The implication of this research for business is that it may be possible to manipulate our biochemistry into persuading us to buy more or establish a greater degree of trust in a brand. While this may sound far-fetched, to some extent this occurs already. Have you ever wondered why the fresh bread counter in a supermarket is always at the back? Or why the fresh fruit and veg is always at the front? It is because the smell of fresh bread and appetizing fruit and veg stimulate hunger and research shows people will buy more food if they feel hungry.

This is all very well but there is little point in stimulating my oxytocin unless your product or service has some value to me. It is important to support the stimulation with some degree of evidence. Essentially Professor Zak’s research confirms what we already know – understanding the emotional context in which you are selling to the customer is vital. For example, if the customer has had a bad experience with your product in the past, your approach and message getting them to buy from you again should be very different from the approach and message you would use to someone who is very brand-loyal. In both cases you are trying to establish desire for, and trust in, what makes your brand ‘special’; what is its value (both rational and emotional) to the customer. Oxytocin is stimulated by emotion not, it would seem, by rational thought so you may wish to place more emphasis on what the product or service might prevent the customer from losing rather than what the customer might gain. We tend to be more motivated by ensuring we keep what we already have rather than what we might be able to gain (see previous post How To Quantify Value which is all about Loss Aversion).

So when thinking about value, the basics still hold true: you’ve got to deliver a good product or service and a good overall customer experience. However, what this research shows is the relative importance of what channels you use to deliver your customer experience. You can’t afford to ignore social media anymore, as much as some of us might like to!

Now please Tweet this article, become a fan on our Facebook page, connect with me on LinkedIn….now you know it’ll make you feel better:-)

Cindy

Fast Company: “Social Networking Affects Brain Like Falling in Love”

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Do customers view the quality of customer service as a key factor in deciding whether to do business with you?  

The answer may surprise you.

Too many businesses still view customer service as a cost of doing business rather than as an opportunity to do more business. Consequently they outsource their customer service call centres to India or the Philippines, bury their customer helplines and encourage customers to view their frequently asked questions pages on their websites for answers. They incentivise their call centre staff to up sell at every opportunity whilst encouraging them to deal with calls in the shortest possible time.

Strangely this attitude is most prevalent in industries where the differences between one brand and another is least pronounced. Examples that spring to mind are utility companies and ISPs, computer hardware and software retailers but there are plenty of others I could mention. If you dig through the sales literature of any business, quality of customer service is nearly always one of the things quoted as something that differentiates the business from its competitors and yet these same companies are quite happy to place their reputation in the hands of another company. Of course when the margin on products are wafer thin and sales appear to be defined by price not service it is tempting to ‘minimise operational costs’ like customer service. There is another way however, as Harvard Business Review’s (July-August 2010) feature by Tony Hsieh, CEO of shoe retailer Zappos shows.

A different approach

A different approach that views customer service as a marketing activity not a cost centre On the face of it selling shoes on line even back in 2000 didn’t seem like a great idea. If Zappos had taken the view that the internet was a way of maximising revenue whilst minimising cost it probably wouldn’t have been.

Fortunately Zappos took a completely different approach. They made excellent customer service a priority for the whole company. They didn’t view customer service as necessary evil but as a marketing activity, preferring to build business through positive word of mouth not traditional advertising. Zappos built their value proposition around exceptional customer service in the belief that this would create an exceptionally loyal customer base where the lifetime value of a customer could be grown if the customer had sufficiently positive associations with the brand.

Measure customer delight not process

Zappos initially experimented with outsourcing aspects of the operation such as warehousing and dispatch but quickly came to the conclusion that the level of customer service they required necessitated managing anything that impacted on customer service in house. They managed their own call centre even though only 5% of sales happen by phone because they realised that their customers phone at least once at some point. Zappos found that if they handled the call well they could create an emotional impact and a lasting memory which in turn led customers to recommend them to others. As a consequence their Customer Loyalty Teams were not judged by traditional call centre metrics that were driven by productivity and speed of resolution or confined to carefully crafted but cold and impersonal scripts. Instead Zappos don’t hold reps accountable for call times, their longest customer call lasted almost 6 hours! Reps don’t up sell because customers don’t like it. Reps have no scripts so that their personality comes through and this enables them to form a more emotional connection with each customer. Reps are judged on whether they go above and beyond for every customer.

