408. Harnessing the Peak-End Rule for Outstanding Experiences (Refreshed Episode)

Welcome to episode 408 of the Brainy Business Understanding the Psychology of why People Buy Today's episode is all about the peak and rule. Ready? Let's get started.

You are listening to the Brainy Business Podcast where we dig into the psychology of why people buy and help you incorporate behavioral economics into your business, making it more brain friendly. Now here's your host, Melina Palmer.

Hello. Hello everyone.

My name is Melina Palmer and I want to welcome you to the Brainy Business Podcast. Today's episode is all about the Peak End Rule. Experience is something I am so passionate about, whether it's external with customers or internal with employee communication. There's so much that can be done to make experiences better for the humans we interact with in business every day, and this is a great way that behavioral economics can be woven into your strategy to make it so you can better communicate and design experiences. Today's Concept the Peak End Rule is a huge piece of that puzzle. It gives us a framework to know where to start when it comes to tackling experience. Because when you think about the micro moments happening in the brain and all those countless choices, it could feel a bit overwhelming and like it isn't worth it to even get started on experience. But never fear. Thanks to the Peak End Rule, you can limit that seemingly endless list to just two key points. Learn all about in Today's Episode don't forget that there are links for everything, including my top related past episodes and books waiting for you in the show. Notes for this episode, which are found within the app you're listening to and at the brainy business.com4:08 all right, let's talk about the Peak End Rule.

