Data-inspired decision-making – How are consumers making choices today
As per a report by Forbes, most of the data-centered organisations are 23 times more likely to acquire customers, six times as likely to retain those customers, and 19 times as likely to be profitable as a result. Data scientists go through numerous hours of research to present unbiased and scientific data-driven decisions. But do you think all the decisions we make in our daily lives are data-driven? Do you think all the data resonates with the psychological factors that eventually help us make a decision? Let us talk about it.
Data-driven vs Data-inspired
Many of you might not realise it, but most of the decisions we take in our day-to-day lives are data-inspired -- be it shopping from an ecommerce platform or thinking of a new venture.
Assume you are trying to buy a shirt. Most of us will research on the product (shirt) and see if the rating is good enough to make a purchase. However, it does not stop here., After seeing the near to perfect ratings, we scroll down to the reviews section to see what negative things other buyers have pointed about the product to make the final decision.
A rating of 4/5 is assumed to be good enough for a product to be purchase-worthy. However, when you try to sneak into the reviews section and let the comments overpower the near perfect ratings, you are no more making a data-driven decision. Game over! It is most likely to be called data-inspired. You are trying to slice down the given data to consider if you should really purchase the product or not.
Organisations leveraging data
Understanding consumer behaviour is very critical for organisations to retain their competitive advantage.
As per a report by McKinsey, organisations that are using their consumer behaviour insights strategically are outperforming their peers by 85% in sales growth margins and by more than 25% in gross margins.
Having said that, the change in the consumer behaviour and availability of unstructured data can make it difficult for organisations to understand the selling patterns. Here is when risk analysis comes into play.
Organisations need to incorporate risk analytics while making the core strategies for their business. It will help them to learn about the high-risk opportunities and how they can have a competitive advantage while standing at the edge of digital disruption.
Data-driven vs. your decision
Where organisations are trying to make completely-aware decisions, we as consumers are so used to the process of analysing our options that we often end up finding ways to being biased towards our favourite products. And trust me, it is just not you alone.
Do you know, just to present the perfect data around every product, the data scientists have to work day and night so that you can make the most of the provided information? Everything is done meticulously to save you from the turmoil of finding the perfect product/service.
But, what do you think we do with that data? Most of us try to stick to the sides of our favourites and try to find the reasons for picking them. Even if the rating of the products we do not love much is 4.5, we will still try to find the reasons behind it not getting a perfect 5. We will very easily find ourselves agreeing to the only ‘not so good’ reviews the product has and then eventually buy from our favourite picks.
This is where our decision becomes conformation bias, where many of us just want to feel good about our decisions by looking at the drawbacks or limitations of the other products we did not buy. This helps us to stay satisfied and see the best in our purchase.
The solution – Is there any yet?
Data is good, but the consumers should be trained. Yes, data-driven facts are a great start to decision-making; however, in the end, it all narrows down to the consumers.
Sometime it is hard to agree with the data provided and that is where data intelligence comes to the rescue.
Imagine buying a new computer for yourself. You like a computer and it has the configuration that you want. As the second step, you see what the price of the computer is and if your budget allows you to make the purchase or not. Now, this is a great example of data intelligence. How?
Setting decision boundaries is very important to utilise the data provided in the best way. Once you know you have the perfect computer, checking the price and reviews (data) will help you make the final decision. If it agrees with your budget, you are good to go. However, if it does not, you may have to look for the second-best option.
It might not be the most critical data-driven or, say, data-inspired decision that you have to make; however, practicing it to let this naturally come to you for all your future decision-making is extremely crucial. Making this a habit will help you make the best choices in the future.
Negotiating your way to final decision
Being prepared in advance with your decision criteria is what helps you make the best suited decisions in your life. When it comes down to negotiation, knowing your decision boundaries and criteria are equally important to land on the best choices.
If you do not have a decision criterion on your mind, you are not going to win the negotiation and will feel out of the place. Eventually, you will end up flipping sides without any firm ground and end up at a loss. For instance, while negotiating at a reseller shop, if you do not have a number on your mind, you might end up settling for a higher price.
The bottom line is…
To ensure that you are making the right choices which resonate with the proven data, it is important that you practice it in your day-to-day decision-making. Cultivating this habit is a great start to bridge the gap between data and your decision-making. Incorporating it in your daily tasks will help it all come naturally to you. Are you leveraging data-driven strategies in your organisation?
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)