How to shape customers’ behaviour through last-mile options

customers' behaviour
Dynamic pricing is becoming an indispensable tool for shaping customers’ behaviour and gaining their loyalty at the same time

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The study of customers’ behaviour is as old as retail itself. Whoever sells something wants to know how to best interact with their audience: what do they want? When do they want it? How often will they buy it? Do they need it fast or at their convenience? How much are they willing to pay for it? 

Four factors, as identified by Kotler and Armstrong in 2008, influence behaviour: Psychological – Personal – Social – Cultural. Data about behaviour is collected by all savvy retailers and used to manipulate their offerings to best suit their target’s historical preferences. 

When it comes to shaping this behaviour the puzzle becomes more challenging. Since the explosion of eCommerce, exacerbated by pandemic’s lockdowns, the shopping environment has drastically changed. Home delivery has become the key advantage retailers need to leverage to stay ahead in a highly competitive race. 

Propelled by Amazon’s stunning takeover of the online landscape, it looked like cost and speed were the only determining factors in this challenge. When disruptions hit the market in 2020, paralysing the last-mile segment due to the sheer number of orders vs. the capacity of fleets, it became apparent that a new set of coordinates had to be accounted for.  

These needs can be summarized in three main currents: 

  • Visibility
  • Freedom
  • Interactivity

Visibility means that the customer wants to know where his order is at any time and be informed about its progress. Freedom and interactivity are direct consequences of the growing experience that customers gathered while buying more and more online: when you master a medium you want your voice to be heard. To cut it short, self-efficacy which refers to ‘individual judgments of a person’s capabilities to perform a behaviour’ (Pookulangara et al., 2011), spiked as eCommerce became the norm. 

As exemplified by the study: Consumer Preferences for Delivery Attributes in Online Retailing, published in the Journal of Business Logistics: “consumers are willing to have their mental accounts for nonmonetary resources prevail over their mental account for money (i.e., delivery fees) if the nonmonetary delivery attribute levels are sufficiently attractive”. If the decision starts with money it is clear that cost and service, to effectively shape consumer behaviour, have to be dynamically tied and displayed in the pre-purchase phase

How can a good home delivery platform offer both visibility, freedom and interactivity? By supporting real-time tracking, good communication, the widest possible offering of options and by always providing time-slots; not fixed but flexible ones. Flexible time-slots are those in which customers choose the width and pay a price that is not fixed to the width of the slot but that changes accordingly to the actual and projected stress weighing on the fleet for that moment. This can let the retailer and shipper economically incentivize wider slots for those who suffer fewer time constraints and/or certain days/hours to better distribute volumes and maximize efficiency.  

Dynamic pricing, enabled by algorithms that compare order volumes with fleet saturation and geographical constraints, is thus becoming the indispensable tool for shaping customers’ behaviour and gaining their loyalty. We live in a fluid environment and must adapt by offering fluid solutions.

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