Thursday, June 21, 2018

Customer Loyalty or Customer Apathy?

In my research into customer loyalty, I’ve come across an interesting paradox: that customers who state that they are not loyal to a brand and even those who feel dissatisfied with its products intend to purchase the same brand the next time they have a need.    It’s not just an unusual few who respond this way: the majority of those who are dissatisfied intend to repurchase the very brand with which they are not satisfied. The percentages vary by product, but it tends to range between 65% and 85%.

In some instances, switching costs can be prohibitive.    There are financial costs, the need to learn to use a slightly different product, the effort and time of identifying a replacement, added difficulty to obtain it, and so on.    Even a less expensive brand may be more costly to use when the fully-loaded costs of acquisition and utilization are considered.

There are also the psychological costs of switching, not the least of which is the humiliation of admitting that the previous decision to purchase an existing brand was a terrible mistake.   Many people will doggedly pursue a course of action they know to be wrong, or repeat it, simply to defend their self-esteem for having made the decision to pursue it in the first place – and the magnitude of this humiliation is even greater when it is an item that is conspicuously consumed, such that others will recognize the change and take it as an admission of a poor decision.

There are also matters of prioritization: rare and lucky is the man who only has one problem to solve and everything else in his life is absolutely wonderful.   So a person may recognize the need to switch brands, and even have the desire to do so, but there are other things that are of greater priority for them – addressing their dissatisfaction with this particular purchase is not the most pressing matter they have to deal with, so they continue to accept partial success while they devote their time and resources to dealing with bigger problems.

There is also the threshold and tolerance for pain, both physical and psychological: a person may recognize something as a problem, but consider it to be a mere nuisance and not worth the time to deal with it.  Because it is not causing them enough pain, it is not worth dealing with.   As a rule, people don’t seek to fix small problems – they may complain, but unless the problem is serious, they are not motivated to invest effort to address the issue.

There is also the fear of change in general.   Even an unsatisfactory product experience is a familiar one, and there is doubt that a different product will actually yield an improvement.   What is unknown is unproven, and arouses suspicion – that it may be no better and possibly worse that the known imperfect solution.   And so, it’s more comfortable to deal with the devil you know rather than face the risk of making matters worse by changing routines.

I expect the precise reasons for “loyalty” to brands varies greatly by the product and its use – but the factors I’ve considered likely come into play to some degree for any dissatisfied customer.  But most importantly is that the statistics and these supporting reasons make it clear that loyalty cannot be taken for granted – or more precisely, apparent loyalty cannot be taken for genuine loyalty.   It may simply be apathy.

Thursday, June 14, 2018

The Pseudoscience of Irrationalism

In my studies of economics, I find myself stuck in the industrial era: the foundational works, which were generally written in the mid-nineteenth to mid-twentieth century.  I keep looking for more current information, considering the economics of the present day, and I am constantly disappointed by the quality of modern “scholarship,” which seems takes the opposite approach, giving further testament to the utter wrongness of the binary fallacy.

Specifically, there seem to be many unqualified scholars who play upon the obvious flaw of classical economics: that it is optimistic.  The classical economists took as a premise that men act intelligently at all times, with full awareness of circumstances and their own long-term self-interest in mind.    So the present-day economists switches to the opposite extreme, taking as a premise that men act unintelligently at all times, with no awareness of circumstances and no consideration of their long-term self-interest.

The problem with both schools of thought is that they suffer from binary thinking: all or nothing, always or never, black or white, with nothing in between.    The presumption is that if something is false, then its exact opposite must be true – which is childish, primitive, and utterly wrong.

Of the two camps, I still gravitate toward the classical – they are not perfectly correct, but they are mostly so.   Man is not a perfectly logical creature with flawless perception – but he is a generally logical creature with fairly accurate perception, in the modern day more so than a century ago because of the accessibility of information.  He is not a hapless fool, but can be fooled.

When an individual is seeking to pursue a personal goal, he tends to act consciously and deliberately, applying his reasoning to the best of his perception and intellect.   Very little is accomplished accidentally – though much is done imprecisely, with imperfect knowledge and imperfect reasoning.

