Driving Value Through the Peak-End Rule.

There are four major types of value; functional, monetary, social and psychological. For brands developing an understanding of how to best leverage each type of value in the right measure for their specific customer cohorts is critical. However, value, like beauty, is in the eye of the beholder, and therefore a one-size-fits-all approach to the value exchange is unlikely to fly.

The issue therefore is how to apply the value exchange at scale and this is where the peak-end rule comes in.

For those unfamiliar with behavioural economics, the Peak-End Rule is a very interesting psychological heuristic – that is a mental shortcut that enables people to make decisions quickly without having to stop and think for a long period of time – that is significant to how people interpret value.The Peak-End rule first came to light in a research study by Fredrickson, Schreiber and Redelmeier; they looked at how participants reacted to two versions of an unpleasant experience.

Participants were asked to dip their hand into a bucket of cold water (14 degrees Celsius) for 60 seconds. They were then asked to do the same with the other hand but keep it submerged for a further 30 seconds, during which the temperature of the water was raised by a degree.

Participants were then given the choice which version to repeat. Overwhelmingly participants chose the second test despite the fact that they endured the unpleasantness for longer.

The memory of the second test, where the temperature of the water was raised was better than the memory of the first.

Since 1993 there have been a number of follow-up studies to reinforce these findings. For instance colonoscopy patients were divided into two groups. One group were given a normal colonoscopy procedure, whilst the other groups underwent the same procedure but the scope was left in place for a further three minutes but not moved, this was uncomfortable but not painful.

The participants that underwent the longer procedure were found to be more likely to return for future appointments.

Despite most studies being tested on unpleasant experiences, it holds true for pleasant experiences too. What people feel at the most intense point of an experience and at its end is what they will use to judge their entire experience, rather than the sum total.

Now what this doesn’t mean is that you can provide ghastly customer service and then at the very end send a delicious cream cake by way of apology (although that might help!), because the peak is as important as the end.

As with any theory, there are of course outliers.

For example with luxurious experiences, the first touchpoint has actually been found to be the most influential. Fortunate diners sitting down to a tasting menu more often base their evaluation of their experience on their impression of the first dish rather than the meat course (often considered the ‘peak’) or final dish.

So for brands targeting high net worths it is critical to get the first touchpoint right as the entire value exchange is centred on that very first moment.

In contrast, for brands where the peak-end rule applies mapping the customer journey for the different behavioural customer cohorts will mean that it is possible to build brand loyalty by delivering meaningful experiences at the times that matter most.

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Written by:

Richard Calvert

Founding Partner at The Thread Team