4 Psychological Drivers For Influencing The Customer Experience

Loss aversion

Have you ever been told something you were doing well and something you were doing poorly by a customer or manager? Did you focus on the positive or the negative? If you’re in the vast majority (and not a self-loathing narcissist), when it comes to choosing to focus on a complement or area of improvement (a win or a loss), you’re more likely to focus on the loss over the win. 

In 1979, Tversky and Kahneman developed prospect theory, a behavioral model that introduced the concept of loss aversion. With loss aversion, people tend to place a greater emphasis on a loss compared to a gain of equal value. 

When it comes to your customers, you should focus on the (potential) loss. Why? Because not all customers are equal. Acquiring a new customer can cost five times more than retaining an existing customer. One customer experience agency found loyal customers are 5x as likely to repurchase, 5x as likely to forgive, 4x as likely to refer, and 7x as likely to try a new offering.

Pretend, for a minute, that you’re a digital solution provider, marketing agency, or customer service-centric business evaluating whether to offer a discount or provide a free trial to acquire new customers. 

By understanding the implications associated with loss aversion, you can see that you’re more likely to achieve better outcomes by offering a free trial of your service in many cases, allowing your users to become dependent on your platform. After all, customers seeking frictionless experiences are more reluctant to give up what they have (or what they need) than to exert effort to acquire something new.

Have you ever checked your balance statement and saw charges for a subscription that you had originally signed up for the “free trial” for? Maybe you immediately cancelled to avoid future charges after that free-trial period ended. Maybe you let it slide because you, along with millions of other customers, now rely on that given service. Amazon, Netflix, the WSJ and just about any major subscription business temporarily offers complementary services for exactly that reason. 

More and more successful customer-centric organizations during this time of need are extending a free and temporary offering, while simultaneously investing in their customers’ life-time-value (CLV) after the pandemic, taking a similar approach to the free offerings of other tech industry titans, like Microsoft or Zoom. 

As Simon Copcutt, Customer Management Practice’s Head of Strategic Accounts stated regarding CCW Digital’s clients (at the beginning of the pandemic):

“Great to see how so many of the leading solution providers we work with are opening up their products for use at no charge while the planet deals with Covid-19. 8x8, Appian Corporation, NICE inContact, Ring Central, [and] Salesforce,” to name a few. They’re not temporarily offering free services or products solely out of altruism. It’s a tradeoff to provide consumers value by negating loss aversion and increasing future customer retention and CLV metrics.

The goal gradient

In 1932, behavioral psychologist Clark Hull observed that animals run faster as they approach a food source. (Yes, I’m comparing you to a hungry animal). The observation eventually led to the goal gradient hypothesis – a conjecture with huge implications for marketers, CX analysts and User Experience (UX) designers today. Do you want to shorten the buying cycle? Do you want to increase your conversion rates on your website? Of course you do. So keep reading. 

In a study published by the Journal of Marketing Research, researchers observed a significant behavioral change among participants who had a coffee card to collect stamps. In this study, each stamp brought the cardholder closer to the goal of receiving a free cup of coffee. As the participants earned more stamps, they began to make purchases more frequently.

In fact, the purchasing behavior was accelerated by 16%, shaving five days off the buying cycle. Now Starbucks and many other renowned customer service leaders and retailers have adopted a similar approach in their marketing campaigns and price models.

Using goal gradient as a psychological driver in your marketing copy can also do wonders for accelerating conversions. For example, whether you’re a B2B or B2C service, you’re UX designers can create a progress bar to highlight that your prospective customer is one step closer to completing the purchase. Job application services have historically been great at getting prospects to complete long and tedious processes through this approach of process bars and goal gradients. 

Read More: 4 Trends That Will Boost Your Customer Experience After The Pandemic

After all, once you allow your customers (or employees) to see the finish line, they’re more likely to race across it to achieve desirable outcomes. This has also led to the increasingly popular concept of “gamification” in customer experience, exerting goal oriented tasks that drive both employee engagement/productivity to meet objectives, and purchasing behavior, as seen in the coffee stamp example. Why? Both employees and consumers are neurologically wired to meet desirable objectives through gamified tasks, especially when the “end is in sight.”

Social inclusion and advocacy

In 1984, Robert Cialdini, Professor of Psychology and Marketing at Arizona State University, introduced the concept of social proof – and the marketing world has never been the same since. In his research, NYT best-seller, Influence: The Psychology of Persuasion, Cialdini highlights how people tend to “view a behavior as more correct” when others are engaging in the same behavior. In short, people seek validity from others – and once they see it, they’re more likely to take action. This has never been more relevant during times of (yes, uncertainty, but) increased Gen Z purchasing power – a generation that values public digital interactions, social inclusion and followings, hence the generation’s coined phrase that marketers love to exploit - FOMO (or fear of missing out).

So exactly how valuable is social inclusion in marketing and sales? According to the Spiegel Research Center at Northwestern University, online reviews, for example, dramatically influence purchasing behavior. In fact, displaying positive reviews on your website can increase conversions by 270%. 

Are you making good use of those reviews? Nearly 84% of consumers are open to sharing positive experiences on social networks. And if you aim to respond within 24 hours, you increase your chances of having a customer upgrade their review to a higher star rating by 33%, driving other potential conversions in a pipeline you didn’t know existed.

The point of “tipping”

According to Malcolm Gladwell, author of five New York Times bestsellers, and member of the TIME 100 Most Influential People list, touted as one of Foreign Policy’s Top Global Thinkers, the "tipping point" is "that magic moment when an idea, trend, or social behavior crosses a threshold, tips, and spreads like wildfire," similarly to the way a pandemic would. According to Gladwell, there are three variables that determine whether and when the tipping point for a product (or service), idea, or phenomenon will be achieved: The Law of the Few, the Stickiness Factor, and the Power of Context.

Read More: A Psychological Approach To Management And Leadership After A Socioeconomic Crisis

Gladwell argues that "the success of any kind of social epidemic is heavily dependent on the involvement of people with a particular and rare set of social gifts." – It’s no wonder paid social media platforms for influencer marketing, such as TikTok, YoutTube, or Instagram have been surging during the pandemic. As consumers have more time on their hands, they turn to engaging mediums that marketing analysts and influencers are capitalizing on to influence brand recognition and purchasing behavior. 

Another important factor that plays a role in determining whether or not a trend will tip is "the stickiness factor." The stickiness factor is a unique quality that causes the phenomenon to "stick" in the minds of the public and influence their behavior. To illustrate this idea, Gladwell discusses the evolution of children’s television between the 1960s and the 200s, from Sesame Street to Blue’s Clues, and products like the inexplicable resurgence of then-terminally-uncool Hush Puppies shoes (among a handful of 1990s Manhattan hipsters) - a trend which soon spread across the United States and resulted in exponential increases in the company’s sales.

The third and final critical aspect that contributes to the tipping point of a trend or phenomenon is what Gladwell terms the "Power of Context." The Power of Context refers to the environment or historical moment in which the trend is introduced. If the context is not right, it is not likely that the tipping point will take place. For example, Gladwell discusses crime rates in New York City and how they tipped because of context. He argues that this happened because the city began removing graffiti from subway trains and clamping down on fare-dodging. By changing the social context of the subway, spiraling factors caused the crime rate in NYC to plummet. 

No one’s safe from the behavioral economic consequences brought upon by the coronavirus pandemic. But adapting to the right trends and ideas will give you the best chance at being on the favorable side of financial Darwinism. 

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For media coverage, lead gen, and digital marketing inquiries, contact me at matt.wujciak@customermanagementpractice.com.