This is one of those concepts that's super easy to understand and get your arms around, but can be difficult to overcome and implement the logic from it in practice. Fortunately, it doesn't need to be that way and hopefully explaining how the rule works will help you to be more confident in using it in practice. Essentially, the Peak End Rule shows us that people do not rate experiences on all their details. Instead, only two points are used to determine overall opinion of the event. The peak, which can be either positive or negative, and the end. Imagine any experience from eating out to buying something online and consider these questions you've probably heard a lot how was everything? Or how did it go? Or something like that. How do you answer that question? More often than not you probably just say fine. But if you are really going to think through and give the most thoughtful possible answer, say you were doing a customer experience survey and being paid for your time. How much more effort would you really put in to answering the question? And then does it even actually encompass any more of the truth than your quick response would have? There would be no perfect and complete way to answer this type of question every single time, but a common example would be going out to eat. To truly answer the how was everything? Question, you would need to consider a whole lot of aspects each course on taste, temperature, texture and how it related to your expectations, interactions with the waitstaff, anytime waiting in the lobby, time with the hostess, ambiance, pricing, and more. Each of these items would have multiple points and times that need to be considered. And what frequency would you need to use as checkpoints to give a truly thorough answer to the question every minute, second, millisecond? All of this doesn't even take into consideration how a conversion chart might work. Say, how many good taste points does it take to make up for a negative ambiance point? Your brain is probably exhausted just thinking about all that work, and this is why the peak end rule, a heuristic or rule of thumb, has been so widely adopted by your subconscious brain. Instead of trying to create an average of all the possible data points and some seriously complex calculations, you can get a good enough answer to the how was everything question using this little mental trick. What your brain ends up doing is forgetting about everything except for the peak point and the end point. All the other things sort of fade into the background. Even if you were brought in and being paid to provide your thoughts on your overall experience with the brand, you would do this. Think about your last experience buying something on a website or staying at a hotel or past vacation, a customer service call. It all comes down to the peak and the end points, and this even impacts our opinions on painful medical tests. Kahneman and colleagues did a study on a couple of medical procedures which they believed would be set up in a way that they would be particularly awful for the person experiencing them because they ended at the most painful part of the procedure. So it was a little painful, then a little bit more, then very painful and you're done. The peak and the end were both at the worst possible point, so they recommended making the procedure go a little longer. The beginning was exactly the same, a little painful, then a little more very painful, and instead of ending there, it then tapered off a little before completion. In this scenario, people were in pain for longer than they needed to be, so more pain overall. But participants overwhelmingly said they liked the second procedure better and would prefer to do that one again. When given the choice, having a little time for the peak to taper off and not be the final moment made the entire experience feel better. One reason this happens is duration neglect, which is essentially saying that we don't pay too much attention to the entire length of time something happened, and these couple of reference points are all that matter. Another Kahneman experiment had people put their hands in extremely cold water. It was 14 degrees Celsius, or just over 57 degrees Fahrenheit. They had to hold their hand in the water for 60 seconds. Then in a second experiment, they put their hands in the 14 degree water for the same 60 seconds and then kept their hand in the water for an additional 30 seconds while it was gradually warmed to 15 degrees Celsius or 59 degrees Fahrenheit. It's barely warmer and 50% longer with your hand in cold water. But which experience do you think people preferred? That's right, the second one. They neglected the overall duration and preferred more time in cold water because it got a little better and separated the peak from the end. It's crazy, but true. And don't go thinking that you always want to extend the duration. It's all about the nature of the experience and your strategy to determine when you should end and how those peaks and end points should work together. Essentially, when the peak peak is negative, you don't want it to line up with the end because it will make the entire experience feel particularly awful. In the opposite situation, when the peak is a really good thing, an overly positive experience ending on the peak is actually very valuable. Essentially, when the peak is negative, you don't want it to line up with the end because it will make the entire experience feel particularly awful. And while in an ideal world we would have nothing but the best possible experiences with our brands at every turn, no matter what. Always good stuff. There are some things that you are needing to ask your customers to do that are not going to be fun. Or your patients or clients, depending on the type of work that you're in. And if you know that it is that negative experience, if it's not going to be their favorite thing to do, you want to make sure that you don't end at that worst possible point. And one of the things you have to be able to do to really look at this properly is to take a step back, look at all of your experiences and think which ones are going to be bad. Being willing to accept that not everything is sunshine and rainbows. And if it is a bad experience, if it's something they're not going to love. That's okay. That can happen. Sometimes it has to happen, like in a painful medical procedure. But. But how do you make it so that it's not going to be the worst possible experience when you can make it a little bit better? Even in a counterintuitive way? It can help people have a better perception of you and the process and everything throughout all of their interactions in the opposite situation, when the peak is a really good thing and overly positive experience ending on the peak is actually very valuable. Think about a concert, maybe a symphony, which ends on the crescendo of everything coming together at once. The finale of a fireworks display, or the most thrilling part of a roller coaster. When those experiences end on their highest peak, they feel particularly awesome. So knowing what type of experience people have with you can help determine what peaks you're dealing with and where they should focus. Fall in the overall experience and any business will have multiple experience paths to consider each individual buying sequence, the search on your website, trying to get videos to play, email sequences, calls to your customer service. Each one has its own assortment of evaluation points with a peak and an end, and those can all add up over time to create an overall experience with you as a brand. I'm going to outline a few of these opportunities quickly for you before we complete the episode. If you've never done any work and customer experience journeys, this may feel overwhelming to try and tackle everything all at once instead of letting that overwhelm keep you stuck. That's bike shedding in action. It's important to break this process down into its smallest pieces. The Master your mindset mini course worksheet can actually help a lot with this, and there is a link to that free course for you in the show notes. My advice is to set aside an hour, use the first half of that to make a comprehensive list of all the experiences you could work on, and the examples I will touch on throughout the episode can help you see how many avenues you could take that in. Use that full 30 minutes to get as many of these opportunities out of your head, and know that 30 minutes is intentionally a long time. You're going to exhaust the easiest stuff in five or maybe 10 minutes. But as you get past that point and dig a little deeper, you're going to come up with some good opportunities that might have been overlooked. Then take the next 30 minutes to prioritize them. You can put them into general buckets, maybe rank them as level 1, 2, or 3, and then once you've sorted them into those buckets. You can just focus on everything that's a level one to prioritize and pick the most important thing that is the the one process you want to start with. In addition to bike