The Anatomy of a Habit

Customer loyalty results from habit, which is a mental shortcut that saves an individual the burden of thinking.   The first time a need arises, they invest time and effort in identifying and evaluating options and choosing the best one.   If the outcome is satisfactory (not necessarily exceptional), they skip all of this effort and go back to the option that worked for them last time.

Because people are creatures of habit, many providers take their regular customers for granted – assuming that if they were satisfied last time, they will come back again.   Very often, this works out in their favor, but they could still improve their customer retention and increase their share of wallet if they put a little more thought into the way that habits work.

Habit is not a reflex action that occurs in a split-second and is flawless and reliable.   It is a conscious choice not to invest effort in a decision and to repeat a previous behavior.  Essentially, there are seven components:

1. Trigger – There is a cue that signifies a need to take an action.
2. Recognition – The person recognizes they have had this need before, and recalls what they did the last time.
3. Recollection – The person remembers how things worked out last time
4. Decision – Based on their recollection, the person decides to do what they did before rather than exploring other options.
5. Action – Providing the decision is to repeat the behavior, they attempt to do what they did the last time the need arose.
6. Reward – The person receives (or does not receive) the benefit they sought as the results of their action.
7. Evaluation – The person considers whether the need has been fulfilled, and if they are pleased with the value for effort.

Each of these components can be worked upon to improve the vendor’s chances of getting repeat business, and getting business in more situations from the same customer – or said another way, they can improve the chances of gaining a loyal customer by reinforcing the customer’s habit:

1. Trigger – Do you know what motivates people to buy?  Can you help create or intensify that stimulus?
2. Recognition – When serving customers, do you do something that would cause them to remember you?
3. Recollection – When serving customers, did you create the greatest satisfaction at the lowest cost (to them)?
4. Decision – Nothing here: if you failed to support recognition and positive recollection, then you stand no chance of influencing the decision.
5. Action – Is the action the customer needs to take simple and straightforward enough that they remember it?  Can you provide anything to help them remember how to contact you and what to do to receive service?
6. Reward – Does your service actually deliver a solution to the customer’s need?
7. Evaluation – Did the customer receive a good deal in terms of the cost (money and effort) they had to give?

The problem(s) that arise when a firm takes its loyal customers for granted is that they become inattentive to the causes of customer loyalty and do not provide adequate support for a habitual reaction: they do not remain in the customer’s mind the next time they have a similar need, they failed to provide complete satisfaction at a reasonable cost, they failed to provide anything to remind the customer how to do business with them the next time the need arises, and so on.

It’s my sense that a company, particularly one that has problems with customer churn rates, would do well to consider the anatomy of habitual behaviors and consider taking active steps to reinforce habits, rather than taking for granted that a customer who was served in the past will automatically come back again.   In direct terms, the reason for low customer loyalty is high vendor neglect – and the latter must be addressed to remedy the former.

Customer Obedience and Autonomy

Discussions of marketing tend to gravitate toward the extremes: either the customers are mindless sheep who will do whatever they are told, or they are autonomous individuals who are immune to influence.   Stranger still, one often hears elements of both extremes in the very same argument, presentation, or proposal – which is a sign that the presenter hasn’t really thought through his case.

It’s usually the case that binary thinking is oversimplified, based on the fallacy of black-or-white with no consideration that there may be a continuum and that most individuals are situated somewhere between the extremes.

No customer is completely obedient: even a person who seems submissive and manipulable has at least a few areas of his life in which he maintains some degree of control.  He is agreeable and gullible to a point, but beyond that point can be pushed no further.  Neither is any customer completely autonomous: there are instances where an individual who insists on thinking and choosing for himself will defer to others, either when the decision is regarded as unimportant or he feels that he lacks the expertise to make a decision.

Marketers must carefully consider the degree of obedience/autonomy a customer will exercise in any buying decision: which things he will want to choose for himself, and which he will submit to accepting whatever is recommended.  While there is no position that is universal to all customers, there are some that are likely to be appropriate to the greater number of customers who are purchasing a specific product in a specific situation.

Healthcare provides a good example of this flexibility.   Most people (though certainly not all) recognize that they lack expertise – they do not know anatomy and medicine, and so will submit themselves entirely to the care of a physician and follow every order they are given.   But most people want to choose which physician treats them – it’s one of the major issues that has prevented socialized medicine in autonomous cultures.