Customer service is personal and individual, you can’t achieve this if customers can’t talk to you At Zappos customers who purchase online are actively encouraged to call if they wish. The phone number is prominently positioned on every webpage.

Personal contact with a rep is key to establishing customer loyalty at an emotional as well as a rational level. To that end most of the customer service effort goes on after the sale. Zappos have extended the returns policy from 30 days to 365 days with free return postage, they give surprise upgrades to overnight shipping, even when the customer chose the free ground shipping option. The warehouse is open 24/7 which is expensive but enables orders arrive more quickly, a key source of satisfaction for e-commerce customers.

Customers are happy but does it pay?

It was not all plain sailing for Zappos. Even though sales went from zero to $70 million by 2003 for most of that time cash had been short as they struggled to cope with growth. In 2008 customers returned 37% of purchases representing more than a third of gross revenue which was just over $1 billion, but Zappos realised customers will buy more and be happier in the long run if they could take out most of the risk from shopping at Zappos.

By the end of 2009 gross revenue had reached almost £1.2 billion and the range has extended beyond shoes to include clothing, housewares, cosmetics and other items.

Whilst ‘going above and beyond’ in customer service may have worked for Zappos, not everyone is convinced that this is a wise strategy. A recent piece of research carried out by the USA based Customer Contact Council to examine the links between customer service and loyalty concluded that “telling reps to exceed customers expectation is apt to yield confusion, wasted time and effort and costly giveaways. The study covered more than 75,000 people who had interacted over the phone with contact-centre representatives or through self-service channels such as web and e-mail as well as hundreds of structured interviews with customer service leaders across the world. This research concluded that exceeding customer expectations during service interactions for example by offering a refund, a free product or a free service such as expedited shipping makes customers only marginally more loyal than simply meeting their needs. 20% of ’satisfied’ customers on the study said they intended to leave the company in question and 28% of ‘dissatisfied’ customers intended to stay. Worse still although customer service can apparently do little to improve customer loyalty poor customer service can do a great deal to undermine it. Customers are four times more likely to leave a customer service interaction disloyal than loyal. Loyalty eroding factors include, 56% of customers having to re-explain an issue, 57% report having to switch from the web to the phone, 59% report expending moderate to high effort to resolve an issue, 59% report being transferred, 62% report having to repeatedly contact the company to resolve an issue.

So how can one reconcile these two apparently contradictory positions?

On the face of it Zappo’s successful approach is completely at odds with the findings of a very comprehensive piece of research. Zappos believe that ‘going above and beyond’ has been the whole basis of their success. The Customer Contact Council research suggests it makes little difference.

Zappos believe that talking to a rep increases customer loyalty, the research suggests the reverse. As ever the devil is in the detail. What differentiated Zappos was the realisation that its value proposition, was not just its products or its route to market but its whole customer experience and the realisation that customer word of mouth could replace ‘traditional’ marketing activities. I can see how talking to a rep who has little authority, is based in another country, who is clearly reading from a script, where the glossy advertising that showed such promise is suddenly at odds with the impersonal if well meaning service, could do little to boost my loyalty. What is more being showered with upgrades and free giveaways at this point would most likely lead me to conclude that the company realises that this customer experience isn’t what they promised in the glossy advertising so they hope a few bribes might persuade me to come back.

Contrast this with Zappo’s approach to customers service. First I probably heard of Zappos via recommendation on the basis of what that recommender experienced and liked so you can be fairly sure that my expectation is aligned to what I will get. Second I talk to someone who isn’t reading from a script and goes to enormous lengths to empathise and meet my needs. Third they are from the same country so they understand not just what I say but also what I mean. The rep has the authority to do whatever is required to meet my needs so does not have to refer me to someone else. I am not told about the free upgrade at the time so it is a nice surprise when the item arrives sooner than expected so it doesn’t look like a bribe. In short I am made to feel like a valued friend to the business not a number who has been greeted by 5 minutes of bad music whilst being told how much the company values my business, who is only talking to the rep because I couldn’t get the online system to work or I was seeking to return the item I purchased or trying to get the item I had already purchased to work.

