The Psychology of CX: Seven Behavioural Economics Principles That Improve Experience Without New Technology

By Alex Boland

Perception is a comparison between what a customer received and what they expected. There are seven principles from behavioural economics that can change the experience without changing a single operational fact.

When we talk about improving customer experience (CX), the conversation now almost always jumps to technology. New AI, a smarter platform, another channel. That instinct can be right, and it is a conversation we have with clients every day. But it can quietly skip over something cheaper, older and remarkably powerful: the way human beings actually make decisions.

Much of what shapes how a customer feels about you has very little to do with the nuts and bolts of what happened. It has to do with how you made them feel about what happened. Perception is a comparison. It is what someone received measured against what they expected to receive. Change the expectation, or how you frame the outcome, and you can change the experience without changing a single operational fact.

That idea sits at the heart of behavioural economics, a field brought to life by thinkers like Daniel Kahneman, Richard Thaler and Dan Ariely. Below are seven ideas from that field that I find most useful and how each one shows up in a contact centre or a service journey. Steal freely.

Key Takeaways

• Perception is a comparison between what a customer received and what they expected. Changing the framing changes the experience without changing any operational fact.
• Effort is the main event in CX. Every extra step, form field or clarifying question is a tax on a brain built to conserve mental effort.
• More choice reduces action. In the Iyengar and Lepper jam study, 24 options converted at 1.8% while six options converted at 12%.
• Customers remember the peak and the ending, not the average. Find the peak pain point in your key journeys and design it out.
• A peer comparison changes behaviour where information alone does not. One letter to high-prescribing GP practices cut antibiotic prescriptions by an estimated 73,406 in six months.
• Defaults are read as recommendations. Organ donation consent runs at roughly 12% in opt-in Germany and 99% in opt-out Austria.

1. Two systems, one tired brain: why customer effort predicts satisfaction

Kahneman’s work describes two modes of thinking. System 1 is fast, automatic and intuitive. It is low effort, and it is often wrong. System 2 is slow, deliberate and analytical. It is more accurate, but it costs real energy, so we avoid using it wherever we can.

Try this one. If it takes 5 machines 5 minutes to make 5 widgets, how long would 100 machines take to make 100 widgets? Most people’s gut says 100 minutes. The answer is 5 minutes. That was System 1 answering before you gave it permission.

This matters because we make an enormous number of decisions every day, by some estimates, as many as 35,000. We are built to conserve mental effort, not to spend it. So, anything you put in front of a customer that increases effort pushes them to give up sooner and rate the experience worse. In CX, effort is the main event.

For CX: measure the effort in your journeys and remove it. Every extra step, form field or clarifying question is a tax the low-effort brain resents.

2. More choice is not a gift: choice overload in products, channels and communications

There is a famous study involving jam (Iyengar and Lepper, 2000). Researchers set up a tasting table in a grocery store. Sometimes it offered 24 flavours and sometimes only six. The big display pulled in more curious shoppers, and they tasted more. But when it came to actually buying, the 24-flavour table converted at just 1.8%. The six-flavour table converted at 12%.

Fewer options, far more sales. The abundance looked appealing and quietly paralysed people. Faced with too much, the low-effort brain does the easiest thing of all, which is nothing.

The lesson scales. When Telstra ran its T22 program it cut its consumer and small business plans from around 1,800 to 20 core plans. That was not only a tidier shelf. The company reported year-on-year net promoter score gains of +24 points for sales and activation and +12 points for assurance, with almost half of customer interactions moving to digital. Less choice, and measurably happier customers.

We see the same pattern in the communications our clients send. For one Australian council, the annual rate notice was a reliable trigger for a spike in call volume. When we reviewed it, the problem was not the rates; it was the letter. It was written from the council’s point of view, assumed the reader already spoke council, and buried the one thing most residents needed to know: they often didn’t need to do anything at all because their direct debit was already in place. Too much information, framed for the sender, drove avoidable contact. Rewritten from the customer’s side, it did the opposite.

