decisions by engaging “system one” automatic thinking instead of effortful and deliberate “system two” thinking.

To aid optimal choice, advisors may want to re-think the client journey. Too often, people think about the end result and the KPI. How much did they invest? Did they adopt or not? But when you think only about a KPI, you can miss out on how customer experience is affecting the probability of that KPI.

Dr. Gosline stresses a probabilistic lens of client experience: the probability of any KPI is the sum of what happens at all customer touchpoints. And, because you can shape these touchpoints, you can also shape your client's experience and improve their decision-making.

Encouraging Optimal Choice With Chutes and Ladders along the Client Journey

Dr. Gosline uses the metaphor of an Chutes and Ladders to help leaders understand the client’s decision journey. Imagine an inverted game of Chutes and Ladders, where you start at the top and endeavor to reach the destination at the bottom. When descending a ladder, you must pay attention and make sure you’re balanced or else there's risk. Sometimes, you’ll even need a person to hold the bottom of the ladder to give you stability. Chutes, in contrast, are easy and delightful. You just sit at the top and zoom down the chute without really having to think about it.

When looking at a client's journey, Dr. Gosline encourages advisors to think about places where ladders (that stand between the client and an optional choice) can be converted to chutes. Ladders require clients to engage “system two” thinking, while chutes allow clients to leverage “system one” thinking.

One way to convert ladders into chutes is to use nudges. Nudging isn’t about making someone want to do something they don't already want to do; it’s about creating a conducive choice context based on an alignment of goals. It’s an approach to designing systems that help people achieve their goals.

Dr. Gosline suggests we look for opportunities by asking, “At what points do we have a lack of action despite clear goals and will? At these points, you may be able to convert a ladder into a chute.”

What types of nudges could be in your toolkit? Dr. Gosline says research suggests some effective approaches, including:

• Defaults: What is the outcome if your client does nothing?
• Social Proof: Provide models of what other similar people are doing.
• Timing: Ask at the right time to increase the probability a behavior is taken.
• Reduce Effort: Help clients reduce effort to improve their outcomes.
• Design to Delight: Think about features and customizations to improve the experience.
• Anchoring: Pay attention to the numbers that are in your client’s environment.
• Finish Strong: Plan the client journey so that it ends on an upswing to create a halo effect on the entire journey.

Apply a Framework to Improve the Client Experience

Advisors should actively work on creating exceptional client journeys, applying Dr. Gosline’s Deconstruct, Describe, Prescribe, Experiment (DDPE) framework:

1. Deconstruct the journey of choices: Start by mapping out the decision touchpoints for a client journey from your client’s perspective.
2. Describe with data: How do we know what's happening here? What data have we collected? What don't we know and what should we start to measure? If you don't measure it, you can't improve it.
3. Prescribe: Based on your analysis, prescribe improvements to the client journey (e.g., which ladders to turn into chutes).
4. Experiment: Think about how you might collect data to test your prescriptions for one key touchpoint via experimentation.

For extra credit, consider meeting with a select group of clients to map out their journey from their perspective. What do they say their journey looks like? How do they describe their pain points? What do they say could be improved?

Engaging in direct conversations with clients about their journey will help them feel heard and become co-creators of their experience. That way, when you apply the DPPE framework to create the optimal client experience, you’re able to consider not only the information and data you have, but also your client’s perspective on their experience.

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