7  Ways to Achieve Exceptional Customer Service

 1. Make customer service a priority for the whole company, not just a department.

2. Empower your customer service reps.  They shouldn’t have to escalate a problem to a supervisor.

3. Fire customers who are insatiable or abuse your staff.

4. Don’t measure call times, don’t upsell and don’t use scripts.

5. Don’t hide your phone number. You want to talk to customers.

6. View the cost of handling customers’ calls as an investment in marketing, not an expense.

7. Celebrate great service by telling stories exceptional stories to the entire company.

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Feeling stuck?
How do you know when your value proposition isn’t working?  An obvious way is when you’re losing sales and prospects have stopped calling, but we often find a deeper sense within companies that something is wrong – you can just feel it.  There is a sense of the organisation being ‘stuck’.  We often hear phrases like, “we try this and we try that but nothing is working” or, “we’ve hit the wall and we don’t know what to do next”.

Your value proposition must be a reflection of what your customers expect and want from you married with what you want and are capable of delivering to them – your capabilities. Anything less than this becomes, at best, just marketing spin and, at worst, a sticking plaster to cover up poor capabilities.

Usually, what we find is that the issue is a disconnect somewhere in the value chain that’s being patched over, often by marketing spin.  The organisation’s value proposition therefore isn’t ‘real’.  Everyone involved – internally and externally – instinctively knows that true value isn’t being delivered or received. It’s like the whole business is wearing a mask.  This unreal or untrue value proposition devalues who you are as a business and what value you can truly bring to your people, your customers and the wider society.

I’m not suggesting that being ‘untrue’ is a planned or even a conscious state.  For most organisations it just occurs happens over time until a tipping point is reached – sales decline, customer satisfaction gets worse, profits lag, or there is a major crisis.  Also, not having a ‘true’ value proposition causes a constant tension inside the business. It’s what psychologists call an impasse, the tension between the ‘true’ and the ‘false’. That tension leads to general malaise and unhappiness with good people walking out of the door.

What stage are you stuck at?
Why do companies find it so difficult to find their true value proposition?  It’s because people and organisations get stuck at different stages of the discovery process.

In his book about psychological impasse, ‘Getting Unstuck: How Dead Ends Become New Paths’, Timothy Butler writes about 6 phases in the impasse process. Generally there’s a movement and a pattern that the impasse follows, and it’s helpful to recognize where you are:

1. The problem or crisis
The first phase is the arrival of a crisis. Each person’s first response is to keep on working, trying even harder to make a difference.

2. It’s my fault – It’s your fault
Phase 2 is a deepening of the crisis. We realize that our old ways are not working and we’re stuck.  Old doubts emerge and your inner critic gets louder, “We never really were on top of that and now it’s really showing up”.

3. Our way isn’t working
We begin to face the situation with new eyes and new ears, ask what is happening, and attend to our current experience.

4. Becoming more open
We begin to listen better and to be open to a new type of information. We are pushed to the edge of our rational, more purely analytic ways of understanding, and we begin to appreciate complexity in the business – we are forced to go deeper.

5. Becoming aware
There is a deepening insight into our familiar patterns. This phase happens over time. There are patterns to the things we like about the world as people and as a business, the things we value. This is about the business becoming more self-aware.

6. Taking action
The sixth and final phase requires taking action. The impasse experience does not become real until we actually do something about it. We schedule that meeting we’ve been thinking about for 2 years but never done. We do something that shows everyone else and ourselves that we’ve gone through the impasse; it’s been a real experience, and now we can act based on what we’ve learned.

What to do next
Recognise the signs of organisational impasse and start working on your true value proposition. Your value proposition must reflect the true nature of your business, your people, your offerings, your customer base, your capabilities and your vision and aspiration for the business and not false marketing messages that have been created to try to represent what you wish you were as a business.

