Tuesday, April 23, 2013

Customer Company – A Deeper Dive into Customer Psychology - Part 1


So, after all the new technology, new high yielding online tools and research, the question still elude most of the people “How well do you know your customers?” 

Certainly it seems to be tough to measure and evaluate the statement “KNOWING THE CUSTOMER”
So what exactly matters? 

Have you tried touching soft human feelings,entertain the eternal child and intrigue the non-resting explorer inside your customers?

What we are talking here is much beyond technology,frameworks,networks and tools. We are talking about Human, his Interactions, his motivation and his behavior as a social Animal.

We have only few so called tools that can help us to address these fine and subtle characteristics of our customers.  First is the facts and data in Social Psychology, second, Company customer Interactions fact.

With these insights into the human mind and research studies on customer loyalty, we can more objectively approach questions like, “What makes a happy customer?”

Let’s get started…and explore what exactly “MAKES THEM HAPPY”.

1. For Customers, its Quality of Service that wins their heart, and not Speed of Service.


“When marketers emphasize doing things faster, they often end up doing things worse”
by William J. McEwen
Excerpted from Married to the Brand
When it comes to a memorable service people tell their friends about, it’s almost by default required that the service be friendlier and experience be more satisfying rather than quick check out business journal revealing this fact)This was especially true for service in premium or prestigious markets, such as customer support at a bank.Customer Experience Report by RightNow, says that the #1 reason customers would abandon a brand was due to poor quality and rude customer service, which were cited 18% more often than “slow or untimely service.”

Timely service is important, but customers are much more likely to remember brands that went above and beyond to solve their problems over brands that got them out the door quickly.


2. Sometime, Customers Exactly Know What They Want .If You Include Them in Your Process, They Will Help.

“It can be really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them. “    -   Steve Jobs


This is certainly true in some instances, as it can be rewarding for brands to give their customers things they didn’t know they needed before they even ask.

Research says customers DO know what they want in many situations. There are certain things that  customers are just flat out better at than you, and one of the things they can be quite good at is “understanding” their peers’ needs.

A study from the Institute of Management Sciences (headed by MIT’s Eric von Hippel) paints a very interesting picture of just how important customer input is in the success of many businesses.
The crucial conclusions of the study were as follows:
  1. In a study of 1,193 commercially successful innovations across nine industries, 737 (60%) came from customers (i.e., customers can have very innovative ideas).
  2. User-created innovations have been successfully utilized to turn around “innovative slump periods.”

While #1 is certainly a shocking revelation, there is a unique case study for #2 that really paints a believable picture for just how valuable customer input is.

The example comes to us from 3M. 3M’s poorly performing Medical-Surgical Markets Division was looking for a way to kick start its lackluster innovation record in the 90s.

Instead of taking the standard route (relying on internal, employee backed ideas), a separate team was formed to search for breakthrough innovation that consisted of the “lead users” (read: customers).
When the results of these two groups (users vs. employees) were compared side-by-side in terms of revenue generated, the differences were quite drastic:
  • User-lead innovations had an average revenue of $146 million dollars (in 5 years)
  • Internally generated innovations had an average revenue of $18 million (for the same span of time).

The results were clear: Customers were coming up with the winning ideas more often than not.
Be sure to utilize your customers to their fullest potential in your business: Customer surveys and analyzing customer feedback should be an integral part of your research.

3. Customers like Loyalty Programs… as Long as You Make Them Seem Easy and fulfilling.



For years, A lot of different loyalty programs have been defined but sadly none stick to the market.

Interestingly, a research by two social psychologists finally reveals a way to make it happen.Consumer researchers, Joseph Nunes and Xavier Dreze, have made some startling findings on customer reward programs.
The critical findings of their research can be summed up as follows:
  1. Customers like reward programs but are much more likely to participate if the business in question utilizes “artificial advancement.”
  2. In a truly interesting look into human nature, people like being part of “gold” and “premium” reward groups… but only if there is a group of people below them.

