The IKEA effect
In 2011 researchers from Harvard, Yale and Duke published the results of a number of studies that identified a psychological phenomenon known as the IKEA effect. Most of you will know that IKEA is a furniture manufacturer and retailer that relies on customers to, not only pick their furniture from a warehouse shelf, but then to also assemble it themselves. On the face of it (or on paper), you would expect that the main advantage that this gives IKEA is a lower cost of sale and which can then be passed onto customers. However, the very fact that customers have to invest more time and effort into the collecting and building of the furniture causes them to place a higher value on it. The researchers found that the more effort someone puts into something, the more they value it. If you have ever grown your own vegetables, I suspect you felt they tasted so much better than store-bought vegetables even though you probably wouldn’t be able to tell the difference in a blind taste-test. The very fact that you put the effort into growing the vegetables results in you assigning a higher value to them.
Amazon Dash buttons
Dash buttons were WiFi enabled ‘Internet of Things’ (IoT) devices, launched by Amazon in 2015, that allowed customers to effortlessly re-order consumer goods such as nappies or washing powder simply with the single click of a button. Customers would stick the buttons in a cupboard next to where the goods were stored and then press the button when they were close to running out. On paper, this sounds like a great idea and I, myself, bought 2 of these to use at home. While it was quite exciting to use these at first, I soon found myself preferring to go onto the Amazon website myself and purchase. Buying through the dash button was so easy I was not sure I could trust it. Did I click it twice? Was I suddenly going to get a delivery of 10 boxes? Did I get the best price? I also found that I lacked the choices on sizes and options I might sometimes want. I don’t think I was the only one that felt this way as, in March 2019, Amazon officially discontinued the dash button programme, claiming that voice purchasing has made them obsolete. Statistics on the usage of Dash buttons is not publicly available but I would suspect after a few trigger happy mishaps, they were relegated to a kitchen drawer.
So what does the IKEA effect and the demise of Amazon Dash buttons tell us about friction in e-commerce? If we make it too easy for customers to purchase online do they feel the products are less valuable or do they trust the process enough?
One of the consequences of making it too easy for customers to purchase something is that it is likely to increase your return rate. If a customer can make a purchase without thinking and considering it too much, this may have a positive impact on KPIs such as conversion rate but also a potential negative impact on KPIs such as return rates. We see this happening during peak promotional periods such as Black Friday. During this period, customers are so keen to get the good deal , they are not necessarily considering how much they actually want the items so, while conversion rates rocket, so do return rates. There is no point increasing your sales if you get a corresponding impact to your returns rate. Overall, you would probably be worse off.
Getting the balance right
I think we can all agree that in e-commerce experience where a customer has to work too hard to purchase is a conversion killer. If you put lots of barriers in front of customers, they are more likely to be put off and abandon their purchase. But let’s look at the other extreme. Let’s imagine an e-commerce site where you can order an expensive item by simply clicking a single button on the product display page. For example: a new car or a holiday. Would you be happy to spend a large amount of money without having to go through a few additional steps to ensure everything is correct and giving you time to validate your decision before committing to such a large spend?
The same could be said for high volume / low price products. This is a particular issue in fast fashion with a business model in which the price of items are generally very low which can result in customers buying multiple items and returning a significant proportion of them. In a competitive market where many businesses offer free returns, this can have a very large impact on margins. Primark, one of the UK high street’s biggest businesses, has famously resisted selling online for years due to the low price-points that they offer and the cost of picking, packing, shipping and returns which have such a high impact on margins. This is where you need to consider a balance. Maybe the value of the item should dictate how much friction you should introduce or maybe it should be based on the likelihood of items being returned.
I was recently speaking to the CEO of a very large bed and mattress retailer who told me that he would prefer customers to lie on an expensive mattress before buying it online. He even considered placing an extra step in the e-commerce checkout encouraging customers to visit a physical store to try the product before purchasing online. You would imagine that to be a huge conversion killer, but he felt that the costs involved in managing returns of mattresses outweighed the impact to conversion. While their e-commerce business is growing fast, they are having to balance this with the impact of returns. You can imagine that you are much less likely to return a mattress if you have had the chance to try it out first.
So, we have some clear examples of online and offline commerce where friction during the checkout process can benefit the customer or the retailer, whether it is giving the customer a higher sense of value or helping to reduce return rates for retailers. While adding friction to an e-commerce journey is counter-intuitive, retailers should avoid always seeing it as universally negative as a small amount of it can be of benefit.