To deceive yourself as a business, albeit subconsciously, is often easier than deceiving other people. It is also much harder to see the failings and the falsehoods. This may explain why customers are often much better at articulating an organisation’s value proposition than the organisation itself. If you are “stuck” then try asking your clients or customers why they buy from you, or why they stopped buying from you might be a great place to start. 

Shakespeare’s words spoken by Polonius in Hamlet are as true today as they ever were:

“To thine own self be true,
and it must follow, as the night the day,
Thou canst not then be false to any man”

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During the course of late 2009 and early 2010, Futurecurve clients and contacts around the world were invited to participate in an online survey on the subject of Value Propositions.  We wanted to find out what the general sentiments were toward value propositions and their importance in helping organisations improve their strategic positioning, grow sales and boost loyalty.

We covered a number of areas, including:

• What is a value proposition?
• Why do organisations need value propositions, how important are they and who is responsible for creating them?
• What organisations have great value propositions, and why?

To find out more click here to download the Value Proposition Survey pdf

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This equation isn’t quite as rationally straightforward as it might at first appear, as demonstrated by the 2002 Nobel Prize winning work of Daniel Kahnemann in his Prospect Theory.  Simply put, people will work harder to avoid losing something than they will to gain it.  In fact, behavioural economics tells us that the psychological effect of a loss on us can be at least twice the effect of a gain, if not more.  Think about it -­ how would you feel if you lost £200 today versus how you would feel if you had a windfall of £200?  Chances are that the way you would feel at losing the money would be stronger than the emotion you would feel at gaining it.

Most significantly, the effect of this cannot be shown by conventional, rational, market research, as these non-rational behaviours largely affect us unconsciously.  You have to dig deeper into the human psyche before this can be uncovered, using good question probing and a more qualitative approach.

In their book ‘Nudge’, Thaler and Sunstein describe their idea for the “save tomorrow pension”; a new pension format designed to appeal to young people, a group who are famously averse to saving. Using the concept of Prospect Theory (more commonly called loss aversion), they created a pension plan where investors signed up for a pension that cost nothing until they receive a pay rise, at which point a percentage of their pay rise is automatically directed into the pension fund.  Through making sure the person never saw a reduction in his or her disposable income, the plan was very clever and very effective.  Pension contributions among this group were 200% higher than normal schemes.

So if we were to re-write our equation it should look like:  Value = Benefits minus COST²

This is why, when you’re convincing yourself that your Client Satisfaction Surveys or Voice of the Customer Programmes are telling you everything you need to know about your clients/customers, they’re not.  You need to ask people to talk about how they feel – not just what they think.  Otherwise you’re never going to understand the value you provide or how to mitigate the emotional ‘losses’ that your clients may perceive.

The lesson learnt from behavioural economics is that value is rooted in our emotions – in our psychological responses – which are not rational… but then most of human behaviour isn’t rational, is it?  We shouldn’t be so surprised.

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“The unpalatable truth, say critics, is that for decades the most well-funded, professionally organised and disciplined Tory campaign has come up short. Disaffected MPs have identified two early scapegoats: Andy Coulson and Steve Hilton. Mr Coulson, unfairly insist some, is being blamed for allowing Mr Cameron to be trapped by his own rhetoric in the television debates. The decision to give Nick Clegg a platform was a grave blunder, as even Mr Cameron has come close to acknowledging. Mr Hilton, meanwhile, shoulders responsibility for crafting a message that failed to connect with sufficient force. Behind-the-scenes anecdotes are starting to emerge. One records how Bill Knapp, the US political consultant hired to help Mr Cameron, had a simple question on the eve of the vital second television debate. What research had been done into what voters thought of the Tory campaign’s key theme of the Big Society? The answer was an embarrassed silence. When results from a hurriedly convened focus group detailed a negative reaction at a subsequent meeting, Mr Hilton is said to have stormed out.” – The Times, 8 May 2010

Cindy

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Creating a High Achievement Culture
In 2001, the great David Maister published the results of a research study of 139 offices of 29 firms in 15 countries in 15 different lines of business. His book, “Practice What You Preach: What Managers Must Do to Create a High Achievement Culture”  became a huge global bestseller and it it he demonstrates very clearly that it’s employee attitudes that drive financial results, and not the other way around.