shedding, there is another brain bias that will be working against you when you think about tackling this project. As I outlined in the first episode on Resetting your mindset, which was episode 13 and is linked for you in the show notes@the brainybusiness.com 97, your brain's inclination will be to think that until you're as great as the star in your space or others you're following on social media or where you can't launch or get started, that until you're offering something they would be proud to put their name on, you can't put anything out there. The thing with your experience peaks and endpoints, those customer journeys is they're already happening. Something is happening all the time and that is the anchor you should be working from. Aspire to eventually be as great as those people you admire. But today, when you're looking at what your experience is going to be tomorrow, you want to look at what it is that people are actually getting from you today. What's the most important experience someone could have with you? The top process and how does that flow right now? Where are the peaks and how does it end? Where can you make it better? What improvements can you make to up level the experience by focusing on those peaks and ends? And a quick pro tip for you whenever possible, don't get bogged down in what you're doing now and try to tweak little by little. Instead, look at what the experience would be in your ideal state and consider how you would build that out. I've done a lot of work on websites for clients and your brain's natural tendency would be to look at the website and go through page by page while you plan the new one. I highly recommend against this and don't let my clients have the site up at all. As we're planning their new one, we talk through ideal state and steps. What's the most important thing then? What? And this helps remove unnecessary steps that are adding clutter and friction. It can very much help an overall experience and help your brain be willing to let go of those extra things you feel like you need to have that might not actually be important anymore and are potentially actually making the experience worse. All of that helps with the overall experience so there are less points of potential irritation and it makes your peak end evaluation much easier. If you get rid of a bunch of extraneous stuff that doesn't have to be part of the process, you have less points to deal with. I think the best thing to learn from this rule is that while it is important to consider everything in an experience to ensure you don't have any big negative peaks you aren't aware of, when there are only two points that matter, you can focus on those two things and not have to worry about everything else. Essentially, let's look at an experience that would take into account 10 points over a span of time, and each one of those points can be ranked on a 10 point scale. Let's say eight of those moments are a five, totally average. One of the remaining points, which is somewhere in the middle, is a 9, and the final point, the end, is a 7. Even though the bulk of the experience is mediocre, that isn't how a customer will remember it. If you were to do a straight average of the 10 points in time, which is what we might be inclined to do, you would end up with a 5.6 on the experience scale, which doesn't feel great. But when you know that the two points that really matter are the peak and the end, you wind up with an 8 overall, which is a pretty solid experience. For the flip of this, let's consider an experience that also has 10 points, and we're still using that 10 point scale. Eight of those points are a seven compared to the fives in the previous example. But there was a massive negative experience that came up as a two and things got a little better, but still ended on a four. Using traditional brain logic, you could get the average experience of 6.2, which is better than the previous experience when all those points are factored in. But just like our first scenario, not everything is going to be recalled by that customer. It doesn't all matter the same. So you're really looking at a very negative 3 overall in this experience. Now, I'm not suggesting that you should lower the average across all experiences, but you don't have to worry about every single moment and data point so much. Instead, you can focus on a couple of opportunities within the experience to incorporate surprise and delight, which was the focus of episode 60 and is linked for you in the show Notes, Unexpected moments of delight drive loyalty and ongoing happiness with your brand. If you can incorporate some positive surprise moments to drive occasional positive peaks, you're doing wonders for the overall perception of your company and the experience of working and interacting with you. And now you can feel unencumbered by the stress of feeling like you have to be stellar 100% of the time. In reality, if you deliver at an 8 most of the time or a 9, there's not much ability to peak except in a negative way. Then there's no way to go but down. And that can be really hard to maintain. Again, for people who do have great experiences, I'm not telling you to make things worse across the board. Instead, this is more about helping everyone to relax and feel good in focusing on their peaks and those final moments. As you're looking to uplevel the experience with your business and even with the best planning, negative things happen. Sometimes, depending on the severity of that thing, it might feel like it's the end of the line, but it doesn't always have to be the end of that customer's experience. In many ways you get the opportunity to determine how long that experience lasts. Remember duration neglect. People liked having their hand in cold water for longer when it got slightly better in those extra 30 seconds. Even if you don't have the opportunity to create a positive peak, putting a little effort into ensuring the last moment isn't the worst can have seriously positive benefits on the overall perception of the experience. People get upset sometimes and they might be fuming and threatening to leave. We've all been there. But because of status quo bias and not loving to make changes, often the effort it would take to leave or will make most people willing to wait it out and see if things get better. Especially if they have a long positive history with your brand. By shifting from a myopic view of this one single moment and looking at this customer's overall journey, you can put them into a surprise and delight path if something bad ever happens. So they have that bad moment and you do what you can to bring them up at least a little with a great customer service call. And I'm going to talk about that a little bit more here in a minute. Then look at what their next couple of engagements would and could be. How can you infuse one or two exciting moments that will create a positive peak and cancel out the negative moment in the long run? Now, as I said, I want to go ahead and run through those couple of examples fairly quickly and showcase different ways you can incorporate the peak end rule into your business and understand it better as a consumer. First off, I want you to think about those customer service experiences since it builds off the example I just finished. Have you ever decided you want to leave a provider? Maybe your cable company or phone company or whomever else we have to do this all the time. And then you had to deal with their nightmare of a customer service experience. Sometimes the people are very rude and make you feel bad bad about wanting to leave their accusatory or threatening. That can take a mediocre history of working with a provider and quickly shift it to a terrible one that people are going to tweet about and blast a brand for the next 10 years. I know I've had this happen where I was moving out of the area and so they didn't actually offer the service in the new county I was moving to and the company was making it really difficult and trying to make me feel bad about canceling my service. I think it was, you know, public utility, something like that, to which you can't even help me where I'm going. Why does this have to be a bad thing? Why is it negative? As a business, it's important to know that there will be churn, people will leave sometimes and it's basically never in your best interest to have that end on a bad note. So if instead I'm the customer again having to leave and the person is incredibly pleasant and understanding and helpful, then you might reconsider if you can or at least remember them more fondly than when you originally decided to cancel your service. When it's time to get that kind of service again, you might remember them in a more positive light than you would have without that final positive customer service experience. Because the end was such a highlight, businesses will almost always benefit from thinking about the long term experience with customers. In this moment, it might seem like it's the end and that person is gone for good no matter what. But more often