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Fight, Flight or Pay

By Pedro Cerqueira
Pedro Cerqueira
Husband, father, former water polo athlete, now an obstacle course runner with Nikes. Passionate about data and product development.
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Fight, Flight or Pay
The act of paying is on the critical path of our customers’ purchase journey and it is, undoubtedly, one of the most, if not the most important action any of our customers can perform that has a direct impact on the financial health of our business.

With that in mind, it's critical for product development to focus on holistically understanding the payments' experience and its main impacting factors, so as to formulate data-driven strategies to create and deliver the perfect payments' experience to each one of our customers!

How might the payment experience feel like and be perceived?

From a customer's perspective, choosing a payment option, sharing payment sensitive details and actually paying for the order are crucial activities, as they are mandatory for the transaction to take place. Despite this, paying is understandably not deemed or perceived as very enjoyable.

Paying is the moment in which the positive feelings of exhilaration from searching, finding and considering the objects of our customers’ desire and affection might start to be overwhelmed by the peak of not so bright feelings, often related to online transactions, such as purchase anxiety, insecurity and risk aversion.

These usually kick-in with different intensities as the customer approaches the moment of clicking/tapping the button to pay and their commitment to the purchase starts to materialize into the real possibility of trading something of net present value (their hard-earned money) for the uncertainty around the possibility of getting their expectations fully met by the promise of a product and/or service.

These sentiments are exacerbated online as the customer cannot really experience the physical product before purchasing or know what the service will be like.
In addition, these days, most online customers are fully aware of online payment scams and have a risk-averse stance when it comes to paying, "fleeing" at the slightest sign of financial peril, just like our ancestors "fled" if they believed a lion was roaming around, taking advantage of the "better safe than sorry" instincts that allowed them to survive and thrive in those early days.

The experience just described can be better understood through the lens of the work of Abraham Maslow in his 1943 paper "A Theory of Human Motivation" in which he introduced his concept of a 5-tiered hierarchy of needs, as well as through Csíkszentmihályi's seminal work "Flow: The Psychology of Optimal Experience" in which he presented the state of flow and its impact on happiness. When searching and browsing through their beloved items on a luxury e-commerce website like Farfetch.com, customers can create emotional connections with the items we sell, reaching the "flow" state. In that moment they become so engrossed and captured by the activity being performed, they enter into a trance where the world disappears from consciousness and they are just enjoying browsing and the Farfetch experience to its full potential. At this phase, the site experience is mostly helping fulfil more complex needs at the top of the hierarchical pyramid (social, esteem and self-esteem needs). Although, when the moment of paying arises there's an abrupt change on the customers' main job-to-be-done and more basic lower level needs related to safety (e.g. financial security) are put into question (even if sometimes exaggeratedly), which explains the drastic shift from "leisure mode" into "survival mode".

So far, this has been an emotional rollercoaster, but this was only half the battle as the payments’ experience isn’t over after clicking/tapping the place order button: unfortunately, sometimes, our customers are not able to pay on their first attempt or at all, especially in a high-value order industry like luxury fashion, in which the average order value often behaves in an inversionally proportional manner to the payment authorization rate.
Payment decline scenarios might happen due to a huge set of different internal (e.g. service unavailability, etc) and external reasons (e.g. insufficient funds, card thresholds, etc).

Regardless of why the decline happened or even how positive the experience was until that moment, the customer sentiment will most likely be negative (negativity bias), potentially of frustration and anger, and their perception will presumably tell them that we are at fault even if we really aren’t (self-serving bias).
This negative sentiment may continue to be perpetuated and possibly exacerbated when being spread through word-of-mouth in the customer's circle of friends and acquaintances, as well as the next time the customer thinks about purchasing with us (horns effect). This is mostly because of the way in which people judge an experience largely based on how they felt at its peak (i.e. its most intense point: the frustration derived from getting a payment decline) and at its end (e.g. not being able to pay and acquire the one thing they wanted and came to the site for), rather than based on the total sum or average of every moment of the experience (peak-end rule).

Because of this, the payments’ experience is a moment that demands the perfect management of customer expectations.  

The impact of "friction" in creating the perfect payments' experience

The perfect payments' experience is one in which the thinking needed to pay feels second nature to each customer, reducing the mental effort to the bare minimum necessary to purchase, thus avoiding the phenomena of ego-depletion that might make the customer abandon their cart (yes, the same ego-depletion that might incentivize impulsive buying can have the opposite effect).