From this premise, Maister went on to develop his Causal Model and we write about this in our value proposition book, which David kindly contributed to. In it, we highlight the importance of employee engagement in bringing your value proposition to the whole organisation.

New study
“CEOs who put stakeholders’ interests ahead of profits generate greater workforce engagement and therefore deliver superior financial results” – so says a survey(1) using data from 520 business organisations in 17 countries. This survey tested the hypothesis that employees develop negative feelings toward their organisation if the CEO’s primary focus is solely on profit maximisation. Perceiving the CEO as autocratic and focused on the short-term, they report being less willing to help the company, which ultimately leads to poorer corporate performance.

So put the command-and-control behaviour away and truly focus on your employees. Develop your employee value proposition which must become embedded in every aspect of your organisation.

Cindy

(1) Mary Sully de Luque of Thunderbird School of Global Management, David A. Waldman of Arizona State University West and Robert J. House of the University of Pennsylvania. Research reported in Harvard Business Review December 2009.

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A former Design Council chair once remarked. We seem to be great in the UK at innovation but not so good at bringing ideas to market and making a profit.  Why are we so bad at commercialising innovation?

I think there are 4 main reason gaps for this –

1. Culture gap

Unlike the US we fear failure more and take rejection more personally. Maybe we need to learn to accept failure more as part of business and stop being so risk averse. Recognising that the US sets the standard for entrepreneurship, the UK government and the Kansas City based Kauffman Foundation have set up scholarship programmes for British innovators to learn from American entrepreneurs.  Some of the participants have been struck by the level of altruism among successful, self-made Americans. The participants say that in the UK people are more reticent to help in an altruistic way. The American mentors will give their time for free and open up their Rolodex and give them contacts.

2. Skills gap

Commercialisation for many inventors is a barrier as they have little experience of the commercial world and an adverse nature towards spending money on bought in expertise. Some view commercial assistance with hesitation and mistrust due to the blood sweat and tears that have gone in to creating their baby. Why should they just hand their baby over to someone else and also pay them to look after it? Sales and marketing is deeply mistrusted and misunderstood. Any new money that comes in will be used for more R&D, as this is their comfort zone.

3. Valuation gap

Inventors are often cash-strapped, good ideas people or academics with a major inability to communicate with business. Often inventors try to use money spent already on R&D to value their equity stake which just doesn’t cut it with commercial investors. They’ll over value their ideas and are reluctant to give up any of their ‘asset’ when it comes to wanting finance to move towards final development or commercialisation. They are largely adverse to releasing equity or control to attract further investment, preferring to own 100% of nothing as opposed to 50% of something.  We see this all to often in the Dragon’s Den!

4. Funding gap

Funding is often available from seed funds and grants to get the idea to a point of final development and to prove a first version. However after that time, any funding is given through a different scheme with its own specific sets of criteria which the companies are not at the right point yet to comply with. There is therefore a funding and assistance gap from final development to commercialisation.  Even before venture capitalists went into hiding, they only invested a fraction of their cash in early stage UK technology (£200m out of £34bn in 2007) and commercialisation capital often falls below minimum venture capital levels.

James Dyson was rejected by the UK government under the previous technology grant SMART scheme 6 times. His project was deemed commercially unviable as they could not see how he was going to take on the current market incumbents. However he did and sold 64 million units in 2008. Why was he rejected? Dyson spends around 11% on R&D per annum. A much higher average than others in the UK I would bet.

So what can be done?

Government – needs to look at more funding towards strengthening the link between R&D and business, as opposed to putting it all into R&D itself. After all, what is the point in inventing something if nobody gets to reap the benefits?

Market test early – the sooner you can bring a prototype to market, the sooner you’ll get good market feedback and the sooner you’ll be able to launch. Never underestimate the power of early customer experience feedback in helping to design a product or service that will be a market winner.  I have known too many inventors who polish their diamonds for years and years before even engaging with the market. Ideally build your value proposition from the beginning and refine it regularly with customer experience. My experience of working with early stage companies suggests that if they build their value proposition early in this iterative way, they get to market much faster and start generating profits much faster than companies who don’t.

