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How Unmet Expectations Are Killing Your Customer Loyalty

How Unmet Expectations Are Killing Your Customer Loyalty
Brand Development

Peter Sena, founder of Digital Surgeons, gives his two cents on why marketers must design experiences that match their consumer’s expectations

PSFK Op-Eds
  • 23 june 2017
Just before the 2016 holiday season Salesforce polled more than 4,000 adult shoppers. They found that 75% of consumers expect a consistent experience wherever they engage. And when the consumer’s experience is inconsistent?
  • 50% are likely to switch brands if a company doesn’t anticipate their needs.

  • 52% will switch if a company doesn’t make an effort to personalize communications for them.

Even worse for brands and businesses:

  • 70% of consumers say technology has made it easier than ever to take their business elsewhere.

It is no surprise that “friction” has stormed into industry lexicon as a catch-all for anything that stops or slows sales conversion.

But to describe friction as any time a brand interaction is neither connected or convenient fails to tell the whole story. After all, consumers have shown they are willing to pay more for analog, even inconvenient, products and services. Particularly if they align with their values or interests. We are marketing in a time where both on-demand streaming platforms like Spotify and classic ways of enjoying music like vinyl thrive — failure happens in the middle.

So WTF is friction? And how can we begin to measure and get rid of it?

Customer Happiness ≥ Perception of an Experience – Expectations

In “Solve for Happy,” Google X’s Chief Business Officer Mo Gawdat shares what he calls the “happiness algorithm.” Gawdat developed the equation after he found himself at the top of his profession, but profoundly unhappy.

A decade after developing the equation, Gawdat used it to get through the most difficult time of his life. It’s hard not to be brought to tears when you read about how he coped with the death of his young son and somehow found lasting peace of mind.

Gawdat’s algorithm states that our happiness is greater than or equal to our perception of life’s events subtracted by our expectations of how life should behave.

I want to posit that our happiness as a customer is no different than our personal happiness.

Friction then occurs when the experience delivered doesn’t match the consumer’s expectations.

A London School of Economics study found that almost 75% of the variation in UK customer happiness (measured by Net Promoter Scores) could be accounted for by the difference between expectations and experiences.

As consumers become less loyal to brands, and more loyal to experiences, marketers must design experiences that match their consumer’s expectations. Or we risk leaving our customers feeling like anyone who went to Fyre Festival.  

In this equation, experience – expectations = several class action lawsuits.

Attendees paid as much as $12,000 for tickets because they believed they were attending an exclusive music festival in the Bahamas surrounded by insta-model influencers. What they got was a tent city, cheese sandwiches, and no running water.

$12,000 is steep for a musical festival, but it found an audience due to the perceived value communicated by its marketing messages.

To avoid friction, it is our job as marketers to deliver experiences that match the perceived value communicated by our advertising. In the past, brand advertising could afford to be much more aspirational, but today “authenticity” reigns supreme.

The Bar Has Been Raised

When a prospect visits a website, they expect to find everything they need to know about a product or service.

When a customer walks into a store, they expect to find products that interest them and knowledgeable sales reps.

Where this becomes challenging is that the expectations I just described are below today’s baselines — consumers have never expected more.

This is largely because consumers perceive digitally-enabled firms to be offering more value. Well-designed businesses like Amazon offer the convenience of “one-tap” shopping and eliminate what psychologist Barry Schwartz calls the “Paradox of Choice”. The Paradox of choice states that consumers are hampered by too much choice and by eliminating options we can reduce shopper anxiety.

The harder we have to work and think to make a choice, the higher our expectations are for what we get in return. When I open the Amazon app and what I need is one-tap away from arriving in two days, I’m that much more likely to be satisfied because it took so little effort.

In some cases, I actually get a cheaper, more direct trip from a taxi driver than an Uber driver. But, if I have to find a local taxi stand and call the office, or stand on the street with my hand raised — I’m going to have higher expectations by the time I get in the backseat. So 9 times out of ten, I choose to Uber.

Digitally-enabled businesses also offer a degree of contextualization and personalization that makes the product or service feel “made-to-measure.” When Amazon offers products aligned with your interests, or the Uber driver greets you by name, there’s a certain unconscious validation that lights up. It’s our need for what famed psychologist Abraham Maslow calls self-actualization at the top of his hierarchy of human needs. It makes us feel special.