than not, that just isn't the case when you treat everyone as if they might come back someday. Look on the bright side and don't burn bridges. It can help with overall reputation and memory of working with you. Because of this peak end rule, in addition to the customer service experience on the phone, think about the experience of buying things on your website. Is it easy, streamlined, clear? Or is it full of confusing negative peaks? When the experience is over, they bought the item, what happens next? Remember, you have the opportunity to extend that experience if it would benefit everyone. So instead of ending at the thank you, your order has been placed moment where they might have some excitement, but they're not exactly looking at a stellar experience there in that flat verbiage. How could you make that a little more positive? Maybe instead of a boilerplate complete message, you can add a little excitement, confetti, in the background, a gif a line that says awesome. We're starting on your widget right now. And remember, the ordering experience doesn't necessarily end when they click buy. What happens when they're waiting for their item to be delivered? When they open the box? When they use it for the first time? How can you make each of those experiences better? And if you were to pick one to make the peak so you don't need to feel overwhelmed with everything, how could you put your eggs into that awesome experience basket? This framework can of course be implemented into any experience with you, your staff, and your business, and it's pretty easy to see the customer engagement opportunities. That's where most people will automatically think when you consider the peak end rule in business. But I want to give you an outside the box example to show the range of how this can apply across all types of experiences. This thing I want to talk about now is employee reviews. I recently wrote an article for my Inc. Magazine column which talks about this specific example and it is linked for you in the show Notes. I'm going to tell you a little bit about it now, and so I want you to think about employee reviews. If you've never done them before, you've probably received one, and if that's not true either, you can probably still put yourself into the mindset pretty easily. So I want you to imagine you're a manager and you have five employees. I know some businesses do all their reviews at one time during the year. I'm so thankful I didn't have to do that. But it's very possible that you may need to do all five at one time and imagine what that means for people who have 25 employees or more. It's a nightmare. So you now have to do reviews for your employees. You sit down to write the first one and reflect upon the entire year. What comes to mind? Do you think about all the average days or do you reflect on a peak or maybe two or three since you're forced to put more effort in and some of the things that have happened most recently as an employee, it's important to know that most managers will look at peaks and very recent happenings when working on your review. Even though it is supposed to encompass the whole year, the brain just has a hard time grabbing all that information. And as with the previous notes, that doesn't mean you should slack off for the first half of the year to bring down your average or anything like that, but you should look for opportunities to incorporate some positive peaks and if there are negative peaks. Do what you can to smooth and balance them out in an authentic way and not looking like a too little too late situation or that you're only doing this because a bad thing happened. One other thing you can do and the basis for my Inc Article is to keep notes on your accomplishments throughout the year so you can help remind your boss of a few peaks to choose from as they do your review. The article is written for the managers so they can work throughout the year to take notes and help overcome the Peak End rule when evaluating their employees. I recommend coming up with a method for note taking, digital or in a physical notebook and writing down observations each week. You could take the opportunity to rank that week on a 10 point scale to help incorporate some of the average days if you wanted, and there can be as little or as many details as you will find helpful. The point is to make note of more than just peaks and if you have any employees where you have a particularly biased view whom you think can do no wrong, or those who can never do anything right, it's a good opportunity to find force yourself to take notes of at least one possibility for improvement or one thing they did well to help balance out the way you look at everyone. And then you have this summary to go back to at the end of the year. So as you can see, the Peak End rule is impacting a whole host of aspects in your life, including your relationships with those around you, including your boss, co workers and employees. When you're tasked with giving an unbiased and holistic review of a giant span of time like a year, it is important to not be swayed by the Peak End rule. So taking notes during the year is important to help do the best job possible. Again, that article I wrote on this for Inc. Magazine is linked for you in the show notes so you can go check that out. If you are working on employee reviews, it gives a more detailed step by step process on how you could work to overcome that bias. The last place I want to touch on where the Peak End Rule comes into play is pricing strategy. You know I love it. I've linked to a couple of research studies in the show notes for anyone who wants more detail. But for our purposes I want to use the example of home values. Let's say you buy a house for $250,000 one day you check Zillow and see the values listed at $600,000 and you think whoa, that's amazing. Then you get an email letting you know that was a glitch within the system and the value is only 300,000. How depressing does that feel? Now that you saw the peak value of 600, even though it was never really real, you have the option now to sell your house for 300,000 and make 50 in profit. Does it feel appealing? What if you bought the same house for 250,000 and watched it climb to 275 and felt fine? And then someone walked up out of the blue and said, I would like to buy this house from you today for $300,000? Do you feel elated at that number? Surprised and delighted. The peaks are setting anchors for your brain to help you determine value and how you ultimately feel at the end. Even when the final number and the beginning number are exactly the same, the peaks between the beginning and the end dictate your overall impression of the value and the experience. If you and your business have fluctuating prices, this can be a good thing. But it's important to know how seeing very high or very low numbers can impact someone's overall opinion. The stock market is another great example of this. People are really good at building big dreams around the highest value on their portfolio, even though those numbers are always changing and not guaranteed. The brain claims perceived ownership over that idea and is very averse to losing it. I've linked to the episodes on loss aversion and booms, bubbles and busts, if you want to hear about all that in more detail. But again, the peak and the end are what matter in someone's opinion of their stock value. And in that case, they're more likely to focus on the positive peaks than anything else. What could have been and what's around right now to determine how they feel about the overall value and how secure they feel into the future. The total number they invested and what it would have been worth somewhere else. Pretty much out the window and not considered. That'd be too logical, right? So, getting back to the pricing example, for those who don't change price as much, what would happen if you did have a super high end offer for one time only? Or if you're always running discounts? What if you forced yourself to charge full price for a month to reestablish value? How would that drive behavior when the next sale occurred? Considering the peak end rule in your pricing and what the most recent was, what the highest point was, what the lowest point was? That all matters in the price that you're offering today based on the expectation of what someone has seen relative to what you're charging now. To quickly summarize what we outlined in this episode and you will find this on your freebie worksheet is that experiences can be lengthy or short and no matter how many points we could consider to evaluate them, more often than not there are only two points that matter, the Peak and the end. When the experience is bad, extend it past that worst point to make it feel better. When the experience is good, consider ending at the highest point and look at all your experiences, both the ones you go through each day and for your customers to find points where you can use the Peak End rule to your advantage and increase the overall experience people have with you and your brand.