For CX: ask whether you offer too many products, plans or channels, and whether your communications carry more than the customer needs. Curate the options and write to the one action that matters.

3. We remember experiences differently than we live them: the peak-end rule

Here is where it gets strange. The way we remember an experience is not the same as the way we lived it.

In the 1990s, researchers (Redelmeier and Kahneman, 1996) asked patients undergoing a colonoscopy, in the era before routine sedation, to rate their pain every 60 seconds. One group had a shorter procedure that ended at a painful peak. Another had a longer, objectively more painful procedure, but the final minutes were made deliberately gentler. The second group remembered the experience as less painful, despite enduring more total discomfort for longer.

This gave us the peak-end rule. We judge an experience largely by two moments: its most intense point, good or bad, and how it ended. Not the average. Not the sum. Think of being lost in IKEA for an hour, then walking out with a cheap ice cream and an enormous hot dog. The maze fades. The happy ending sticks.

We put this to work for an insurance organisation. On paper the process looked fine, but one step quietly wrecked it. The person you spoke to could not take payment, so the call had to be transferred to a separate team on a separate system, then transferred back, often to someone new who started again. A smooth journey with one clunky, painful peak in the middle. We worked with the technology vendors, found why the first agent could not take payment, and adjusted the integration so they could take it directly. The whole step disappeared, and the peak pain point went with it.

For CX: map your key journeys, find the peak pain point and the ending, and redesign the operation around them. Those are the moments the customer carries.

1. Not all good things are equal: hygiene factors and Kano model satisfiers

The Kano model reminds us that drivers of experience do different jobs. Some are hygiene factors, sometimes called must-haves. Empathy, speed and clear communication fall here. Their absence causes real dissatisfaction, but their presence is simply expected. You do not get extra credit for a customer feeling heard, but you get punished if they do not.

Other factors are satisfiers, where more is genuinely better. Expertise is the clearest example. A confident, accurate, knowledgeable interaction has no ceiling. Every increment above expectation builds satisfaction and loyalty. Meet the hygiene factors so you do not lose, then invest in the satisfiers to win.

For CX: use driver analysis to sort your factors into hygiene and satisfiers, then stop over-investing in factors that can only ever get you to neutral.

2. The first number changes everything: anchoring in customer communications

Anchoring is our tendency to lean too heavily on the first piece of information we see. In one classic experiment (Tversky and Kahneman, 1974), people spun a wheel that landed on either 10 or 65 (the wheel was rigged), then were asked what percentage of United Nations countries are in Africa. Those who saw 10 guessed on average 25%. Those who saw 65 guessed on average 45%. A meaningless number quietly moved a real-world estimate.

In CX, the first price, option or figure a customer sees becomes the anchor for everything that follows. You can make a difficult outcome feel far more reasonable by anchoring it against a worse one. Offer the technician tomorrow in an all-day window, and it sounds like an imposition. Mention first that the next guaranteed two-hour slot is a week away, then offer tomorrow, and the same all-day window suddenly feels like a favour.

One of our clients had a wave of customers rolling off a heavily discounted hardship plan offered during COVID. The original messaging apologised: sorry, this is ending. Customers were furious. So they flipped the script to something closer to congratulations: you have had a significant discount for four years; that is a great outcome, and it is now coming to an end. Same fact, same money, far fewer complaints. How you present something matters as much as what you present.

For CX: set the anchor on purpose. The first number, option or comparison a customer meets will colour everything that follows, so choose it.

3. We do what our peers do: using social norms to shift performance

Humans are social animals, and social norms shape behaviour more than information alone does. In a national UK trial (Hallsworth and colleagues, published in The Lancet in 2016, run by the Behavioural Insights Team), the highest-prescribing GP practices were each sent a single letter from England’s Chief Medical Officer. It told them, in plain terms, that they were prescribing antibiotics at a higher rate than 80% of practices in their area.

That one letter led to an estimated 73,406 fewer antibiotic prescriptions over the following six months, a drop of 3.3%, at almost no cost. A separate arm of the same trial tried patient-focused posters and leaflets instead, and that made no meaningful difference. The information alone changed little. The comparison to a peer norm did the work.