The more challenging the circumstances, the less chance that imprecision will result in success.  If a person is to succeed in high-stakes situations, and to do so routinely, it must be by the application of his best knowledge and reasoning.   And for those who do not think for themselves, they are more likely to mindlessly emulate the success rather than the failure of others.

On a societal scale, the success or failure of a society is merely the aggregation of the success or failure of those individuals of which it is composed.   Hence a culture that fails to apply knowledge and reasoning is not sustainable, and will invariably fall to one that is superior in those regards.  But again, these are generalizations: we can recognize that imprecise or even improper action may sometimes lead to success, and the intelligent man recognizes that this is an exceptional situation whose occurrence is improbable.

And this is likely the proper reaction to the black swan: to recognize that it is an exception, an unusual occurrence that cannot be denied – its truth must be accepted.  But this does not mean that the appearance of an exception disproves a theorem, and it should certainly not serve as the foundation for a diametrically opposed school of thought, or an approach that is based on unusual circumstances.  

Such things are best relegated to the side-show: a curious novelty of no particular significance in the long run.    And this, I expect, is the fate not only of the theories, but the theorists as well.

Thursday, June 7, 2018

UI vs. UX vs. CX

At first, it may seem a good thing that user experience (UX) has become a popular trend - if done well, there is the potential to make significant improvements to a broad range of products and services that are currently rather inadequate and unsatisfying.    The problem is, it's not being done well, which not only makes things worse instead of better, but threatens to discredit the legitimate practice.

The problem that occurs when UX becomes trendy is that people who don't understand it attempt to do it, without actually learning anything about it, and the results are tragic.   This may be an individual practitioner who wishes to add a trendy new acronym to his resume without having any training or credentials, or a department manager who insists that his people can take on this task, even though they lack knowledge and credentials.

What facilitates this hubris is that UX is so poorly described - its nothing new, but an attempt to mash together two distinctly different disciplines:  user interface design (UI) and customer experience management (CX).  The first is concerned with usability (can a person use software on a computer or mobile device) and the second is concerned with usefulness (does a customer derive value from interacting with an organization).   

The relatively new field, or fad, of UX ttempts to encompass both - such that practitioners who have expertise in one area attempt to do the other.  The result is a compromise that leaves one of the two tasks sorely neglected: a person with a marketing background who knows a few tricks in Photoshop feels he can also do the design work, or a designer who can kludge together a survey feels he can do market research – so with an ample supply of narcissism and hubris, each believes he can do the others’ job as well or better than a bona fide expert.    Like stewardesses who think that their extensive flight experience makes them qualified to fly the plane.

That said, the guilt is not always with the employee, and is very often on the side of the employer.  I have been in contact with several UI practitioners who feel they are being forced into the UX space by their employers - who, without providing any instruction or resources, expect someone with an art-school degree to do marketing work ... or else.  So it's also true to say that, in their greed, firms wish to save the salary of a pilot by ordering the cabin crew into the cockpit.  

Whether they just wish to be trendy or have a desire to find a competitive advantage in saturated markets without making significant investment, they have forgotten the lessons taught by Adam Smith a few centuries ago, or Xenophon a few millennia before that, about the division and specialization of labor.   

Ironically, the lesson has only recently been remembered, or re-rembered, by IT departments, who are slowly recognizing that the generalist "unicorns" have burdened their systems with mountains of amateurish, inefficient, and poorly written code that will take many years and dollars for specialists to clean up.  So perhaps this delusion has simply migrated to the design/marketing wing, and one can expect it will drift elsewhere when that discipline finally comes to its senses.  

But while inefficient code can lurk for decades in the back-end systems, causing relatively minor problems that frustrate system users who are mostly employees, an ill-conceived experience is thrown directly into the faces of the customers - who have little tolerance for sloppy and inefficient service, and who are for most organizations the chief source of revenue.    The results of a poor UX are far more damaging, and potentially devastating to the firm.  







Thursday, May 31, 2018

Dissatisfaction and Psychological Motivation

The greatest and most certain source of customer dissatisfaction is the failure of a product to satisfy the need for which it was purchased – which in turn has many possible causes, the first of which is the misidentification or misunderstanding of need and the criteria by which the need will be fulfilled.  This occurs more often where the product is a good (which the customer lacks the skills to successfully employ, or even to select the right good) but is also quite common in services (when the customer has provided incorrect or insufficient information for the service provider to take the correct action).

