Customers decide emotionally and justify rationally

Customers decide emotionally and justify rationally

Understanding The Customer Beats Lowering Prices

In their new book, The Intuitive Customer, authors Colin Shaw and Ryan Hamilton contend that companies experiencing plateaus in their Net Promoter Scores cannot combat declining customer loyalty by cutting prices and focusing on cost.

“Understanding why customers do what they do allows you to predict what they will do next,” the authors write. They identify three key precepts:

1. Customers are people, not hyper-rational automatons, and their decisions — even the seemingly rational ones — are often driven by emotions.

2. We need to understand the psychology of why people do things if we are going to anticipate them and serve them better.

3. People don’t buy just based on price; buying decisions are far more complex than going with the cheapest option.

Being able to predict customer behavior opens opportunities to sell by designing an experience that leads customers down a particular path to buy – where buying isn’t a natural decision, it’s an intuitive one, like driving on auto-pilot.

Apple, Zappos and Mandarin Oriental hotels are companies the authors cite as leaders in establishing customer memory.

A customer experience is a customer’s perception of their rational, physical, emotional, subconscious, and psychological interaction with any part of an organization. These perceptions influence customer behaviors and build memories, which drive customer loyalty and thereby affect the economic value an organization generates.

Organizations the authors describe as “flat-earthers” look at customer experience from the rational and physical perspective — focusing on how quickly a delivery is made or how quickly a phone call is answered, or the objective quality of the product.

The authors contend that more than 50% of customer experience is about how a customer feels.

Here are the seven imperatives for moving to the next level of customer experience, as defined by the authors.

1. Recognize that customers decide emotionally and justify rationally.

2. Embrace the all-encompassing nature of customers’ irrationality.

3. Understand that customers’ minds can be in conflict with themselves.

4. Commit yourself to understanding and predicting customer habits and behaviors.

5. Uncover the hidden causes and unintended consequences of customers wanting things to be easy.

6. Accept that apparently irrelevant aspects of your customer experience are sometimes the most important aspects.

7. Realize that the only way to build customer loyalty is through customers’ memories.

In a preface to the book, Glenn Laverty, president and CEO of Ricoh Canada, says it raised its Net Promoter Score by 34 points in 30 months through a combination of factors, which included:

  • Sharing the customer experience vision with the entire team — including HR, IT and Finance — up and down the organization, regardless of title and position.
  • Introducing a compensation structure tying pay directly into customer focus.

This has translated into a 10% year-over-year sales increase for the past 10 years, reduced customer churn and increased market share.

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