Monday, November 28, 2016

Customer Complacency

I was speaking with a product manager about the competitive position of his product, as it was my sense that there was a saturated market for it that would be difficult to grow – so I did not see a way to increase aggregate demand, and wanted to know his strategy for increasing market share.   “Customers are just complacent,” he replied.  “They keep using the same brand because it’s not worth the effort to switch.”  

His strategy was therefore to monitor the behavior of customers to detect moments of dissatisfaction, when they might feel an acute sense of dissatisfaction with their current vendor and might be likely to consider switching.  It seemed a reasonable approach, but not a particularly innovative one.  He was quick to admit that the competition was likely monitoring his brand’s customers for the same signs of dissatisfaction, and that to retain his current customers he would need to be careful not to disappoint them.

This last insight rather impressed me, as I’ve been concerned for some time about the way in which marketers in general focus on acquiring new customers and then immediately beginning to ignore and neglect them once they have converted, taking it for granted that they would remain “loyal” to the brand so long as it did not disappoint them.   Few brands seem to consider what they must do to avoid disappointing customers, and only seem to react when a disappointment has occurred and they need to retain the customer who has a sharp interest in leaving the brand.  

But aside of a customer calling to cancel his account, what can be done to detect a customer who’s been roused from his complacency, or prevent him from having a moment of dissatisfaction?  Our discussion did not move in this direction, but it’s been on my mind and seems rather a quandary.

For relationship companies who are able to track customer behavior, it seems relatively simple to be attentive to the data they are already collecting to detect a change in the consumption pattern or monitor the frequency of service calls (a customer who has had to call three times in the last month to straighten out a problem with their account is likely to be disgruntled).

For transactional companies who are unable to track customer behavior, it seems impossible.   Because they can only monitor the market in the aggregate, they are unaware of the behavior of an individual customer.  Hence they can tell when the market in general is buying more or less of their product, but the important data is being lost in the crowd.

Since I currently work for a relationship company, the problems of the transactional firm do not seem germane, though they are a bit more perplexing.  I could meditate on it but have no immediate need for the knowledge it would render.   There are certain products, instances, and aspects of an ongoing service that function as once-and-done transactions, even those can be monitored in the long run – these could be improved, but again these seem to be a small part of the business.

Neither do I think it will be appropriate to follow up with the specific results of my investigation: that’s privileged, not for the blog.  But what I can share is the core theory and methodology: to monitor consumption and ancillary transactions to detect signs of dissatisfaction that could culminate in sufficient cause to consider switching providers.  For others who manage customer experience for relationship firms, this should provide the seed to grow their own solution.

Tuesday, November 22, 2016

Economics of Action

I’ve been struggling for some time to reconcile transactional economics and autistic economics, and my sense is that economic theory has since the beginning been to dismissive of the latter.  And while in the present day producing for one’s own consumption is increasingly rare (or at least that is the perception fostered by those who prefer to ignore it), it is still significant to the underlying motivations of participants in an economy and in some cases directly relevant (make-or-buy decisions).

Every human action is undertaken to effect a change, and one that exchanges a less satisfactory state of affairs for a more satisfactory one – at least if it is an action performed with premeditation and guided to some degree by reason or emotional desire.   And every human action is an inherent exchange of the effort required to perform the action for the sake of the benefit (plus the cost of materials consumed, which are also acquired by means of action).

Monetization is a convenient but incomplete way of assessing the value of action.  To make a good that is intended for sale is to assess the cost of making it against the benefit to be derived by selling it.   But at the same time to make a good that is intended for consumption is likewise assessed against the options of purchasing it for consumption – the effort of the making being the cost of acquisition.

And even in a transactional economy, money is merely the medium through which effort is transferred.   We earn a wage by selling labor rather than using labor to our own benefit, and obtain goods by spending that wage rather than undertaking the effort to create them by means of our own labor.  So money is merely a container for the value created by labor (as wealth was never created by merely printing more money).

