Monday, August 22, 2011

5 Tips for better customer service from Behavioural Economics

This weekend I visited a café famous for being one of the first to bring real coffee to Melbourne.  But in my estimation, that business is surviving on its heritage alone. Both the product and, more strikingly, the service left a lot to be desired.  A sneering barista who barely grunted to acknowledge our orders and practically threw change at my friend made us feel that we were not living up to his expectations.  Needless to say, I won’t be back.  This got me thinking about five principles of Behavioural Economics that can help businesses (well, at least, those who think customer retention is important), improve areas of poor customer service.

In Behavioural Economics framing refers to the language and context you use when interacting with a customer.  It has been shown that using language like “can’t”, “won’t” and “that’s our policy” inflames the customer experience.  Offering to “take you through the steps…” is much more constructive than “you can’t do that before you do this” because you have framed it in the affirmative. 

Drop in the Bucket Effect
In environments like call centres where the sheer volume of customer inquiries can be overwhelming, it can be difficult for your staff to feel they can make a difference – the drop in the bucket effect.  The knack is to think of the one rather than the many.  Metrics like “How many customers you helped” is better at motivating staff than measurements like call handling time because it takes performance back to the one-to-one relationship.  Likewise, celebrate the success stories where a staff member has helped a customer – noting it doesn’t have to always be ‘going above and beyond’, it should be the goal of every interaction. 

Procedural Fairness
We cope better with outcomes when we feel that we have been treated fairly through the process. To this end, inform your customers of the process that will be used to evaluate their request to help them understand what happens and why.  “I’ll have to speak with my manager” is not as effective as setting up the interaction by outlining the steps and escalation points. “Just before I ask you to go into detail about your concern, I would like to explain my role in this process.  I will…then…and finally…Do you have any questions before we start?”

Just as we cope better when we know what the evaluation process will be, we also want to be treated as unique individuals. As Dan Ariely writes in Predictably Irrational, we have a “need for uniqueness”.  But whilst of course we are not unique in thinking we are unique (we all do), the lesson here is never to tell a customer they are one of many because that will diminish their sense of individuality. “My issue”… “My situation”. I once had a spat with my car manufacturer because they were interested in their policy whereas I was interested in the inconvenience the car break down meant to my life. 

Endowment effect
The endowment effect means we tend to overvalue what we own.  That’s why you think your car is worth more on trade-in than the dealer. In a customer service setting, this can help explain why customers can be all consumed by their issue, which to your organisation may seem trivial. Again in my car manufacturer’s case, they saw my car breakdown as an isolated issue to be resolved through their usual process. I saw it as a failed new car purchase that stranded me for a whole weekend.  To deal with this you need to see the issue from the customer’s perspective and work with them to understand what it would take to have the concern resolved.

Customer service undoubtedly one of the trickiest areas of business management.  The good news? Whilst the challenge of balancing your organisation’s policies, procedures and resourcing with the expectations of individual customers seems to be in constant flux, there actually consistent and predictable behavioural reasons why customers react in the way they do. An understanding of Behavioural Economics can mean more effective, efficient and satisfying customer service models, so why not get started?  Until next time, happy serving. 

This article also appeared in Smartcompany

Image source:


  1. Customer service professionals will find this article very useful. Please post more of this in the future.

  2. These are the top and unique tips I am reading about better customer service. I will do suggest my friends also to consider these tips. Thank you for sharing.
    user engagement