Now what does that mean?
For #1, it’s essential that we understand what “artificial advancement” really means.
In their research on the Endowed Progress Effect, Nunes and Dreze tested two versions of a car-wash loyalty program, which consisted of a card that got stamped after every wash.

The first card needed 8 stamps to get a free wash.The second card needed 10 stamps to get a free wash, but 2 stamps were automatically added when the customer joined.

That means both cards took 8 stamps total to get a free wash; they were just framed differently. Which one do you think performed better?

Their findings: Despite the similar process, the second card performed almost twice as well as the first card, having 34 percent of participants complete it versus 19 percent for the other card.

Why is this important?
It shows that customers are more likely to stick with loyalty programs if the task at hand is framed as already being started.

Beginning a new task is a point where our brains often try to sabotage us, and additional research has shown that we are much more likely to complete a task if we feel like we’ve already taken the first few steps. This “artificial advancement” used on the second card was what made customers more likely to complete the card program to the end.

Last but not least, Nunes did a separate study on reward levels within customer loyalty programs and found that customers are even MORE loyal if they are labeled within a “gold club,” but only if there is another level below them.
The Takeaway?
Customers will embrace loyalty programs if you can make them feel like they aren’t a “new task” to perform, but a task that’s already begun. They also like being part of different levels and will strive to be in a “gold club”… but only if there are levels below them.

4. It takes a 16px thought to WOW your customers, and most of the times, it doesn’t Take a Lot of Money

“ WOWing” your customer means to be Customers completely blown away by a seemingly 16px but very thoughtful action. Here is an example of person who created a positive and unexpected experience for their customer. (Their employers are lucky to have them on staff.)

Minerva is employee at a car dealer. A customer came in wanting a replacement key chain. Apparently there was a problem with hers. The employee she spoke with discovered the dealer was out of stock. Rather than send the customer away empty handed, Minerva reached into her purse and gave the customer hers, which was the same kind the customer wanted.

The customer was thrilled. It was a small gesture but unexpected and thoughtful. This customer was so thrilled she has repeated the story more than once.
As she tells it, “So I thought of booking for the next shipment that could have taken generally one month or so. Minerva (Customer Exec) handed me her keychain that was exactly same as I wanted, made my day. They care for you. ”
What’s actually happening: While the cost of the gifts/actions is quite 16px, the human mind simply cannot refuse the psychological construct of reciprocity.Reciprocity can be summed up as our natural inclination to feel grateful for favors and our desire to “pay them back,” no matter how small they are .
It’s the intention of the giver that affects the perceived value of the gift. 
Customers perceive the service as a genuine act of kindness rather than as you trying to buy their affection with costly gifts. “Check out how you can actually wow your customers”
So remember, it doesn’t take huge expenses to win customers over!

5. Its give and take buddy. Customers Will Remember Your Business If You Can Remember Their Names

What’s the sweetest sound that can flutter into your ears?
Recent research studying brain activation tells that its “Your Name”. (No prizes for Right Guess) Everyone loves hearing their own name!

The implications of this have been seen across a variety of situations in dealing with customers:
  1. People tend to like you more if you use their name a few times during conversations. (But there is a limit; saying their name too much becomes unnatural and insincere.)
  2. People open emails with more consistency if their name is included. (That’s a big reason to ask for a name if you want increased conversions via email.)
  3. People often assume you are more competent if you know their name; it’s a big part of their identity, and if you recall it and use it, you are instantly viewed in a better light in their eyes. 
Utilizing customer names when interacting with them directly is an important part of making people feel like individuals rather than a “support ticket” Or “ Job Sheet Number”.
There’s quite a difference between receiving an automated email from “DO-NOT-REPLY” versus receiving one from “Scott” saying, “Hey Greg, thank you for your purchase! :)”

Always keep that in mind!

I hope the first installment of the Research will help you in breaking in the fantasized myth of "KNOWING YOUR CUSTOMERS" statement.  Do let me know what you feel, stay tuned to be the part of next part. You can reach me on Twitter @nitintweets



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