Granted, the basic theory considers the situation of a person whose product is as good as anyone else’s and who sees all forms of labor as being equally unpleasant – but the differences in the quality of goods and the unpleasantness of labor are merely refinements on the basic equation to account for variables, and does not invalidate the essential premise.

Thursday, November 17, 2016

Loyalty and the Emotional Aftershock

While it is a mistake to assume that all human behavior is driven by random emotions (or that emotions are at all random), it is likewise incorrect to believe that behavior is driven entirely by logic.   It is a collaboration between reason and emotion that drives actual behavior, but in that regard reason has been given too much credit and emotion too little – and this is the reason that many plans for marketing and customer loyalty do not work out in reality.

It’s generally recognized that the emotions lead reason, or at least occur before it.   To assess something we must notice it, and feel that it is important enough to spend time thinking about.     This is why advertising often communicates so little information about the product and its benefit – it is meant to create awareness and curiosity in a prospect, though it very often fails when it provides nothing to feed the curiosity it has created.

It’s also generally recognized that the emotions are what drives a person to select a specific brand.   While reason is employed to determine whether there is any benefit to purchasing a good or service, the goods and services in the present market are so commoditized that there is no reason to favor one brand over another.  The differences are usually quite negligible.

And it also seems to be generally believed that an individual’s loyalty to a brand is based on reason: that they evaluate their experience of using a product, determine whether their functional need was served, and if this equation returns an affirmative result, the individual repurchases that band rather than undertaking a fresh evaluation of his field of options.

But this last belief is subject to some argument: whether repurchasing out of convenience (or mental laziness) qualifies as loyalty – particularly when customers who report being completely satisfied by a given brand often try others and sometimes switch to a different one.   The “rational man” camp struggles to support its argument, and my sense is that loyalty has less to do with the rational evaluation of a product experience and more to do with the emotional aftershock of the entire experience of the brand.

If we accept that reason selects the product and emotion selects the brand, then the kind of satisfaction that arises from the cold, analytical assessment of whether the good or service satisfied the functional requirements supports a sense of satisfaction with the product – and not with the brand.  So any sense of loyalty to a given brand arises from the emotions that arise.  It seems sensible that if a product fulfilled the functional need, the consumer “feels happy” about the purchase and that some of this emotional halo will extend to the brand, but not a sufficient amount to create loyalty.

And to take it a step further, emotions are more important than reason in the long run.  The facts about the product, the evaluation of how it serves a need, and all of the rational thinking about the product ends very quickly after the product experience has ended, but the emotional aftershock, which is by its nature more vague and general, lasts for quite a long time after the rational thinking has ceased.

This is the reasons customers can very quickly respond to the question of how they feel about a brand, but much more slowly to what they think about the brand.   They can instantly say that they were happy with the experience, but it takes quite some time and reflection for them to recall the specific reasons that led them to purchase it and those that cause them to think that the product was suitable to a given purpose.

This is not to switch to the opposite extreme and declare reason to be of no use and encourage marketers to embrace emotion to the ignorance of anything else.  My sense is that reason is fundamental and that a product must stand a rational analysis – it must have satisfied the need for which it was purchased, or the emotions about the experience will be negative as well.   And I don’t suppose it’s possible to have good emotions about a functionally unsatisfactory experience.   But neither does a functionally satisfactory experience guarantee loyalty.   The emotional layer must be considered, though its rational underpinnings cannot be ignored.

Friday, November 11, 2016

An Ethical Dilemma of Service

Lately, I find myself struggling with one of the most common ethical dilemmas of customer service: whether it is right to give the customer what they demand or to ignore the customer’s demands and give them something that would better suit their needs.  There are positive and negative consequences to adopting either as an extreme, and I mean to consider them here.

