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Why customers do what they do
It feels like we’re at the dawn of a new era in understanding how people — namely our customers — make decisions, and some businesses will benefit enormously. More importantly, customers will soon enjoy more kinds of services designed to better meet their needs.
Our collective thinking is being informed by discoveries in behavioral sciences and behavioral economics about the role of the unconscious mind and the centrality of emotions in driving behavior. Many of these findings are now verifiable through neuroimaging tools.
Among other things, we’re realizing that people aren’t Vulcan-like beings who make choices on a cold, purely rational basis. Individuals — our customers — are complicated and swayed by factors beneath the level of consciousness.
Insights about how people are wired have been rolling in for decades. But lately, these insights have penetrated the mainstream consciousness due, in part, to the popular writers like Ori and Rom Brafman (Sway) and Dan Ariely (Predictably Irrational), among others, who are distilling social science discoveries for mass audiences.
These findings aren’t causing companies to rethink their missions—not yet, anyway. Delta Airlines and Verizon aren’t transforming their business models to accommodate social science breakthroughs, but a subtle and profound shift is occurring.
Out with the old…
I’ve been encountering more clients lately who are moving away from outmoded assumptions about service and toward conducting research to learn what factors drive their customers behavior. Instead of relying on the “if you build it, they will come” principle, businesses are trying to figure out precisely why their customers are buying, or not.
For example, the traditional service model emphasized customer satisfaction (“C-Sat”) which many practitioners still believe is predictive of repurchasing behavior. C-Sat has been universally regarded as a proxy for service quality, but research shows that emphasizing satisfaction alone is an overly narrow focus. Multiple drivers, unique to each context, play a far greater role in influencing customer loyalty.
In fact, research shows that customers will tell a service provider that they’re ‘satisfied’ yet switch away from the brand for any number of reasons. Ironically, a majority of people who defect reported that they were ‘satisfied’.
Recently, my team assisted a U.S. retailer that had been suffering from declining retention rates. The company wasn’t aware that their new interactive voice response (IVR) menu frustrated customers who’d been reporting that they were ‘satisfied’ overall. By asking exacting questions and conducting a proper analysis, the company was able to prevent further market damage. The fix turned out to be cheap, simple and quick.
The big news isn’t that companies are rejecting C-Sat, but that they’re taking a refreshingly thoughtful, behaviorally-grounded view of their customers which is opening the door for interesting, potentially sweeping changes.
Not so long ago, presenting behavioral research to the “C-suite” caused their eyes to glaze over. Now, forward-thinking leaders are requesting this information to support their business decisions.
What’s next?
It does feel like we’re entering a new era in understanding customers, but we’re only in its nascent stages. Applied behavioral psychologists don’t yet have a seat at the table, but the business community generally seems to be more receptive to their findings.
I think we’ll recognize the next stage when traditional organizations focus on using behavioral research to design services that are more compatible with human needs. Until then, keep your eye on the agile, innovative companies who are internalizing insights about their customers. You’ll recognize them by their customers who are enjoying richer, more immersive service experiences and returning for more.
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As always, I’d love to hear your views on this subject….
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Want more info on this subject?
Scholars who are contributing to the growing body of social sciences and economics knowledge include Amos Tversky, Daniel Kahneman, Richard Thaler, and Robert Shiller.
Here’s info about my company’s (Osprey) decision-support services and Customer Insight Lab.
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Tags: Ariely, behavioral economics, Behavioral Science, Brafman, customer experience, CX, immersive, Predictably Irrational, social sciences, Swayed
