My first brush with what was then called customer satisfaction was with a mega B2B firm in financial services. Both the CEO and President were Harvard-trained economists, not exactly lightweights. Every time I presented the data on what mattered to our customers and the impact of customer perceptions on the business, they summarily dismissed what our customers were saying as ill-informed. The only thing that mattered in their world was “Best Execution” (AKA price), and if customers weren’t smart enough to know that, then it was the customer’s problem!
While the world has since moved from this extreme, the default position of most firms is to treat customer and employee decisions and behaviors as a Ben Franklinesque exercise of weighing the pros and cons of their choices and deciding accordingly. Most of us probably recommend this type of approach to others when they are faced with choices, and we like to think that we make “informed” decisions based on the facts. The science of human decision-making and behavior, however, tells us otherwise.
Behavioral Economics has shattered the illusion of rational decision-making. People simply do not have the time, energy, knowledge, training, information, disposition, or sufficient concern to make purely rational decisions. This does not mean, however, that our decisions and behaviors are irrational. Quite to the contrary: there is a strong case to be made that investing time, energy, knowledge, training, information, disposition, and sufficient concern into making decisions would be irrational. The “cost” of that investment would far exceed the value of the return and, quite frankly, would leave us in a state of perpetual analysis paralysis.
Perhaps not strictly rational (or “logical” as Dr. Spock would say), customers and employees make perfectly reasonable decisions given the constraints they face regarding their time, energy, knowledge, training, information, disposition, and level of concern. There is nothing unreasonable in making a decision based on convenience, of buying something good enough (“satisficing”), staying with a job you enjoy/leaving a “good-paying” job you hate, or being loyal to a brand with which you identify. Since when is doing something that makes the customer or employee feel good unreasonable?
Although few of us admit it about ourselves, human behavior is driven primarily by emotions, by visceral, “gut” responses, after which we line up the “rational” reasons to explain decisions we already have made. Those emotions make us human. Emotions are a complex result of our personal experiences and memories, the environment, and our physiological and neurological responses to a situation (or stimuli). It is eminently reasonable to make decisions that make us feel good. A strong case can be made that a purely rational decision that makes us feel bad is unreasonable.
It is similarly unreasonable for companies to expect customers or employees to try to approach decisions like a calculator. Ironically, given what we know about human behavior, I would go so far as to say it is the firm that is acting irrationally when it expects its customers and employees to behave like rational decision-making machines.
How do Customers and Employees Feel?
What does this have to do with CX and EX? Everything. Companies produce, distribute, sell, and service stuff. They instinctively organize around and focus on their stuff. Faced with questions regarding delivering a superior customer experience and bolstering customer relationships and loyalty they reflexively go to the question of how to make their stuff better, faster, cheaper, more durable – improving the quality attributes of their stuff.
Quality matters. This is not an argument for ignoring the importance of possible improvements to your stuff. Time and again, however, the data has indicated that improving how customers feel about your stuff provides a greater lift in customer experience and loyalty than improvements to the stuff itself.
I have seen this confirmed with client data in terms of repurchase behavior, brand loyalty, and the explanatory power of key drivers.
- Working with one of the leading sellers of mobile devices we wanted to determine the extent to which consumers repurchased the same brand. As expected, those who rated their devices highly were more likely to repurchase the same brand than those who were dissatisfied with their devices. But when we layered in the emotional attachment the numbers popped: consumers who liked their devices and expressed positive emotional attachments to their mobiles were 50% more likely to repurchase the same brand than those who also rated their devices favorably but showed no emotional feelings regarding the brand.