Giving the Customer What They Want

The simplest option, which requires the least amount of thought, is simply providing the customer with what they want without any further thought and certainly no objection.  The servant merely follows orders, or the marketer does research to determine customer preferences and delivers a service to suit them.   There is no thought of the consequences: if the product the customer demands fails to accomplish their goals or even does them harm, the servant/supplier bears no ethical responsibility because he had no part in the decision. 

Opponents of this approach cite this abdication of responsibility as an ethical failure, insisting that the servant should serve the needs of his client rather than blindly following orders – if the service in question is not in the client’s best interest, the servant should refuse the order and do something he feels is in his client’s interests instead.  

Proponents of this approach cite the fiduciary responsibility to a paying customer: where the customer offers payment for the provision of a specific service, the servant is bound by the terms of that agreement to do what is demanded and it would be unethical to do otherwise.   They maintain that customers are satisfied when they get what they want and upset when they do not, so satisfying the customer’s desires is necessary to having customers at all.

Giving the Customer What They Need

The alternate option is to diagnose the problem the customer is attempting to solve and providing a product that effectively addresses it.  In effect, the servant ignores the stated orders and instead considers the need for which a product is being purchased, and if the demanded product is not the best solution, the servant provides something else.   This requires a long period of diagnosis and a great deal of effort to uncover the real problem before it can be solved.

Opponents of this approach generally blame the proponents of being egotistical and dismissive – of thinking that they know the customer’s needs better than the customer himself, and violate their fiduciary relationship by demanding payment for something the customer did not want and did not agree to pay for. And moreover, that if a customer wants a specific product he will seek it out, and switch to another provider if the one he is dealing with seems to be ignoring his demands.

Proponents of this approach believe that their responsibility is to solve the customers’ problems, not merely fill their orders.  They generally position themselves as experts whose service is providing their expertise regardless of the customer’s own analysis of the problem and choice of a solution.   They maintain that customers are satisfied only when their problem is solved and will give long-term loyalty to a firm that does so, even if it means ignoring their immediate demands.

Approaching a Resolution

My sense is that resolving the problem depends very strongly on the specific qualities of a given service encounter.  In some instances customers want a specific solution, trust in their own judgment, and are skeptical of a servant who attempts to upsell them on claims that a more expensive solution is really what they need.   In other instances, customers recognize that they do not know what will solve their problem and rely upon the expert advice of a service provider to determine how best to solve it.

Where the customer knows the manner of service he wants (a consultation in which the servant selects the solution or the provisioning of a solution of his own choosing), then the service provider can act accordingly – no expectations are violated, nor any agreement broken, when there is transparency and open agreement to the nature of the service.  Where this is clear and understood by both parties, there is no ethical conflict.

Where there is disagreement between the parties, communication and persuasion can be used on both sides to negotiate the manner of service.  And again, this openness and transparency prevents misunderstandings.   It is clearly unethical and a violation of fiduciary responsibility for the servant to do his own thing without permission, it becomes ethical once that permission is granted.

How to convince a client to go along with the servant’s intent to diagnose and solve rather than merely fill orders is a tactical issue, beyond the scope of this meditation, and likely dependent on the idiosyncrasies of the situation and relationship.   The topics of trust-building and persuasion are vast.  But in the scope of the present meditation, it should suffice to say that trust-building and persuasion are critical factors in resolving the ethical dilemma and the conflicts that can arise as a consequence of ignoring the dilemma or dealing with it in a clandestine and perfunctory manner.

Monday, November 7, 2016

Reason and Irrationality

Very often the term “irrational” is simply used by those who, being vain and arrogant, presume to pass judgment on other peoples’ aims and volitions.  No one is qualified to declare what should make any other person happier or less discontented.  We may assume that others seek the same ends as ourselves, and can assess what we might do were we to exchange places with another – but to suggest that others should be compelled act in a manner that reflects our own will and aspirations is merely contempt and manipulation.

