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How to Shape Customer Behavior?

Tuesday, April 29, 2014

Google and Microsoft took what initially appeared to be an innovative path to decrease residential energy consumption. Believing that customer's decisions to conserve electricity were impeded solely by the lack of easily-understood, real-time consumption information unobtainable via paper utility bills, both created web-based analytics platforms, displaying consumption costs in real-time to help make conservation decisions. And both companies canceled the projects. Their tools had absolutely no effect on behavior. 

According to a recent article in the Wall Street Journal, oPower programs yielded $234 million in energy savings last year, removing 1900 gWh from the electrical energy grid, enough energy to power 190,000 homes for a year. How did oPower succeed when goliaths failed?

The overall goal is to decrease energy usage. Google & Microsoft solved a data problem with their belief that people naturally want to conserve energy but are prevented from doing so by a lack of insight.  Their failure disproves their hypothesis.  oPower solved both a context and motivation problem using both descriptive and injunctive norms. oPower partnered with public utility companies to present via monthly bills a comparison of recent historical energy consumption with nearest two or three neighbors. Because individuals measure their own behavior against their perception of peer norms, consumption data in context with neighbors or peers can change behaviors. This is an example of a descriptive social norm.  Those consuming greater energy than their neighbors began to conserve energy.  But as is common with descriptive norms, it had a boomerang effect on those consuming less energy that subsequently relaxed conservation efforts and quickly climbed to the average.  oPower added an injunctive norm wherein they added a smiley (☺) or frowney (☹) face to the descriptive comparisons, representing approval or disapproval of their positioning relative to their neighbors.  The addition of this judgment is a form of operant conditioning, which is a powerful driver of behavior.

Google, Microsoft, and oPower all provided insight into energy consumption. Their assumptions were vastly different. Google and Microsoft incorrectly believed that people inherently desired to conserve energy and insight would enable behavior change. oPower correctly assumed that social pressure was a far more effective means of shaping customer behavior.   Research has shown repeatedly that people desire to conform to social norms. Other research has shown they overestimate the prevalence of undesirable behavior and use these perceptions as standards for comparison. Energy customers overestimate their neighbor’s energy consumption and conserve when faced with descriptive norms showing otherwise coupled with assessments of desirability of behavior.

How can you use descriptive norms to change behaviors?  One chief customer officer (CCO) showed a B2B customer how often they were calling customer support in comparison with other customers and as a result were decidedly unprofitable. The number of support requests tapered dramatically thereafter. Another company uses peer mediation in their customer communities to assess behavior in comparison with other players and assess penalties in an effort to root out toxic behavior. 

What other applications of these principles have you found?

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Categories: Consumer Spending | Customer Insight

2014 CCO Tenure Study Preview

Wednesday, April 16, 2014

I'm putting the finishing touches on the CCO Council 2014 Tenure Study and am excited to share a sneak preview. For the last four years, I have examined the role of the Chief Customer Officer to understand the context within which CCOs are functioning and the future of the role, specifically as these relate to the development and execution of potential CCO career strategies.

The CCO Council defines a chief customer officer as the customer-facing executive who is ultimately accountable for customers and who is driving customer strategy at the highest levels of the organization. This eliminates middle-level to senior-level executives who may be customer centric and even responsible for customer experience within their organizations, but who don't appear to possess sufficient authority to act and influence across organizational boundaries.

The average chief customer officer tenure increased again to 34.5 months, up from ~23 months four years ago. The lengthening tenure reflects in part the fact that mobility was severely restricted during the years following the recession. As well, enterprise CCOs weathered the recession far better than those in small companies.  Most importantly, this increasing tenure speaks to the growing recognition of the value of the CCO role and its increasing stability. Nevertheless, as the newest member of the C-suite, it remains the most fragile role, trailing the CMO by ten and a half months. As a side note, there is an interesting flaw in the way that Spencer Stuart computes the CMO tenure. If the CCO tenure were computed in the same fashion the average CCO tenure would be 3.2 months. Look for more detail in the upcoming tenure study results.