- Two projects in the auto sector also confirmed the impact of emotions. A luxury car manufacturer also was exploring repurchase behavior. Those who stayed with the brand and those who switched gave the vehicles comparable ratings on functional performance. The difference: customers who switched brands didn’t express strong feelings about the cars, while those who stayed loyal conveyed positive emotions when they spoke of their vehicles. (In an ironic twist, the defectors gave the brand higher NPS scores than those that stayed loyal! In other words, they would recommend the vehicles to others but weren’t personally attached to the brand.) A second auto project found that among customers who had repairs done by dealers and rated those repairs as very good or excellent, those who also expressed positive emotions regarding their experience rated their loyalty to the brand 50% higher than those who had no emotional engagement.
- For a banking client we measured the impact of including emotions in the key driver analysis explaining the overall customer experience. Once again, we found a 50% bump: when we added emotional measures to the analysis the models explained 50% more of the variance in overall CX compared to the model excluding emotions.
To paraphrase Maya Angelou: customers and employees will never forget how your company, brand, stuff made them feel. Those feelings, those emotions forge enduring memories that stick with us and drive our future decisions and behaviors. That is perfectly reasonable.
- Case in point: in multiple projects comparing Apple iPhones and Samsung droids, I have seen the droids win the day on functional performance. Ben Franklin would tell us that Samsung is the better (AKA more rational) choice. But Apple customers love their i-everything, and this is reflected in stronger levels of customer loyalty, repurchase behavior, cross-selling, and brand extensions . . . which is reasonable.
The Science of CX and EX
Customer and Employee Experience is the science of understanding how people feel about the experiences they have with a company. The application of that science is using those insights to deliver experiences that elicit the feelings that drive or motivate the behaviors the firm wants from customers and employees. Yes, this sounds manipulative, like a rat-in-a-maze behavioral modification experiment.
People are inherently more complex than lab rats. Each of us has our personal histories and memories and reacts differently to the same situations. But at their core, the justification for investing in improving the customer and employee experiences is the return on those investments. Those returns stem from monetizing the changes in the behavior of customers and employees.
The Irrational Firm
What is both unreasonable and irrational is the resistance of many firms to acknowledging human nature in their CX and EX efforts. Sure, some pay lip service to the impact of emotions on customer and employee behaviors; and then promptly lapse back to bringing in the folks in the white lab coats to work on improving their stuff.
In all fairness there are some signs of change. Some companies are beginning to think more about human-centered design and behavioral economics and talk about “empathy” abounds. But most of it is just that: talk. And while human-centered design is a step in the right direction, the focus typically devolves into improvements in the functional user experience and loses sight of how customers and employees feel about the experience.
The rational and reasonable thing for companies to do is to remember what Maya Angelou said and concentrate on how they make customers and employees feel.
Great post! To understand and leverage brand, customer, and employee decision-making today, game, set, and match to Daniel Kahneman, Behavioral Economics, and the Peak-End Rule! Everything about experience, whether b2b or b2c, has emotional underpinnings.
Good article, but there’s still a gap in how we persuade the bosses to invest in this.
The examples you give are useful, but the push back we’d get is that they demonstrate correlation, not causation. That’s a hard one to deal with.
Who is Maya Angelou? On Googling there’s a civil rights activist and poet by that name – is that who you mean? How is a quote from her of relevance? (again, I’m thinking of presenting to the bosses and anticipating challenges). Bear in mind you have an international audience.
You might want to change ‘Dr Spock’ (a famous pediatrician) for ‘Mr Spock’ (a fictional Vulcan) if that’s who you mean.
You might be interested in this classic study that apparently shows that companies who focus on CX perform better on the stock exchange.
Thank you for your comments, Michael and Nick.
The correlation vs. causation debate will never go away — of course it also applies to examples based purely on traditional inputs that totally ignore emotions, as well as all of the studies regarding better stock performance among CX leaders. CX leaders might simply be better-managed firms that would outperform the laggards no matter what.
I stand corrected (and apologize to both the real — albeit deceased — and fictional) Spocks.
As for Maya Angelou, perhaps I am just another ethno-centric American, but her comments are more relevant to human behavior than those of Milton Friedman (another Yank, but one who won the Nobel-like prize for economics and no doubt is better known to the business community).