Eftpos ad's unfortunate resemblance to toilet bowl

Not one of my most sophisticated posts, I'll admit, but this Eftpos ad had me perplexed for a moment. I couldn't work out why they were promoting a hygiene strip across the coffee - you know like the sanitation strip you get in hotel bathrooms?

Their beer ad is below.

 

Gender differences in bottle shop behaviour

An article on the gender difference in booze buying behaviour grabbed my attention the other week. "Cheap Booze for him" headlined a story about some Roy Morgan research that identified that blokes were driven by bargains, whereas women sought helpful customer service ("Cheap Booze for him" by Inga Gilchrist, MXNews 4/7/11).  The article quoted bar duty manager David Dearlove as explaining that emotions were the difference, where "females want more from a situation, so they want to be waited on. Whereas guys just say 'Give me my beer' and they're done."  Very hunter-gatherer!

Devising your customer engagement plan
As this snippet of research indicates, businesses have a lot of decisions to make when structuring the optimal customer engagement plan (*refer caveat below).  In this case, "beer on sale" would likely stimulate male foot traffic and you would tend to up-weight staff at the registers.  A promotion on "wine matching" may instead stimulate more female custom, and you would need to ensure you had staff available in the aisles to direct purchase decisions.

At what point can you influence the purchase decision?
The interesting point here I think is that men in this scenario are making the decision before entering the store - indeed it is the reason they visit the store.   Women, on the other hand, visit the store in order to make a decision, and in fact be helped to make it.  This means the retailer has different opportunities to influence what the customer walks away with.

To make the most of male customers, the retailer should place high margin wine or champagne near the beer on special, suggesting the guy keep in sweet with his lady by coming home bearing gifts.  This is a technique used in grocery where nappies sell well with beer!  This opportunity for the retailer centers around the behavioural principles of sunk cost and mental accounting. The guy has already 'spent' the amount of money for the beer before he arrives in store (sunk cost), and that means that it should be easier to up-sell because any other purchase comes out of another mental bank account.

To make the most of female customers, the retailer can of course use direct customer service, but the other opportunity is to help the decision making by noting which wines are most popular, best value, match with particular foods and so on.  You have probably seen these techniques applied on point of sale, like "staff picks" or "popular seller", and these work because they use the behavioural economics principle of herding - we go where others go.  If you know other people like the wine, then there is less chance of making a poor choice.  Use of a rating system can also help to frame the decision, so a rating system for value or taste can help influence customer purchases.

Behavioural Economics can influence both genders
Whilst I do enjoy little snippets on gender differences, more important to your business is how you can influence the behaviour demonstrated by the sexes.  Male or female, your customer can be greatly influenced by strategies to get them in the door, and then again whilst in store so it may be worth you considering what Behavioural Economics can offer at each decision point.  Until next time, happy boozing.

(*Note, whilst the article on the research pointed to some gender differences which I have used in this post, there are doubtless many exceptions and qualifiers that you would need to consider before applying carte blanche to your business. Start with accessing the source research through Roy Morgan if you are interested.)

Image from http://www.bargaineering.com/images/in_posts/wine-shop-aisle.jpg

Why we hide behind big, boring reports

I recently read an interesting piece called "Tell Me Something I Don't Know-Why MR is Comprehensive, Accurate, and Often Boring‏" in which the author Yi Kang laments the dull and contrived nature of most market research.  

"Turns out that big, thick tomes of information do serve a purpose – making people feel good. In a recent survey, business executives were most confident in a decision being “well thought out” when the supporting research was “comprehensive” and “accurate."

But when asked if the supporting research made a difference in the business decision (not feeling good but having impact). A very different picture emerged. “Making a difference” requires market research to do at least one of two things: say something new or say something contrarian."

I think Yi is spot on for a couple of key behavioural reasons;


Status quo bias – comfort in sticking to what we know, and
Loss aversion – being more fearful of losing what we have than risking a gain


There’s a lot of comfort in a big, professional document because that implies safety, thoroughness and, frankly, that someone else has done the thinking so we don’t have to.  (It also helps to justify the expense on the research because quantity still trumps quality a lot of the time in perception management).


Of course it's not just market research that taps into our desire for credibility.  Just think about the business documents and spreadsheets we slave over that your boss may not even read. Executive summaries are there for a reason after all.


The other interesting thing we can draw from behavioural economics is the “not invented here” bias that we are subject to – in this case it explains why a lot of those research findings don’t go anywhere. To get traction, the stakeholders need to be part of the insights generation phase, otherwise the outputs are likely to be filed away in a drawer.


So what's the answer?  How about we take some chances and throw away the templated documents, the proforma Powerpoint presentations, the phone book sized research reports and instead throw some reflections up on a whiteboard to discuss, challenge, laugh about, but ultimately get stimulated enough to take action?  Getting your researchers to evoke insights rather than yawns? Sounds good to me.

