Wednesday, October 11, 2017

Why You Should Never Ask For Referrals

Word-of-mouth seems to be back in fashion, as I’ve recently read a handful of articles on the topic of getting referrals from customers.   And to my way of thinking, the advice that’s being promulgated is dead wrong.   That is, I’m seeing advice to ask customers for referrals right away, upon closing the sale, and providing them with incentives for their next purchase if they send the firm any business.

What makes that advice so wrong is that it is usually far too soon to expect a customer to make a referral: he has just purchased a product, has yet to try it out, and does not know whether he is actually happy with the outcome.  Being pressed immediately to tell others about his experience with a product he hasn’t even take out of the box is inappropriate and uncomfortable. 

What makes word-of-mouth so powerful is its raw honesty.   When a person tells another person about their success with a brand, the person they tell receives this as legitimate and trustworthy information that is well-meant, because the person who is telling them this is concerned for their welfare and is not seeking anything for himself by passing along the information.

So it should be immediately evident that offering customers a premium or discount for spreading the word is immediately harmful to their integrity and the value of their recommendation.   If the person to whom they are promoting the brand knows about this, the integrity of the referring party is called into question – and they certainly will learn of it when they purchase and the brand makes them the very same offer of a benefit to promote to their friends and neighbors.

Even suggesting to a person that they ought to advocate for the brand is an affront to their integrity: they will decide, on their own, whether their experience is worth sharing.  A person who gives a referral is staking their personal reputation on the outcome to others, generally those with whom he has some manner of relationship.  The degree to which he values that relationship governs his likelihood of recommending a brand to the other party – thus an attempt to cajole a person into referring others is interfering in their personal choices, their personal relationships, and their personal brand.


In all, there is likely no proper time and no proper way to ask others to advocate for the brand, and word-of-mouth is entirely out of the brand’s control – but for one thing: a brand can earn word-of-mouth by actually delivering value to the customer.   Customers will give referrals when they are ready, and not sooner.

Wednesday, October 4, 2017

Types of Organizations

This may be a topic I’ve covered before – I vaguely remember it but can’t find the post – but I have had several conversations lately about the differences between business, charity, and government organizations.   And when I find myself having redundant conversation, it’s fodder for the notebook.

Organizations

An organization is created to achieve a benefit for someone, but only if there is a need for the participation/contributions of more than one person.  Where one person is capable of doing something, he does it himself. 

It is also generally true that an organization is created when there is an ongoing need.   There are some ad-hoc organizations that disband as soon as their purpose is achieved, but these are by their nature temporary.   Most organizations are ongoing concerns that serve ongoing needs.

Business/Commercial 

The most familiar kind of organization is a business, which has the following critical characteristics
  • The benefit is enjoyed by someone other than those who contribute to its creation
  • Those who wish to enjoy the benefit are willing to compensate those whose contributions are required to furnish it
  • Those who furnish the benefit wish to be compensated for their contributions

Social 

A social organization forms when people seek to organize for their own benefit. 
  • The benefit is enjoyed by some or all members of the group
  • Those who furnish the benefit are compensated by their enjoyment of the benefit

Charity

Charities (nonprofit organizations) have the following characteristics:
  • The benefit is enjoyed by someone other than those who contribute to its creation
  • Those who wish to enjoy the benefit are unwilling or unable to pay the cost of furnishing it
  • Someone else is willing to pay for the beneficiaries to receive the benefit 

Government

Government programs are created when there is demand for a benefit but no-one is willing to pay for it voluntarily.  That is:
  • The benefit is enjoyed by someone other than those who contribute to its creation
  • Those who wish to enjoy the benefit are unwilling or unable to pay the cost of furnishing it
  • No-one else is willing to pay for the beneficiaries to receive the benefit 

Dysfunctional

And as I was reviewing and whittling down the criteria for the four main kinds, it occurred to me that there do exist dysfunctional organizations
  • The benefit is not enjoyed by anyone
  • Those who receive secondary benefits (employment) seek to perpetuate the organization in spite of its lack of a primary benefit

What’s the Point?

