Learning from LinkedIn

LinkedIn serves as a great example of behavioural principles applied to drive success.  In case you are not one of the 150 million users worldwide (or 2 million in Australia), LinkedIn is a social networking site for professionals, and much of its success I believe is due to how it engages its users.

Here are a four of the Behavioural Principles at play.

1. Herding - going where others are

When first signing up with LinkedIn your decision is reinforced by reminding you that are joining 150 million professionals in the professional community.  However, whilst it's great to see the herding principle in place, I think this is quite a passive execution and in itself, does not compel people to join.

Once joined up and networked, LinkedIn support your sense of herd connectedness through statistics on how many people you can reach through the connections of your network. Large numbers (for instance my 263 connections extrapolate to over 2.7 million) create a sense of possibility.  LinkedIn also provide stats on how many new people have joined my network in the last couple of days, showcasing how vibrant, current and desirable LinkedIn is to the broader population.

2. Completion - we like to finish once we've made a start

Once you have a profile, LinkedIn consistently give you feedback on how your profile could be even better, for example by asking for a recommendation or adding speciality skills.  But that's not all. LinkedIn measure and illustrate your degree of completion as a percentage, and for many, we can't feel entirely satisfied until we've reached 100%.

Completion is also used to help people network.  LinkedIn helpfully provide a snapshot of "People You May Know" and make it very simple to scroll through and invite them to connect.

Completion is also used effectively within the discussion sections of LinkedIn.  With the objective of getting as many members as possible exchanging ideas, LinkedIn get you started by pre-populating the discussion with your photo next to the empty text box, giving you a sense that the only thing left to do is say what's on your mind.  Easy!

3. Uniqueness - we all like to feel special

Whilst herding is great for a sense of comfort, we all like to feel that we are unique.  You can see this principle being supported within the Groups function where like-minded people exchange content. Here the people that have been deemed 'most influential' for that week are listed and ranked, encouraging them and others to continue fuelling the content exchange, which in turn keeps LinkedIn a vibrant place to visit. 

4. Status Quo Bias - we're complacent

In order to maximise the volume of networking, LinkedIn need to overcome our usual state of inertia. To prevail over inherent laziness (or for some, a fear of rejection), LinkedIn make the process of inviting someone to connect very easy by pre-populating the invitation with text so that you don't even need to think of what to write.  

Spot the behaviour

I've only touched on four of the behavioural principles demonstrated by LinkedIn so next time you use the site, look at it from a behavioural perspective.  Once your eyes are opened to what LinkedIn are doing, you will see many more tricks that you can apply to your own website. I'd love to hear about what you find, so happy linking.

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It's not me it's you: Dropping a customer who doesn't spend enough

We've all been there. That customer who soaks up an inordinate amount of time and energy without spending enough for you to justify the level of resourcing.  And now it's crunch time - how should you move a customer who had face to face sales representation to a less frequent cycle and/or telesales account management without losing their business?  Here are some pointers from behavioural economics to change your service mix.

You don't know what you've got till it's gone...aka "Endowment effect"
You can be sure that the customer took face to face (F2F) representation for granted when they had it - but now that it might be taken away it's seen as a catastrophe. Endowment effect is our tendency to overvalue what we own - in your customer's case, they "own" the level of service they have been used to.

Tell them they can have F2F representation again...but they need to meet the criteria and to do that they can work with their very smart new telesales account manager who will help them get there. Will they like it? Most possibly not because it will be seen as personal affront. But guess what, you're in business and are entitled to treat customers who spend more differently. 

Business Class vs Economy, it's your choice
Procedural fairness explains our tendency to accept a judgment if it has been fairly considered and you know the rules.  If you've ever flown Business Class and then had to go back to Economy, you will know which you prefer, but you also know what it takes to get back to Business Class - money.  Do your customers know what it takes to get F2F representation?  Share the decision and the objective criteria (eg spend more than $5,000 pa...) to help them understand that they are actually in control of their servicing - all it takes is increased spend. 