Build whole-brain teams – innovators are often discerning, thoughtful and meticulous and have a certain intellectual snobbery about their creations. They are often not the best people to bring their creations to market and sometimes view sales and marketing with suspicion, even contempt.

Recognise that there is a need to bring the detail, rational types together with the more relationship focused, doer types into whole-brain innovation and commercialisation teams.

Some of the best innovation and commercial marriages are between the so called left brainers and right brainers. The Pixar director Brad Bird and the producer John Walker are “famous for fighting openly”, Bird has been quoted as saying, “because he’s got to get it done and I’ve got to make it as good as it can be before it gets done.”  (the CTQ tool can be used to help profile people to create whole-brain teams)

What are the other key ingredients to making the UK better at bringing ideas to market?

Cindy

With thanks for input to this article from Ian Heywood, UK Grants Ltd.

Acknowledgements to The Design Council’s ‘Inventing a Profit’ paper and the Harvard Business Review article ‘Innovation in Turbulent Times’.

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Everyone who answered this question mentioned relationship building and communication as being key for sales people but I don’t think that’s enough without the ability to really listen, really hear what you’re being told and to be creative with what you’ve heard.   This is always the starting point to building your value proposition as this is the customer experience part of the process,

As we become even more polarised from transactional selling (where the buyer knows what they want) to consultative selling (where they don’t know what they want), the merits of a good consultative sales person become clearer and clearer.

A good consultative sales person will translate what they’ve heard into some in-the-moment innovation crafting and keep offering this back and forward with the client until they have a starting point of a solution. I deliberately chose the words innovation crafting rather than solution crafting for consultative selling as it must be co-created with the buyer rather than a fixed solution the sales person has in their mind. This needs innate creative ability as well as good listening and relationship skills.

Really listening and building a good relationship over time also means dropping your ego.  You may not make the sale today, tomorrow or next month and you may not sell what you wanted to sell, so let that go.  In consultative selling the relationship with the buyer over an extended period is key and it can’t be faked, they will see straight through that.

 
My 8 tips to building a sales person’s value proposition are:

1. 1. Listen, really listen
2. 2. Hear what you’re being told
3. 3. Replay what you think you’ve heard back to your buyer
4. 4. Use your creativity for innovation crafting
5. 5. Drop your ego
6. 6. Build good, real relationships
7. 7. Ask for commitment to you early in the process, but not too early – it’s like dating!
8. 8. Stay for the long game

As we continue to move more and more towards automating transactional (often commodity) sales then I think this aspect of consultative selling for more complex products/services will become even more important. It’ll be one of the few differentiators left.

Connect with me on LinkedIn.

Cindy

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As strange as Paris Syndrome may seem, I thought this also illustrates different cultural attitudes to customer centricity. As much as I love France, as a frequent visitor I am no longer surprised at the almost total absence of what I perceive as good customer service.  So how very customer-centric, I thought, of the Japanese embassy to respond in a pre-emptive way to Japanese visitors to Paris.

The perennial problem with gathering customer experience is what to do with it.  You can use it tactically, as the Japanese embassy have done, and respond to particular issues that were highlighted.  And you can use customer experience strategically and look at what the whole experience is telling you and implement holistic changes to the structure, process and people – the whole value proposition.

Customer experience is one of the new business buzzwords, a bit like value proposition. Everyone wants to know what their customer experience is, but once captured (and it should be captured on a regular basis, not once!), few people know how to use it, other than implement a few tactical changes.  The Value Proposition Builder™ is a holistic framework that takes you step-by-step through how to create your value proposition from your customer experience.

So the next time the Japanese embassy get a call from a distressed tourist on their hotline, I was thinking about offering to help them create a value proposition for Japanese tourists visiting Paris.  My ‘flu has clearly been giving me delusions of grandeur, so I’ll just send them a copy of the book instead…once it’s been translated into Japanese, of course.

Cindy

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