This meditation is admittedly outside my usual milieu, but I find the topic comes up fairly often in discussions of new products and programs.  So the value in this consideration is winnowing down a large number of ideas to a smaller number that are worth pursuing: if people could benefit from something but aren’t willing to pay for it, then it’s not a fruitful pursuit for a commercial organization (but might be a good idea for a nonprofit if you can find donors, or a government program if you cannot, or a social organization of the people are able and willing to organize and provide for their own needs).


Wednesday, September 27, 2017

Nine Desirable Emotional States

I generally subscribe to the notion that the foundation of consumer behavior is rather simple: people are motivated to avoid unhappiness or achieve happiness.   For now, I want to focus on the latter, as it tends to be more difficult to define.  

Even the term “happiness” is vague because it encompasses a broad range of more specific emotional states.   I’ve looked to a handful of sources that describe pleasant, desirable, or positive emotions and compiled the following list:

Tranquility

The term “contentment” is a bit problematic because it is considered to be a neutral emotional state – a sort of blank canvas that describes a person who is not distracted by emotions at the moment.    Tranquility is more of an active state, a sense of satisfaction that arises from the realization that one’s present situation and condition is acceptable.  It is not merely being content on an unconscious level, but being aware of one’s own contentment and the feeling of relaxation and serenity that result of being pleased with one’s condition.

Joy, bliss, and ecstasy are also described as emotional states that arise from a sense of well-being.   I do not see a significant difference – they are merely a more intense experience of the core emption of tranquility.

Belonging is a sense of well-being that arises from relationships with other people (family, friends, peers, etc.).  While some sources classify it as a different emotion, it is a subset of tranquility because it pertains to satisfaction with a situation.

Confidence

Confidence is a positive feeling that comes from the power to achieve something, even if the action to achieve it is not being undertaken at the moment.  The feeling arises from having the capabilities or resources to avoid or mitigate negative outcomes or to achieve positive ones.

It is arguable whether pride is a subset of confidence or of relief.  Where pride is derived from a sense of capability before taking action, it is a subset of confidence.  Where pride is derived from achieving an outcome in spite of doubt, it is a subset of belief.

Excitement

Excitement is an emotion that arises in the course of a challenge in which a person is mostly confident that they will have the ability to succeed.   While some argue that the emotional intensity of excitement is a form of fear, it is not a negative emotion when the individual feels that a positive outcome will be achieved, even if there is some degree of doubt.    And the doubt is necessary for excitement to be experienced: if one is completely certain of the outcome, there is no feeling of excitement.

Hope is merely another form of excitement that focuses on the desire to achieve a positive outcome, even when the obstacles or challenges are not clearly understood.

Relief

Relief is the immediate emotional consequence of achieving a positive outcome in spite of doubt.    This outcome may be a positive accomplishment, but is more often merely the avoidance or mitigation of damage: one feels relief when a threat has passed and the negative consequences that were expected have not occurred.   It’s noted that “thrill seekers” often put themselves in danger in order to experience the relief that occurs when the dangerous event has ended.

Some sources describe achievement and validation as being different emotional states related to success at a goal, but I disagree: these are also forms of relief, occurring when the degree of doubt was relatively low.  There is no emotional reaction to the completion of a task in which the actor had complete confidence and the outcome had been expected.

Satisfaction

Satisfaction occurs when the results of an action were “right” according to a person’s moral standards.   Similar to relief, the emotion occurs only when there was a sense of doubt that the right outcome would occur – but it is distinct from relief in that the functional outcome may have been negative, but it agrees with a person’s moral beliefs.

Satisfaction may occur when good things happen to good people, but it also occurs when bad things happen to bad people.   The concepts of “poetic justice” and “schadenfreude”  describe incidents in which a person suffered harm, but the harm was deserved as a consequence of their actions or their moral character.

Amusement

Amusement is the emotion that surround a positive or benign discovery.   It is a sense of satisfaction that is achieved by making sense of something that seemed confusing.  The “funny” quality of humor arises from the discovery that is made when untangling the riddle of a joke.   Amusement tends to be a short-lived state that fades quickly. 

Though amusement may be re-experienced through memory, remembering something amusing is not the same experience as being amused, but it is not experienced twice from the same stimulus (the joke is not funny a second time), unless perhaps the original solution has been forgotten.

Gratitude

Gratitude is a feeling of thankfulness experienced in response to another person who has done something needful for the benefit of another person, though it may also be effected by the mere promise or statement of intent to do something needful.   Gratitude is also felt when there is not a specific benefactor, though a person who benefits from circumstance may invent or personify an imaginary benefactor.