Image from http://jameswoodward.files.wordpress.com/2008/08/piles_of_paper_small.jpg?w=200&h=239

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

Tips for introducing a service fee

Debating whether you should introduce a fee of some kind to cover a service you provide? There are obvious financial advantages to your bottom line, but is it worth the negative reaction you may get from customers? Here are three behavioural principles that will help you consider your options.

Social contract

Charging for something shifts it from social to commercial transaction, and this means that the service will be viewed differently. In a case study profiled in “Predictably Irrational” by Dan Ariely, a childcare center imposed a fee on parents who were late in collecting their child. Sounds like a sensible idea, motivating those parents prone to tardiness to make more of an effort to get there on time.  But what happened? Tardiness became worse!  Why? Parents felt less guilty about being late because they were now “paying” for it.  The arrangement had shifted from a social to financial transaction, and expectations shifted in kind.  In your business, take note of how social norms are influencing the behaviour of your customers before you shift it to entitlement territory.

Adaptation

We adapt to something faster if we are not interrupted and reminded about it (think ‘quick like a Bandaid’).  By introducing a service fee you will be drawing attention to that service every time you charge for it.   If it’s great service, it can be a good move to charge every time so that you can showcase the value and prevent customers taking it for granted (adapting to it). But if your service is not that hot or not easily understood, better the charge is either infrequent (like annual) or deemphasised (don’t provide long-winded explanations on every bill) so that customers have a chance to forget about it after initially being annoyed. 

Loss aversion

The power of fees is often in what you do not charge.  “We’ll waive normal joining fees” or “We’ve scrapped fees” are popular techniques amongst banks and gyms because they placate our aversion to loss – we feel like winners because we’ve avoided the pain of a fee.  For the reason alone of customer motivation it is worth having some sort of fee that you can waive as you need.

From your own experience as a consumer it should come as no surprise that service fees are often resented.  The opportunity for your business is to know how and why you can use fees to influence customer outcomes and overcome potential resentment, and to proceed knowing that it’s not as simple as cost recovery.  Until next time, happy charging.

This article also appeared in Smartcompany.com.

Image from http://www.itnews.com.au/News/245014,industry-in-uproar-over-austrac-cost-recovery-proposal.aspx

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

New thinking for old business models; Drivers on Scoot and Coles Collect

Two fliers dropped into my letter box captured my attention recently because they were advertising new ways of thinking about existing business models.

The first was a flier for Drivers on Scoot.  As their leaflet probes..."Had a little too much to drink and need to get home safely with your car?"  Ah ha! A solution to the vexed issue that compounds big-night out regret - having to get your car the next day.  The system involves four steps. 1. you make a booking 2. a driver meets you at the agreed time 3. the driver folds the motorised scooter they used to get to you into a bag and slips it in your car boot, and 4. they drive you and your car safely home. The driver then trundles off on their scooter to the next appointment..

Why did I think this business was interesting?  It challenges the conventional thinking around how to get you and your car home (most typically a taxi home and then a logistical negotiation the following day to collect the vehicle).  Promoted as cheaper than a two-way taxi trip,  Drivers on Scoot have attempted to resolve a common issue for people based on these insights: control and convenience.  Control because leaving your car means you cannot control what happens to it, and convenience because you do not have to waste time the following day reclaiming your vehicle.

The second flier I received was for Coles Click & Collect.  This is a new service model that Coles have introduced in Windsor, Victoria whereby you order your groceries online, but instead of having them delivered they are hand packed and you collect them at a service station depot with fancy secured fridges.  It's the "new express way to shop" according to the brochure.

Why did I think this was interesting? Coles are tackling a problem that I myself have experienced with online shopping - I simply do not want to commit to being at home for the 3 hour delivery window on a particular day.  But I would happily shop online if I had control over when I could collect the goods.  Have you noticed that control and convenience have reared their heads again?  Control because I have control over when I collect the groceries and convenience because it fits in with my plans. 

So have I tried either system? Well, no.  I have been too well behaved to need the services of Drivers on Scoot (plus I think they need to target the spontaneous after-work drinks crowd rather than planned-nights out crowd). And for Coles, I do not travel through Windsor and so would need to wait for the service to be offered locally.

But what's interesting is that both Drivers on Scoot and Coles Click & Collect are based around control and convenience.  They have crafted business models based on fitting in with the lifestyle of the customer.  Here's the opportunity for your business: look for the problems that your customers are grappling with to get stuff done. A problem related to having a few drinks? Getting your car home.  A problem with online shopping? Being home when the delivery is scheduled.  Looking beyond your usual assumptions may give rise to a new thinking about your business, so give it a shot.  I look forward to seeing your flier in my mailbox soon.

PS For an excellent practical step-by-step on this type of disruptive thinking, check out Disrupt! Think the Unthinkable to Spark Transformation in Your Business by Luke Williams.  http://www.amazon.com/Disrupt-Think-Unthinkable-Transformation-Business/dp/0137025149

Image from http://www.performance-car-guide.co.uk/images/Car-Night-Time.jpg