So what got your brain buzzing as you learned about the Peak End rule today? For me, I love how versatile this concept can be. I think it's most common to look at this in a customer facing way only.

And yes, that is so important for.

Companies, but it doesn't have to start and end there. Employees have experiences with you as well. If you're in hr, it can be about hiring and onboarding and knowing that the Peak End rule can be really important as you look to hire and retain great talent. If you're in a department, you can look at the experience that other teams have when engaging with you. Maybe this is the ticketing system used by an IT help desk or the marketing team, or the processes people are having to deal with when they're interacting with accounting or project management. Or as I said for any manager looking to do reviews.

As I talked about throughout the episode.

You can have a positive impact on your experience scores whether you formally collect them or not. By leveraging the Peak end rule. Maybe you even look for opportunities to incorporate some surprise and delight to help boost things even more. Whether you're working on customer facing experiences or ones with internal employees or both, my top recommendations when looking to use the peak and rule are to find and eliminate those negative peaks first so they aren't working against you. Then look for ways to boost positive.

Peaks and have fun with it it.

By incorporating surprise and delight. And of course you need to understand the true end of your experience as it isn't always as clear as it may seem. For more on that, I've linked to my episodes on Disney and my conversation with Jennifer Kleinhens where we talk about that specifically, as well as my conversation with Bob Cialdini when we talked about experience and how delight can help combat negative peaks when they pop up. Those top related past episodes and books are waiting for you in the show notes for the episode which are found within the app you're listening to and@the brainybusiness.com 408 and just like that, episode 408 on the Peak end rule is done. Join me Friday for a brand new episode with Haley Swofford to share about love at Microsoft. It's going to be a lot of fun. You don't want to miss it. Until then, thanks again for listening and learning with me. And remember to be thoughtful.

Thank you for listening to the Brainy Business Podcast. Melina offers virtual strategy sessions, workshops and other services to help businesses be more brain friendly. For more free resources, visit thebrainybusiness.com.