The problem begins in the process of selection: the customer is unable to choose the correct product because he does not know what will solve his need – sales can be of some assistance, but because sales tends to focus on “selling” it’s rare to encounter a sales professional whose ethics can overpower his mercenary interest in talking to the customer out of buying the wrong product.   A perfect product, proficiently employed, cannot result in satisfaction if it is the wrong product in the first place.

To back it up another step, to select the right product to serve a need, one must understand the need – if the need is not understood, everything after it (the purchasing and use process) cannot succeed except by accident.

Where needs are practical, satisfaction of need is fairly straightforward because the problem can be objectively diagnosed and the results objectively assessed – the use of the product effected the exact change that was desired.  I would propose that for the great majority of products in the present day. 

But where the needs are psychological, satisfaction of need can be extremely difficult.  Who can say, with certainty, what will cause a desired change in emotional state – to make a person happy, or to mitigate their anger, even when that person is oneself?   And how can person who means to serve another know what their psychological state is and how it can be positively affected?  

It seems a trivial thing, but it likely has a very large financial impact on developed markers.  Given the evolution of customer services, we are as a culture extremely good at diagnosing and correcting functional problems – and I would posit that, with some exceptions, the “kings” have been worked out of most product experiences insofar as their ability to satisfy the customer’s functional need - they at least have the capability to solve the need if selected and employed appropriately, by objective and observable criteria.

Thus considered, it is the emotional criteria that are the most likely cause of the greater proportion of customer satisfaction in the present day.   It is not that the product does not deliver its functional purpose, but that its employment does not address the psychological need for which it was sought, not was the correct product even selected because the need was not sufficiently understood.

Thursday, May 24, 2018

Finance: The Third Level of Consequence

Where economics focuses on financial outcomes, it is functioning at the third level of consequence, ignoring two levels of consequence that precede it.  This may be the reason that the financial approach to economics finds itself so often frustrated, unable to form a reliable model or explain the phenomena that naturally occurs in the market.

The first level of consequence is corporeal: the human being is a mind that is contained with the fragile case of a body.  Therefore, the first consequences of concern at the prospect of any human action is the jeopardy it poses to the integrity of the body and mind of the actor.   Any injury or debilitation in pursuit of a specific goal is a permanent consequence, whose cost must be factored into the greater “budget” of life.  In general, we expect that we will maintain our present state – to emerge from any activity in more or less the same condition in which we entered into it.

Costs to corporeal integrity may be objectively calculated according to the projected value, accounting for the risk of damage and the value that is placed on the type of damage inflicted.   But while it is easy enough for an actuary to put a dollar value on the debilitation of another person, it is not so easy for a person to assess the value of their own debilitation – nor is accepting the actuary’s figures a sign of assent or agreement of value.  

The second level of consequence is social: the human being is a social animal, who benefits from participation in society.   There is no method to reliably quantify the degree to which we value the engagement with others nor the value that can be placed upon our identity and esteem in a social context, but they are nonetheless valued.   And just as we expect participation in an activity to have no effect on the integrity of our bodies, so do we expect participation to have no effect on our social standing.

It is likewise futile to attempt to monetize human relationships.   We may decide to engage in some activity that will harm our esteem by the same vague estimations of potential outcomes: how will our esteem and relationships suffer as a consequence of our involvement, and what is the likelihood of our involvement being observed or detected?   But what is the financial value of damaging a social connection?

It is only on the third level of consequence that we begin to consider anything that can be assessed financially.    On this level, we begin to consider the consequences an effect will have on property: whether we will gain or lose value, or the fundamental nature of property will be changed in an undertaking that decreases or augments its value to us.

Even then, assigning a monetary value to property is a highly subjective matter – even when one attempts to objectivize it, this is generally done by the market value of the property were it offered for sale.  That is to say, the value is considered to be that placed upon it by someone who does not already own it, not the value placed upon it by the owner – which is always greater.   If it were not so, we would choose to possess nothing, the money offered in exchange for it being more valuable to us than its possession – hence to possess anything at all is to value it more than its market price.