Even the submissive customers are not completely submissive: a common complaint among medical practitioners is that customers do not comply with their orders – they refuse to break harmful habits, or to that medications and attend therapy as instructed.   While they are agreeable to the suggestion, their autonomy is shown in the lack of compliance in follow-through.

Other industries face the same issues: customers who seem agreeable to a point, but who then fail to obey.   The vendor, in their arrogance, expects a customer to be completely compliant and does not know what to do when the customer refuses to comply – except that they wish to avoid being blamed for the customer’s “failure” to mindlessly obey their directives.  In such instances, they have clearly mistaken the customers’ tendency to reclaim their autonomy.

On the other hand, even the autonomous customer is not completely autonomous: in general, people don’t invest much time in thinking through their purchases.    When an item is expensive, risky, or  important, people will invest time and thought into exploring or evaluating options – but when cost, risk, and importance is low, even highly autonomous individuals tend to follow suggestions rather than think for themselves.   In such instances, failure to provide guidance is failure to close the deal.

In all, this points to a need for further research – not in general, but in specific to the product, segment, and situation because generalizations do not hold in all instances.   To make sales and satisfy customers ultimately depends on coming to a proper conclusion as to the level of obedience and autonomy that can be reasonably expected of the majority of individuals in a given situation.   There simply are no easy and universal answers.

Lessons from the Hotel Industry

I watched a presentation from the hotel industry, in which the speaker mentioned some of the warning signs that indicate a property is going swiftly downhill:

1. Employees no longer care about the customers.  When a customer identifies a problem, the employee refuses to acknowledge it or take any action outside of their routine duties to solve it.
2. Maintenance is poor.   There is basic and obvious neglect in the physical environment: peeling wallpaper, a thick coat of dust, dirty or broken furniture.  All of these seem superficial, but are symptoms of a property that is neglecting the basics.
3. Commitments are not made or honored.  The company’s basic promises to customers are not being kept.  Customers are stalled or brushed off in hopes they will go away and simply accept that their expectations will not be met.
4.  Employees show no initiative and merely follow orders.   Rather than going above and beyond the call of duty to ensure customer satisfaction, employees take a not-my-job attitude and do nothing to address the problems they see. 

Each of these has parallels in online services across all industries:

1. Customer feedback is ignored.   Comments or problem reports are not accepted, or if they are the customer receives a stock “thank you for your feedback” reply and nothing is actually done to address the issue.
2. The site is broken or outdated.   While it would seem to be basic practice to avoid broken images and links, these sorts of blemishes still exist on many sites.  And while web sites don’t become threadbare, their design becomes outdated and behind the times.
3. Service commitments are not honored.  The company’s operations are governed by strict policies and procedures.  The typical response to a customer request or problem report is an excuse without a remedy.
4. Nothing beyond standard service is available under any circumstances.   A customer who has an unusual request will not be heard, or if he is heard he will be told why the request will not be honored.

In all, what this amounts to is a culture of excuses rather than a culture of service excellence: when a company is settled in its routines and its message to customers is “that’s the way it is” then its culture has become toxic and customers will abandon for a provider that seems more interested in serving their needs.

In a competitive industry, which is virtually every industry, customers do not need to tolerate poor service to get the core value.  There are other choices, and they will find them.

A Confederacy of Dunces

Between the third and fourth quarter of every year, I seem to get pulled into a lot of meetings where some executive has decided to assemble a think tank, planning committee, strategy group, or other impressively-named gaggle of people whom the organizer expects to do his thinking for him.  He has a desire to achieve something that can’t quite be called a “goal” because it is too nebulous and ill defined, so he brings together some people to turn it into some thing actionable.   And that is not necessarily a bad thing, but it seldom turns out well.

My sense is it’s largely because such groups attract people who want to be perceived as being thought leaders, but who don’t actually want to think or share their thoughts.   Being on a committee makes a person seem important, and all the more so if it has an impressive name.   So in any team/committee of twelve, about half the people are there just so they can put it on their annual review, but they contribute nothing at all to the discussion.  At best, they’re dead wood who remain completely silent – though they sometimes speak just so they can say they contributed something, and it’s usually something useless that detracts or at least distracts from the purpose of the group.

Others get involved to prevent progress from occurring.   They consider the group’s activities to be a threat to a status quo with which they are perfectly happy, and want to prevent the group from proposing any changes that will rock their pleasure-boat.   They bring a spirit of can’t-be-done, are quick to identify flaws without proposing solutions or alternate approaches, and it becomes clear that their participation is in the nature of a saboteur that simply wants to prevent the committee from working.  And since it’s much easier to destroy an idea than create one, must easier to feed doubt than grow enthusiasm, they often get their way.