Another basis for the accusation of irrationality is that every action accomplishes some things at the cost of others.  A person who seeks to obtain something of little value at the cost of failing to obtain something of greater value is not necessarily irrational, but his reasoning may seem flawed to someone who holds different values.   But again, the decision of what things matter more than others is essentially a decision each person must make for himself.   If we judge the action of another to be irrational in this manner, it is often because we arrogantly assume that anyone who does not share our values is mentally inferior.

Consider the debate over whether it is better to live in wealth or in poverty, or the choice we make in the face of any opportunity to exchange our self-respect and dignity for some material gain.  The choice an individual will make is a reflection of his values.  It is even arbitrary to consider the satisfaction of the body’s physiological needs to be of the highest order – the man who risks his life for an ideal is by no means irrational, and who says that he is so fails to understand the values of a person who would make such a choice.

When the intended goals of an action are understood, then a course of action may be considered in light of its effectiveness and efficiency at achieving that goal.  That is, the “right” action achieved the greatest degree of success with the least effort.   But because man is not omniscient, omnipotent, and infallible it’s generally witnessed that the course of action he chooses to pursue is flawed and often quite poorly considered.  But again, this does not mean action is irrational, merely imperfect in the estimation of another person who also is not omniscient, omnipotent, and infallible.

Thus considered, the only truly irrational behaviors are reflexes, a response to stimuli that cannot be controlled by the volition of the person concerned.  Even the actions of an insane person are based on reason, albeit a perverse and ill-conceived form of it.  As to insanity, maintaining the expectation that others will pursue the outcomes and follow the reasoning that we feel they ought to, rather than acknowledging they can and will think independently and follow a course of those of their own choosing, reeks of egomania.

Ultimately, we must act the subjectivity of human action, and acknowledge the right of each person to make his own choices.  The degree to which one may pass judgment is in assessing whether the course of action chosen was effective in achieving the desired outcome – and refrain from presumptions of being a fit judge of what is useful for others and what will make them the most happy.

Wednesday, November 2, 2016

Disclaimers and Dishonesty

There was an interesting incident in the usability lab, one which researchers typically dismiss as a data point because it’s just one person’s behavior and it was quite unusual, but meaningful nonetheless.   A test subject asked to click through a product acquisition flow immediately scrolled to the bottom of the page and glanced at the disclaimers.   When the proctor asked why she had done this, her reply was that “I want to see if you are honest.”

When asked to explain what she meant by that, she flatly stated that the amount of legal text at the bottom of the page gives her a sense of whether the company she is dealing with is honest.   Most of the page is “just marketing,” she said, and the small print at the bottom is where “the government makes you tell the truth about the lies you just told.”   By her estimation, the company was not trustworthy at all.

In the break between sessions, I slipped away to do some analysis on that page, an acquisition flow for a financial product.  The content of the page, excluding navigation and identity, measured 572 words.  The disclaimers at the bottom of the page, excluding copyright notice, was 1,623 words – meaning for every word of marketing, there were three words that explained the conditions under which the promises that were implied might actually be kept.

Afterward, I did a bit of competitive analysis to see if this was typical of the industry, sampling about half a dozen sites that sold the same product.  The worst of the lot had about four words of disclaimer for each word of content, the average was about 2.5, and the best of the lot had a very low ratio of 0.75 – which is still quite a lot.   It occurred to me afterward that I didn’t click the links that would expose additional disclaimers, so the ratios may be far worse than I am reporting here.

As an insider, I can understand that companies want to put their best foot forward and to lure the public by showing “as low as” rates on loan products and “as high as” rates on investment products.   But when it takes three words of disclaimer for every word of the promise, my sense is that the line has been crossed between putting on one’s best face and being completely deceitful.  

I have the sense that I may be gearing myself up to do a fairly extensive research project to satisfy my own curiosity, checking the promise-to-disclaimer ratio across different industries and cross-referencing this against brand trust surveys … but for now I’m satisfied that the test subject’s opinion that the amount of disclaimer text tells how dishonest the company is entirely reasonable and that companies should be thankful that more people don’t look at the small print very closely (or at all).