Where the benefit granted is protection against harm, gratitude is blended with relief.   The feeling we have toward the benefactor, however, is distinct from the feeling of relief at having escaped harm, though the two are experienced simultaneously.

Admiration

Admiration is a sense of affiliation we feel to a specific individual.  This may occur in the context of a social relationship, but it may also occur independent of one, which makes it a separate emotion (from tranqulity).

Friendship, love, and other forms of attachment are subsets of admiration.

Arguably, there are positive emotions that occur when we are the subject of admiration, but these are more in the nature of gratitude.

Wonder

Wonder is an emotion that occurs when an experience defies comprehension but seems to pose no threat.  It is most often described in context of the perception of something on a grand scale (often natural phenomena).   Wonder may also be fascination with a form of technical excellence (watching someone do something well)

The feelings of awe and surprise are sometimes listed separately, but sometimes as a subset of wonder.   However, “awe” is more closely related to fear and is not always a pleasant emotion and “surprise” can include an unpleasant rahter than pleasant sensation.

Note: Vicarious Emotional States


Some sources draw a distinction between an emotion that is experienced personally versus an emotion that is experienced vicariously – but it seems to me that the feeling that is aroused when a person’s sympathy is with another person is essentially the same as the feeling that is aroused when the same situation involves them personally.   That is, the relief a person feels watching someone else escape danger is the same emotion they would feel if they had been the one who had escaped danger.   So there is no need for a duplicate of every term for vicarious emotions.

Wednesday, September 20, 2017

The Sustainable Zone

Any firm that wishes to have longevity must serve two masters: the customers who benefit from the good or service it provides, and the stakeholders who furnish capital and labor that enable the product to be previsioned.    It seems a simple enough concept, but I find that I often need to sketch out a Venn diagram to explain it to both sides: those who wish to create value to the customer at a loss of income to the firm and those who wish to create profit for the firm at the loss of value to the customer.   Neither of these is a sustainable strategy.


In its naissance, most firms are targeted toward providing value to the customer.   The founder generally recognizes that “people need [product]” and arrangements are made to provide it to them in an affordable manner.  The focus is entirely on the customer, and very often with little regard to the financial interests of the firm.   Hence, most new businesses fail: they are wildly popular with customers who are getting more than they pay for, but ultimately cannot be financially sustained.

As a firm grows, it becomes inclined to seek value to the stakeholders, generally more toward the providers of capital than of labor, but there are instances in which a firm has been nibbled to death by its own workforce.  The focus is on the profit of the firm, and customers are expected to accept compromises to the benefits they receive.   Eventually, even the most loyal customers recognize they are getting less than they pay for and leave.  The firm may be highly efficient, but becomes unprofitable and cannot be sustained not because of waste, but because of insufficient revenue.

In practice, there are few situations in which a firm is entirely aligned to one side or the other.   A firm devoted to customer service still recognizes it needs sufficient income and efficiency to maintain its operations, and a firm devoted entirely to profit still recognizes it needs to provide some level of value to its customers to have revenue at all.   The difficulty lies in striking the proper balance in its operations.

And in that regard, firms are inclined to drag customers over the border into serving its interests rather than being willing to take a loss to serve the interests of the customer.   This is the reason that so many products on the market are imperfect – customers begrudgingly accept that the product is barely capable of serving their needs, or that they are getting a satisfactory product but paying a significant premium over a generic solution to get marginally better quality.

And then, there is the matter of mutability, as firms pendulate into the areas to either side of the sustainable zone.   The firm realizes it is financially unsustainable and swings away from serving its customers well, then loses so many customers that it becomes panicked about its revenues and swings back to service at a financial loss.   It can play this game for decades if it earns enough loyalty during its customer-oriented years to keep them from defecting in droves when it enters a profit-oriented era.


It can usually be seen when a company changes executive management: the CEO who was brought aboard to solve the company’s financial woes is ousted when the measures he takes drive away customers.  He is replaced by a new CEO who is service oriented, and who brings back the customers, until this results in a diminished financial performance for the firm, at which point he is ousted to make room for a finance-oriented CEO.   Lather, rinse, and repeat.