But I'm special!  I'm an important account!
This type of change reminds the customer that they are one of many, upsetting their sense of uniqueness. Talk to the customer about what makes their business special and why you see a continuing relationship with them, albeit through a different channel.

Don't think about it as losing something
We hate to lose more than we love to win. In this case, the customer may react badly if they perceive the service mix as losing something so do everything you can to frame the change as a gain. Can they get more frequent attention via the phone for example? Do they get the resourcing support of a whole team rather than one individual? Will shorter appointments save them time?  Mark out potential reasons why F2F may not have been the best method of contact from that customer's perspective and consider how to use it in your justification. A word of caution though, the change will most probably be seen as cost cutting, so don't go too heavy on the "it's better for you" angle unless you can actually prove a better service level.

Quick like a bandaid
With unpleasant news, get it over quickly because we adapt more readily if we are not constantly reminded of what has changed. Handover the accounts (and do this properly by thoroughly briefing the new rep and telling the customer) and move on so the healing can begin. 

Still scared to act?
If you are still procrastinating about making the changes, know that you are falling into the trap of loss aversion - you are more fearful of losing the business of some difficult customers than motivated by the gains you can make by having your F2F sales reps concentrate on the accounts with most potential.  And you may well lose some customers.  So to get over this mental hurdle, do some number crunching. How much does it cost you to service those accounts, what's your margin, and what's the opportunity cost between these accounts and the potential accounts your rep could be growing?  Overcome your reticence with a good dose of fear busting.

By no means is changing service mix an easy thing to do, but it is an important aspect of managing your business. If you want to take it a step further and fire a customer, you may want to check out "Firing a Customer - what holds us back?".  Until next time, happy dropping!

Picture from http://www.officialpsds.com/images/thumbs/Roped-off-psd65892.png

Why does retweeted stuff turn me off?

Here's some self-disclosure for you.  I find when I am following particular Twitter topics (for instance "Behavioural Economics"...yes, I am that nerdy) I start to ignore tweets that have been incessantly retweeted.  This is contrary to the Behavioural Economics principle of herding ie we go where others are.  So if my fellow Twitterites are actually helping me sort out which content is of most interest in the marketplace, what on earth is behind my irrational shunning of these tweets?

I think it comes down to hard coded arrogance.  I want to have discovered it myself - the fact that others have retweeted it en masse diminishes my sense of uniqueness, and uniqueness is a central part of our identity. There's a part of us that wants to be the black sheep.  Turning up to a party in the same dress as the host, ordering the same meal at a restaurant as someone else, excitedly telling a friend of an App you've discovered only for them to turn around and say they knew about it days ago, these are things that niggle at our sense of uniqueness. 

I also think I am caught in the old content filtering mindset where you would read the source (eg newspaper article) and from there on, related strands of material would be supplementing that original piece through editorial or review.  With retweets, there is usually no value add beyond distribution and so I find my interest level is subdued rather than activated.  It's dilution rather than illumination.  The related behavioural concept at play here is vividness, where we tune into things that are more striking.  Reweets undermine vividness through their sheer domination of the topic feed.

I'm interested in your reaction to retweeted topics and whether you likewise 'turn off' from reading some content because of its popularity?  Drop me a comment (and I look forward to you retweeting this piece!).

Image from:
http://www.smh.com.au/ffximage/2008/08/28/black_sheep_lead_wideweb__470x308,0.jpg

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.

Framing

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?”

Uniqueness

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 http://www.smartcompany.com.au/blogs/20110822-5-tips-for-better-customer-service.html

Image source: http://www.google.com.au/imgres?q=next+teller&hl=en&gbv=2&biw=1280&bih=603&tbm=isch&tbnid=gNH_K6WLyMUTtM:&imgrefurl=http://www.posdisplays.com.au/menu_card_holder.html&docid=0UdatlbuNpnqhM&w=325&h=63&ei=AxRSTp-BFObliALctYjjAw&zoom=1