One of the more exciting findings is the lengthened tenure of members of the CCO Council. Where average enterprise tenure is 34.5 months, tenure of Council members is a whopping 54.2 months. CCO Council members are demonstrating significantly greater ROI as they elicit greater executive commitment and involvement, demonstrate a clear impact on executive objectives, and incorporate customer strategy into the overall corporate strategy. As well, they enjoy significantly greater influence over the rest of the organization as they balance business and customer needs.

Another significant finding of the study is that for the first time, CCOs are enjoying an unprecedented mobility. When I first began the study, the CCO role was terminal-they retired in the role and there wasn't a career path available. Now, however, the CCO is being promoted to COO, CEO, or president of a business unit. This is indicative of the increased importance companies are placing on their customer strategies in requiring that executives have substantial customer roles. Executives and boards are beginning to recognize the value of the chief customer officer as a stepping-stone into roles of greater responsibility and authority. This will be covered in greater depth in the forthcoming study.

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Categories: CCO Council | Chief Customer Officer

The Tweet Heard 'Round the World

Tuesday, April 08, 2014
Reflect back with me to April 19, 1775... 
With the might of the British Empire behind them, the British infantry believed it was utterly invincible. Imagine its surprise when it became surrounded by the Minute Men and later, many more of the American colonists. In the tension that followed, one nervous British infantryman fired upon the colonists, which started an exchange of fire from both sides. With this one shot that later became known as the shot heard 'round the world, the revolutionary war had begun.
Slightly more recently, in September of 2013, Chicago-based business owner and Twitter user Hasan Syed made history after British Airways lost his parents luggage on a flight from Chicago to Paris. Syed did something nobody has ever done before: he bought a series of promoted tweets on Twitter to express his frustration and displeasure.
Don't fly @BritishAirways. Their customer service is horrendous 
Checkout @British_Airways state-of-the-art baggage handling system [with photo of horse and buggy]
@British_Airways is the worst airline ever. Lost my luggage and can't even track it down Absolutely pathetic
A full 7 hours later, @British_Airways responded:
Sorry for the delay in responding, our twitter feed is open 09:00-17:00 GMT. Please DM [direct message] your baggage ref and we'll look into this.
By any account, Syed is no social media powerhouse. As of February 2014, he still had only 1,129 followers and 436 tweets. The sponsored tweet, however, for which he spent $1,000.00, yielded 76,000 impressions and 14,000 engagements (replies, retweets, etc.), all of which sided with him against the brand or broadcast their own, similar stories. Syed's tweet also quickly entered the news cycle, where his story appeared on BBC News, Time, Fox News, the Guardian, NBC News, Mashable, Huffington Post, and others.
With Hasan Syed's "tweet heard 'round the world" on September 2, 2013, the revolutionary war for customer control of your brand had begun. That same day, Andy Witt (@designingWell) tweeted:
What if patients were more forward and public with their frustration with hospitals like Hasan Syed was with @British_Airways?
Just like the British regulars, big companies have long thought they were utterly invincible-they controlled the messages, the media, and the conversations with their customers, when they bothered to have them. But to Andy Witt's point, what if one (or more) of your key customers - by size, revenue, influence, or other criterion - broadcast their frustration with your company to the public and to your other customers? What would the impact on your brand look like? Would it be inconsequential? Or could it cost millions of dollars in advertising to rectify?
Let's be honest. The age of cool products and feel-good service has come and gone. Social media, with all it empowers, is here to stay and still growing. It is not enough to listen to and pacify customers. Now, more than ever, reputations and relationships with customers can be tarnished, if not destroyed, with a few simple keystrokes. Customers are taking charge. They clearly want a voice.
We've entered the age of engagement. Today we have to engage the Hasan Syed's of the world: collaborate with them to help fix our problems and enlist them as our sales force to dramatically grow our businesses. In the days ahead, the most successful companies will grow only as they engage customers in customer acquisition, retention, operations, innovation, and even strategy.

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Categories: Customer Engagement | Customer Insight | Customer Loyalty | Customer Retention