Irrational consumers with good reasons

Why don’t Danes seek out the best deals even when they can save good hard cash? MindLab helped the Consumer Agency to understand the choices that consumers make.

”It would take a lot for me to switch banks again. Basically, I don’t want anything to do with financial matters. If I could pay money not to have to, I would.”

Copenhagen woman

Danes are loyal customers when they go shopping, visit the dentist or borrow from the bank. They choose the places they are used to visiting and rarely investigate the possibility of getting a better deal elsewhere. The Consumer Agency believes this is unfortunate, because consumers with more awareness would encourage competition and create a better situation for themselves. MindLab helped the Consumer Agency to understand what is at stake when consumers make choices that from an economist’s perspective can seem irrational. The aim was to produce ideas for initiatives that could help consumers to make better-informed choices in the future.

MindLab involved:

• 9 bank customers from various regions of Denmark

Principal results

• A thorough understanding of the bank customers’ motivations and tools

h2. What MindLab did

In a pilot project MindLab decided to focus on consumers’ relationships with their banks, because the banking industry is an area of commerce that enjoys one of the highest levels of customer loyalty, despite the fact that much money could be saved if consumers behaved with more awareness.

In the course of the project, MindLab interviewed nine Danish bank customers about the last time they had taken out a loan or switched banks. They heard stories that were a far cry from the economists’ notion of the rational consumer. For example, the project yielded a meeting with a brewery worker who was so eager to buy her dream house that she had not even thought to discuss the terms of her loan. Not to mention the academic from Copenhagen who consciously chose not to spend any time investigating the cost of bank loans because he felt he could afford not to. Overall, the interviews yielded some snapshots of consumers who brought up some good reasons to act ‘irrationally’.

The interviews were an eye-opener for the officials, who gained an insight into consumer logic and behaviour patterns that was quite different from the one they had previously had. On this basis, the Consumer Agency decided to conduct a larger-scale qualitative study of consumer decision-making in many different fields of commerce, and to supplement this with a quantitative study. In the spring of 2010 MindLab will use the results from both the pilot project and the new study to perform a number of tests on some initiatives that are intended to make consumers more rational in the future.

”Doing research in an allotment shed is more fun than trying to find out which bank charges the lowest interest rate. I don’t get any kind of kick from investigating how much interest banks charge.”

Consumer