[Editor’s note: This post was last updated on May 4, 2022.]
Is it possible for a company to be too easy to do business with? The answer, surprisingly, is “yes” – and it reflects a larger, more troubling issue about customer experience (CX) design.
Robinhood, a commission-free investing and trading app, came under scrutiny a couple years ago from behavioral researchers who argued that the platform incentivized potentially risky investor behavior. The company’s stated mission is to “democratize finance for all,” and the firm has sought to accomplish that by making online trading simpler, easier and more engaging than ever before.
Robinhood pioneered commission-free trading, which, in and of itself, removed an important financial friction point for novice investors. In addition, the app streamlined online stock transactions considerably, paring it down to a single click versus the multi-step process employed by other online brokerages.
The company also sought to make stock trading a more engaging and entertaining endeavor. When new customers sign-up, Robinhood tantalizes them with a 100% guarantee that they’ll be rewarded with a free share of stock (worth anywhere between $2.50 and $200). In addition, at certain milestones (such as making a deposit or executing a trade), Robinhood users see confetti raining down on their screen, celebrating their accomplishment. The system also pushes notifications to investors about their stock positions, further encouraging app engagement. Critics contend that these types of practices serve to irresponsibly “gamify” the investing experience.
By making stock trading (and its even more complex and risky cousin, options trading) so easy and engaging, some argue that Robinhood has removed important “guardrails” that protect investors from behaving imprudently.
In what was perhaps a tacit acknowledgement of this criticism, the company in September 2020 made it more difficult for users to trade options, after a 20-year old novice investor committed suicide, distraught over $730,000 in apparent investing losses that he’d incurred through the app.
A New York Times analysis of Robinhood customers’ trading activity lended support to the idea that the app’s effortless user interface may have contributed to a lack of investing discipline. It found that Robinhood’s users (half of whom are entirely new to investing) execute trades far more frequently than users of other online brokerage platforms. With numerous studies showing that such “day trading” strategies depress even sophisticated investors’ returns, it does beg the question: Is the Robinhood experience too easy for customers’ own good?
The optics of all this get worse when you consider how Robinhood makes money. Through a practice called “payment for order flow,” the firm gets paid for each stock or options trade – not by the investor (since the transaction is commission-free), but by other “market making” firms that execute the transaction on Robinhood’s behalf. Sounds confusing? It is, but here’s the key point: While frequent trading isn’t generally good for investors’ returns, it is good for Robinhood. The more its users trade, the more money the company makes.
(It’s worth noting here that, one place where Robinhood has created friction in its customer experience design is with the cancellation of trades. In contrast to the app’s one-click purchase process, backing out of a trade isn’t as simple as hitting a well-labeled “cancel” button. Rather, the interface requires a couple notably less intuitive steps.)
Let’s be clear, there’s no evidence that Robinhood is maliciously attempting to subvert investor performance. Like any other company, Robinhood is trying to create an offering that stands out in the marketplace and attracts consumer interest. That can be a delicate exercise, as profit-making enterprises try to balance their own interests with those of their customers. Sometimes, well-intentioned businesses get that balance wrong (and, at other times, disreputable businesses deliberately tip that scale).
In the digital world, questionable user experience design tactics, like those Robinhood has come under fire for, are common enough that there’s a term for them: “dark patterns” (a phrase coined by British UX designer Harry Brignull back in 2010).
Dark patterns refer to digital design techniques that purposely (though sometimes subtly) nudge the customer’s behavior in a certain direction. Examples include:
- The preselection of a purchase option which leads customers to unwittingly sign up for services they didn’t intend to buy (such as Amazon’s website defaulting to the “Subscribe & Save” option when customers purchase household good that require periodic replenishment).
- Using brighter colors, bigger button sizes and strategically labeled links to get customers to click on certain options (e.g., such as social media firms’ privacy preference selections, which are designed to encourage users to make their posts viewable to the largest audience possible).
- Free trials for services which require the customer to enter credit card information, and then deliberately avoid alerting the individual when the trial is expiring and recurring charges are commencing.
While the concept of dark patterns refers specifically to website and app design, many of the techniques it leverages date back well before the Internet age. Comparable non-digital customer experience design techniques include:
- Bait and switch offers, such as those from credit card companies that advertise 0% balance transfer teaser rates, and then conveniently bury information about the actual (post-teaser) interest rates in a dense, incomprehensible cardholder agreement.
- Hidden costs, such as those tacked on at the end of a transaction (baggage fees, resort fees, shipping fees, even Covid fees). By that point, many consumers have already psychologically committed to the purchase, and resign themselves to accept the surprise additional expenses.
- Staged urgency, such as when automobile dealers try to goad a prospective buyer into a purchase by saying they have low inventory for a particular vehicle (“it might not be here tomorrow”), or that the price they’re offering is only valid that day (“come back next week and you might have to pay more”).
Whether employed online or offline, these are all examples of customer experience design practices that steer people’s behavior in a certain direction – getting them to click a particular button, to make a purchase decision, to renew a subscription, to take some desired action.
It’s important to note, not all CX design techniques are bad. The discipline relies heavily on behavioral and cognitive science to favorably shape customers’ perceptions and memories of an experience (strategies that I explore in depth in my book From Impressed To Obsessed). It’s such techniques that explain why guests at DisneyWorld can spend hours standing in line, yet leave the park raving about their trip.
A problem arises, though, when these techniques are abused, when they serve to misalign the interests of the company and the customer – encouraging behavior that can actually be harmful to the individual or others around them. When that happens, it undermines a key tenet of good CX design: the demonstration of advocacy for your customer.
For a disturbing example of just how nefarious (and, arguably, immoral) the “dark side” of customer experience can be, take some time to watch the Netflix documentary “The Social Dilemma.” The film describes how social media firms engineer their customer experiences in a way that fuels unhealthy habits – gluing people to their devices, surrounding them in echo chambers, and exposing them to disinformation. It’s a deeply unsettling example of how customer experience design can have negative consequences not just for individuals, but for society as a whole.
When CX design techniques are used to manipulate people and put a company’s interests ahead of its customer’s, “success” may indeed follow – but it will be short-lived. Complex cancellation procedures may temporarily boost retention. Hidden fees may temporarily increase revenues. Seamless conversions of free trials to paid subscriptions may temporarily grow the customer base. Deceiving privacy opt-in language may temporarily increase data monetization opportunities. The examples go on and on.
Eventually, however, these questionable practices catch up with a business. Customers (and even regulators) become wise to the manipulation, or a competitor gains traction by offering a more authentic, transparent and customer-friendly experience.
As numerous studies have shown, companies that deliver a great customer experience – companies that truly earn customer trust and loyalty – tend to outperform their competitors over the long-term. “Good” profits prevail over “bad” ones. Virtuous CX design techniques win out over deceptive ones.
There’s a fine line between experience design which enriches customers versus that which exploits them. Business leaders have a moral obligation to respect that line – to wield the power of CX design wisely, and to stay away from the dark side.
[A version of this article originally appeared on Forbes.com.]
Jon Picoult is founder of Watermark Consulting, a customer experience advisory firm that helps companies impress customers and inspire employees, creating raving fans that drive business growth. Author of “FROM IMPRESSED TO OBSESSED: 12 Principles for Turning Customers and Employees into Lifelong Fans,” Picoult is an acclaimed speaker, and advisor to some of world’s foremost brands. Follow Jon on Twitter or Instagram, or subscribe to his monthly eNewsletter.