The same lever works inside an operation. I once ran an inbound sales team for a large Australian telco where performance varied widely. We simply showed each person, privately in a one-on-one, where their own numbers sat against the rest of the team. No names, no warning letters, just the comparison and an honest conversation about how we could help them improve. Conversion rose by 22%. It is worth adding that COPC’s benchmarking does exactly this at the level of a whole operation, showing a business where it sits against its peers.

For CX: show people where they stand against a relevant norm, whether that is an agent against the team or a business against its benchmarks. Comparison moves behaviour in a way that plain information rarely does.

4. The power of doing nothing: designing defaults that help customers

Finally, defaults. Compare effective consent to organ donation in Germany and Austria (Johnson and Goldstein, 2003). The two countries share a border, a language, and similar culture, values and healthcare systems. Germany sits at around 12%. Austria sits at around 99%.

Same choice, wildly different default. In Germany, you opt in to donate. In Austria, you opt out. Almost nobody changes the default in either direction.

A default is read as a quiet recommendation, and because we are wired to minimise effort, most of us go along with it. Australia, where I live, runs an opt-in model. Some analysis suggests that a shift to an opt-out model could see well over a thousand more Australians receive a transplant each year, largely by redesigning a single form.

Defaults show up everywhere in service. One insurer we worked with wanted to lift self-service during renewals and had built a genuinely simple online path. But the communications had never been audited, and line after line nudged people the other way: if you have any questions, please call us. Meant kindly, it quietly steered customers into the most overloaded, most expensive channel, the opposite of what everyone wanted. Fixing the wording pointed people to the path that was actually best for them.

For CX: design your defaults and design your communications, so the easiest path is also the best one for the customer.

The seven, at a glance

Principle	What it means	Where it shows up in CX
Two systems	We default to fast, low-effort thinking	Strip effort out of every journey
Choice overload	Too many options paralyse	Curate products, channels and communications
Peak-end rule	We remember the peak and the ending	Protect the peak, finish well
Kano	Hygiene factors versus satisfiers	Meet the must-haves, then invest in expertise
Anchoring	The first number frames the rest	Set the anchor deliberately
Social norms	We follow our peers	Show people where they stand
Defaults	We stick with the pre-set option	Make the best path the default

The bottom line

Technology will keep changing what is possible in CX, and we will keep helping clients make the most of it. But some of the highest-leverage improvements cost almost nothing. They come from understanding how people think and designing the experience around that.

There is one thread running through all seven ideas. Each of them plays out across a whole journey, not at the single moment a customer happens to contact you. The peak that gets remembered, the communications that trigger a call, the default that decides a channel: they all sit upstream of the interaction you measure. Knowing the psychology is one thing. Redesigning the entire service journey around it is what changes the numbers.

Want to go deeper? This piece draws on four books I would happily recommend to anyone interested in behavioural economics and customer experience:

• Thinking, Fast and Slow, Daniel Kahneman
• Nudge, Richard Thaler and Cass Sunstein
• Predictably Irrational, Dan Ariely
• The Effortless Experience, Matthew Dixon, Nick Toman and Rick DeLisi

If there is one practical next step, it is to look at your experience as a whole journey rather than a series of isolated contacts. That is exactly what COPC’s Service Journey Thinking is built to do. You can explore the approach here: https://www.copc.com/what-we-do/customer-experience/service-journeys/

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About the Author

Alex Boland
Director, Australia & New Zealand Operations, COPC Inc.

Alex has more than 25 years of hands-on experience in customer experience, operations, consulting, and transformation across the Asia Pacific region. He leads COPC Inc.’s regional strategy and delivery across Australia and New Zealand, spanning consulting, benchmarking, training, certification, and operational excellence. His client work covers government, telecommunications, financial services, utilities, outsourcing, and technology, with a focus on CX strategy, performance benchmarking, contact centre operations, process optimisation, and large-scale transformation programs. Alex represents COPC in industry research and benchmarking studies and speaks regularly on operational excellence and customer-centric transformation.