Still others vaguely agree with the purpose, but they have a political agenda: they want to own what the committee creates.  While their contributions seem to be proposing alternate solutions, it becomes clear that every solution they propose merely increases their own power and authority by placing the control of the solution in their own department – whether or not it makes sense for the process to reside there.   This can be terribly distracting, because good solutions are scuttled in favor of less effective ones (which are not completely useless) that increase their political power - and because their interest is in having control rather than achieving results, it becomes obvious that the plan has little chance of success.

Similarly, there are those with alternate agendas that they have either failed to pursue or haven’t earnestly tried to pursue – but their agendas are similar enough to the objective of the group that they can divert the group’s discussions to their agenda.   What they are seeking is usually something worth doing, but it is not the purpose of the group and would be better handled by creating a separate work group to pursue so that these side-tracks do not become diversions from the main purpose of the group.

In all, a committee of twelve people usually has only three or four who are dedicated to the purpose and willing to contribute in a meaningful way.   And to make matters worse, the behavior of the non-contributors often alienates and demoralizes contributors to the point where they stop contributing, or find better things to do with their time.  I have noticed that it is difficult, to the point of being nearly impossible, to recruit smart and capable people to committees - their aftertastes of their past experience lingers on.

In the end, it’s my sense that these groups would be more productive if they were pruned down to those individuals who are earnest and capable.  A group of four intelligent and hard-working people can do more, and do better, than a committee of twenty people who lack those qualities.  But this never seems to be the case: a series of meetings is set up with the same group of people – the useless and the detractors are never cast out, the earnest ones leave in disgust, and new members who could be useful are never added.

But going back to the premise, groups like this are organized by executives who have only a passing fancy – they don’t monitor the group, don’t attend meetings, don’t provide clear guidance, and don’t keep the group focused and on track.   As in many things, reward comes from effort – and when the only “effort” is in suggesting a group should be convened to discuss an idea, the outcome is much discussion and no progress.

Value, Consistency, and the Value of Consistency

Brand is about consistency.   The value of a brand, from the very beginning, was that it indicated to customers what they could expect of a specific product from a specific vendor.   Later, when brand began to accrue other qualities, such as emotional benefits and the esteem of conspicuous consumption, customers were attracted to the brand because they expected those qualities to be delivered as well.

So the value of a traditional brand is that it delivers the same quality, experience after experience, year after year, decade after decade.   Brands that advertise they have been in business for a hundred years communicate a long history of consistent quality.  Consistency with expectations is critical.

Human beliefs are based on consistency.   When two things occur at the same time, we believe it to be coincidence and attach no special value to the correlation.  But when two things occur at the same time, over and over, we create an association and believe the two to be correlated.   It is not even necessary to understand the reason for the correlation: some of the most strongly held beliefs (superstition and religion) are based on situation where the correlation cannot be explained.

This is as true of brands as everyday experiences: a brand must be consistent to be meaningful.  There cannot be the sense that what the customer gets the next time will be different from what they got the last time.   Any change causes the customer to question the correlation, and to doubt that the brand has the qualities they expect - and for that doubt to become more generalized and existing beliefs to be questioned.  If the logo on the package is different, it is assumed that there must be other things that are different about the product it contains.

Whenever a brand changes, it takes some time to adjust: customers are displeased when anything is different, and need to be reassured that the qualities they value about the brand have remained the same.   Or when an unpopular brand changes to become more appealing, they must then convince customers who were disappointed in the past that things are now different and they should give the brand a second chance.

As an aside, correlations are subjective, so it is difficult to identify which qualities are important and which are not: companies assume they know why customers buy their brand and are indifferent to any other aspect, but are often quite surprised when a minor change that they assumed would be inconsequential results in an exodus of customers.   But the concept of a brand, or any object, is the sensory stimulation.   The customer cares not only about the taste of a food product, but it's scent and visual appearance as well - change any one thing, even an inessential quality, and customers cannot refrain from reconstructing their conception of the brand.

So in that sense, consistency itself is a value: knowing what to expect of a brand means that the customer doesn't have to reevaluate it each time they purchase.   This reduces the effort (cost) of buying, and ensures that the benefit-to-cost ratio remains favorable to the brand.   Any change casts doubt on their existing beliefs, causes them to have to re-think and re-evaluate, and provides an opportunity to change their conception of a brand, for better or for worse.