Digitally-enabled businesses have also trained customers to expect a surplus of relevant information. An Amazon product page lists everything you need to know, including verified reviews. In most cities, Uber displays your route and fare even before you step in the car.

Contrast that with the in-store shopping experience. We wander the aisles scanning choice after choice, only able to glean what is on the front of the box. We ask store associates for help who know little about us, or the products. In fact, 44% of consumers feel like they know more about products than the store associates.

Bottom line, consumers expect more. Friction happens every time you let them down.

On-Demand Differentiation

As expectations rise and consumers become more loyal to experiences than brands, branding is becoming much harder.

When big box commerce is one-tap away on a mobile phone, how do you differentiate?

Brands today have to work a hell of a lot harder. Coca-Cola. Cadillac. John Deere. These great brands were built and stewarded by great teams from generation to generation to generation.

But, now we’ll never have another generation that won’t grow up as digital natives with entirely new expectations.

To meet the new baseline for experience, businesses and brands must apply a principle I call designing like a cyborg — they must create personalized, human touch points in the customer journey enabled by technology.

This will allow them to deliver better experiences faster, better, and cheaper. The more you can automate something, the more you can deliver things fast, efficiently, and effectively.

To maintain a hundred person customer service team requires a large investment, forcing you to sell your product at a higher price point or compromise on the skill of labor to maintain your margins. Whereas if you only had to have 50, 15, or 5 customer reps, you can have higher compensated, better skilled employees backed by machine and system automation. This allows you to deliver a better experience at a higher profit margin and a decreased cost of delivery in long-term.

Organizations also must vertically integrate products and experience wherever possible. Digital experiences can be controlled from front to back. The flagship store is being replaced by the flagship site not only because it scales beyond Times Square or any other shopping mecca, but because the designer is able to control every touchpoint. There are no disgruntled employees or unruly customers that can ruin the shopping experience.

Digital services like Uber that aren’t fully “experience integrated” and rely on outside contractors rigorously rate their drivers and riders to ensure an experience consistent with their brand.

It is also important to note the importance of vertical integration in its more traditional usage. Digitally-enabled businesses are taking a cue from retailers that have long sold their own brands in-store to drive up profit margins. Brands and businesses like Tesla that are fully vertically integrated business models can control each step of production, sales, and experience to drive both profit margins and customer happiness.

Ultimately to differentiate, you have to either be convenient or memorable. Failure happens in the middle.

When it comes to commodities, it’s no longer about who is the cheapest, but who is the easiest and fastest. Specialty products are no longer differentiated by the status they convey, but by the memory they create.

Who Is Rising to the Challenge?

Amazon’s “beta” Go experience is a case study in “cyborg” physical/digital experience design.

There are also rumors that Amazon is considering the warehouse-storefront model.

I like this model because it allows retailers to deliver both convenience and memorable experience at once. The showroom in front can be filled with reps, products, and services that create valuable touch points. But if you just want to get in and out, the warehouse in the back can provide delivery or pickup for repeat purchases on generic products, or to accommodate consumers with less time to spend.

Brands and businesses must map their consumer journey to understand the behaviors that lead to purchase and best design experiences that reduce friction along the way.

Do most of your consumers webroom? Meaning they browse online and buy in store as is common for appliances and apparel.

Or do they browse in store and buy online as many do when they are shopping for the best price?

If you’re not sure, chances are there is significant friction for them along their journey.

Surveys like Net Promoter Score are often cited as tools for identifying if customers are happy with your product or service. It debits or credits your score based on whether someone is likely to promote your product to a friend, or not. The ultimate idea is that the more people that are promoting your brand, the more it will grow.

And there is a lot of truth in that.

But, the problem is that NPS only factors a small percentage of your customer base. It also doesn’t measure churn. Someone may recommend your product or service to a friend, but never use it again.

I challenge us as marketers to identify a new “friction quotient” that better illustrates whether our experiences are creating friction, or loyalty. It is imperative that we understand if our marketing and messaging are meeting the expectations of today’s digitally-empowered shoppers.

Peter Sena II is an entrepreneur, angel investor, and Yale University Venture Mentor who founded Digital Surgeons, a technology-enabled, outcome-obsessed agency that knows moving the needle is all that matters.

+Brand Development
+customer loyalty
+experiential marketing
+friction
+on-demand
+paradox of choice
+retail
+technology
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