According to Econsultancy, every $92 spent on customer acquisition results in only $1 spent on conversion. This perfectly illustrates why businesses need to pay more attention to converting and retaining customers.
According to the Harvard Business Review, it costs between 5-25 times more, depending upon your industry, to acquire a new customer than to retain one. This reflects how imperative it is to retain customers. Customer service is the channel businesses use to both acquire and retain customers more effectively and efficiently.
There are several tools, techniques and management theories available for improving customer service. They are all largely subjective to the type of industry, the size of the business, and the business’ goals, among other things. The one aspect that is not subjective is human psychology. Therefore, below are 4 techniques, based on human psychology, designed to make your customer service more effective:
1. The Halo Effect
It has been rightly said that the first impression is the last impression. While a brand with a big media budget may have the resources to redeem itself, not every business can pull that off. That’s why it’s better to ensure the first interaction between the brand and the customer is positive, because it will pay off in the long run.
Psychology’s Halo Effect refers to the phenomenon that when a person has a positive first impression of a business, that person will reflect on future interactions with the business in a positive sense as well. This positive sense can be cultivated in several ways – by providing first-time customers with single-click solutions, by providing valuable freebies, by displaying your credentials or even offering your recommendations, as these all can have a cumulative effect.
Along the same lines is the following rule – end strong. This is important to remember because after the first interaction is over, there is no guarantee when, or if, the next interaction will occur. Until it does, something needs to remind the customer about the brand so the next conversation starts on an equally-positive note. The airline industry has focused extensively on this. Most of the business class air hostesses try to remember the names of the passengers in order to greet them by their first name when the flight lands. This creates a lasting effect for when the customer needs to book a future flight. A similar approach can be used after having resolved a customer query – provide them with a small freebie or offer as a gesture of gratitude for being patient with your brand.
2. Personalize All Communication
This is one of the subtlest, yet most-effective ways to assure a consumer of a brand’s reliability. When you meet a kid for the first time, if you refer to them with a generalized title like kiddo or cute one, the attention you receive is passive and voluntary; but when you refer to them by their first name, you immediately have their attention because it is a natural reflexive action. Being addressed by our first name gives us the impression that someone familiar is calling us.
And there is scientific data that confirms this phenomenon:
a) Businesses can experience an up to 760% increase in revenue from segmented email campaigns.
b) 73% of consumers prefer a company which uses data to personalize their shopping experiences.
c) According to the University of Southern California’s research, 85% of millennials are more likely to make a purchase if the product has been personalized to their tastes.
The most-effective method for doing this is by leveraging the power of chatbots, which have created a unique channel for those naturally-responsive to messengers. With the increased use of Facebook, Instagram and LinkedIn for messaging, the natural response to chat-boxes is to reply. Therefore, including chatbots on the home page can be immensely effective.
Chatbots should be programmed to welcome the visitor and ask for a first name, which can be used at crucial touchpoints – like when the same visitor proceeds through the product range or when signing for the newsletter or is about to add a product to their cart. The business should then be able to personalize every future piece of communication directed toward the visitor.
3. Use CHOICES
McKinsey’s Behavioural Insight Lab developed the CHOICES framework, which is based on work published by world-renowned authors, researchers and Nobel Laureates like Daniel Kahneman, Dan Ariely, Uri Gneezy, Richard Thaler, John List and John Lowenstein. The CHOICES framework highlights the following principles:
a. Context: Visitors identify information within the subtext of other subconscious benchmark information. Show your offerings as compared to a famous/trending brand’s offerings.
b. Habit: People involuntarily behave according to their habits. Proactively contact new customers right after they purchase when your analytics show you that people tend to call at a specific time after they make a purchase.
c. Other People: Regardless of how distinct people want to perceive themselves, they always become affected by mass influence. Show the number of customers satisfactorily served. To further reinforce this fact, show satisfied customers that match the customer’s profile.
d. Incentives: People, especially millennials, respond to instant gratification. This is why the Likes, Comments and Shares buttons on social media are so crucial. Provide incentives for first time/repeat buyers or freebies for those who identify bugs or glitches in your app.
e. Congruence: People work consistently to preserve their positive public perception. Point out that which is publicly important to a specific customer when making your sales pitch – prestige, residence, family integrity, public habits like punctuality, or their fondness for precision, and then position your brand to show how your product(s) can enhance this public image.
f. Emotions: The physical and emotional states of others affect people. Use images of happy, presentable employees in chatbots, letterhead, emails and e-books that show them helping customers 24/7.
g. Salience: People take in messages that are easier to process and remember. Maintain cohesive emails when sending them to customers. If one email highlights a specifically-tailored offering, the following email should pick up where the earlier one left off.
4. Leverage Maslow’s Hierarchy of Needs.
Everyone knows Maslow’s Hierarchy of Needs, which states that you cater to the physiological, safety, social, self-esteem and self-actualization needs of your customers. This drives your customer executives to push customers through the customer journey until they become brand advocates. Clayton Alderfer presented a more comprehensive model, the ERG Theory, which segregates customer needs into:
a. Existence: When a consumer is looking for a straightforward solution to a straightforward problem, they have access to multiple options. One strategy could simply be to differentiate the brand’s offerings so it shows how the products offered by the brand are more helpful in solving the consumer’s pain-points. The motive is to differentiate and prove the effectiveness of the brand’s solution.
b. Relatedness: This pertains to the desire to maintain important interpersonal relationships. After the brand has built enough credibility with the consumer, they can share their positive experience with their loved ones on social media or by giving the brand a positive review on a public channel. To reach this stage, the consumer must have made at least one successful purchase and experienced the brand’s offerings in action.
c. Growth: The intrinsic desire for personal development. At this stage, the customer is already a brand promoter and has taken past action to prove the same. The brand should now consider cross-selling, in case they are developing a new product, addressing a bigger solution or partnering with another brand. At this stage, consumers can be very helpful.
Brands can pitch solutions, offerings or incentives toward the next level, depending upon the customer or prospect’s current satisfaction levels.