Every time we force the customer to spend unnecessary mental resources thinking (e.g. how do I pay?), making a decision (e.g. what payment option do I choose from all the seven available?), acting (e.g. filling unnecessary payment form fields) or recovering from an error (e.g. why was my credit card refused?) we add what we usually call "friction".
Too much "friction" and the customer is out of here and we don't know if we're ever going to see them again or what they’ll tell their friends! (Although we can assume it's not going to be very flattering!)
Again, this "flight" behaviour has its roots in our ancestors as they thrived, by carefully selecting their "fights" and how to efficiently spend their physical and mental resources in order to survive in a harsh and unforgiving environment. Each point of "friction" represents a potential "fight" in which the customer has to, most of the time subconsciously, decide whether to "fight" or "flight". There are seemingly bigger "fights" (e.g. customer gets no help or guidance after a payment decline error) and smaller "fights" (e.g. customer isn't provided with adequate tips on how to fill the card expiration date form field). When most of these decisions start to be made consciously it's highly likely that the experience is no longer being felt as second nature from the customer's perspective.

For the untrained eye, many of these "friction" points might even seem too small or inoffensive in isolation but together might compound into a "death by a thousand cuts" phenomena. Coupled with the many different cultures and contexts that surround each customer's purchase experience (e.g. trying to purchase after a hard day at work or relaxed at home) it's interesting to measure and validate how the probability of cart abandonment increases as customers hurdle through the different "friction" points in their purchase journey and the very significant impact on a company's top line.

Given this, delivering a payment experience that feels second nature to the customer in which they are nudged to think just enough at the right time is paramount to reach the perfect payments' experience, which will be more likely to lead to conversion (if that's what we're aiming for!).

How do we aim at giving each customer their perfect payments' experience?

What is classified as "friction" and its actual impact will vary from customer to customer and it's important to measure and learn how each individual reacts to it as each is unique in their characteristics and context!
What works for one customer might not work for another!

The above sounds overly complex and time-consuming, but, nowadays, Product people are creating products customers love by harnessing the power of behavioural data and experimentation at scale!

As an example, this means we can build machine learning algorithms that will feed from data on each customer payment behaviour and preferences to automatically and continuously experiment, learn and adapt their individual payment experience to be exactly what they need at each moment in time! (Even rather than what they think they want!)

Our machine counterparts can help us create the perfect payments’ experience since when the customer gets to our site for the first time until the day they eventually lapse.

Algorithms can identify, compare and categorize a customer by learning from similar customers and their behaviors, as well as the customer's past behavior.
  • A customer that just got to our site can be identified as someone that is more likely to advance to checkout to purchase if they know we support their preferred payment method. This means that the experience can experiment adapting to "advertise” that payment option earlier in the journey.
  • When getting to the payment step, if a customer is categorized as more risk-averse and sensitive to security issues, the experience can automatically adapt its look-and-feel and copy to assure them no sensitive data will be kept.
  • After their first glance at the available payment options, the customer that has always been paying successfully with a 100% authorization rate on their credit card can be positively surprised by the automatic pre-selection of credit card as their default option.
  • The customer fills their credit card details and, despite the contextual help, gets 2 consecutive form validation errors. By knowing that this type of customer usually leaves before their third validation error, a modal can immediately pop up putting a Customer Service agent in contact through the customer's preferred channel.
  • After correctly filling the payment form, the customer tries to pay, but gets an insufficient funds error. At this moment, a new option may appear to suggest splitting payment by more than one credit card, allowing the customer to pay successfully!
The results of each single little experiment just mentioned will allow our algorithms to learn and continuously re-adapt the experience as more data is collected in a never ending virtuous cycle.

As we can see by the examples above, the perfect payments' experience is not always completely "frictionless", especially when it comes to such a complex task like paying. The perfect payments' experience is one that adapts proactively and reactively to the context and the different circumstances that successively arise from usage, enabling the customer and the business to achieve their goals.

Just think, what if the user was identified as fraudulent as soon as they first land on the site? The perfect payments' experience could immediately adapt to purposefully add "friction" to their purchase journey, consequently reducing the chance of chargebacks and helping the bottom line!

THE opportunity for Product Development

The future of product development is exciting and this is a huge opportunity!
Imagine being able to test all these hypotheses at scale while making sure to balance top and bottom-line impact to make the right calls for both the Customer and Farfetch!

And, for the long run, rather than to settle for creating and building the perfect payments' experience, humans and machines can work together to create THE perfect experience, whatever that feels or looks like for each individual customer!

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