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The American Customer Satisfaction Index, a customer satisfaction survey that happens once a quarter, has a stat stuck in my brain: it’s only increased by four points since 1994. I blame the lack of customer centricity and the fact that people don’t know what they don’t know regarding customer centricity.

When you ask a question, how customer-centric are you? The answer normally is I’m very customer-centric. Then, when you ask how customer-centric your organization is, you get a different answer.

An important aspect of customer-centricity is planning with the customer in mind. Now, you can decide things customers don’t like, but only when you do it consciously after thinking through the consequences.

When I started doing this work, I could ask questions and understand how customer-centric these organizations are. You can also tell how customer-centric an organization is by looking at the metrics that they’re using. My second-ever book, Revolutionize Your Customer Experience, was based on our research with many customers back then. We assessed the customer-centricity of hundreds of customers since then.

We discovered all organizations are journeying from Naive to Natural regarding customers. The four orientations include:

1. Naive organizations don’t consider the customer at all, like most cable companies.
2. Transactional companies treat customers as if they’re a transaction. They process them.
3. Enlightened organizations are more organizations that have recognized that they need to provide a coordinated experience.
4. Natural organizations are focused on the customer.

Nine areas of organizations demonstrate an organization’s customer-centricity when delivering experiences. These include:

• People: What’s the type of people you recruit? How do you go about recruiting those people? How do you train those people?
• Customer strategy: Do you talk about customers in your plan, or is it product-led or solely profit-led or whatever?
• Systems: Are they deploying systems, and what are they designed for, customer-wise?
• Measurement: What do they measure to ensure their business is on track? Does that metric take Customer Experience into account?
• Channel Approach: Which channels do they offer to people?
• Expectations: How well do they know what customers want from them?
• Marketing and branding: How does the message and image relate to customers?
• Processes: How customer-centric are the processes, an area that tends to be internally and efficiency-focused?
• Culture: What’s the culture like? Is that customer-focused?
• Leadership: How customer-focused is the leadership of the organization?

Customer centricity is a cultural orientation. It’s not enough to be enthusiastic about your customers. If you want this concept to stick, it would be best to determine how your organization will change its culture to reflect this new goal.

So, deciding whether the company is ready for change is essential. Organizations often don’t realize that their actions now impact the experience and centricity of the organization.

Let me give you some examples by going through the four orientations and giving you a flavor of the orientation.

Naïve

A naive organization focuses on themselves to the detriment of the customer. We call them inside out. In other words, they look at themselves first before they look at what’s good for the customer, either by choice or chance.

These organizations are very product-led. Also, they’re reactive to customer demands but don’t measure customer satisfaction. (Why would you? Because it doesn’t matter what the customers think anyway.) These organizations are also rationally based. In addition, they treat employees poorly and give employees no empowerment. Finally, a Naïve organization’s KPIs are usually efficiency and productivity-focused.

It’s helpful to picture a used car lot where you drive the car off the parking lot, the engine falls out, and they couldn’t care less. That’s a Naïve organization.

Transactional

The majority of organizations are Transactional. They treat the customer as if they’re something to process. Transactional companies primarily focus on the rational aspects of a Customer Experience, like delivery times or price.

Unlike Naïve organizations, Transactional ones have recognized the importance of the customer, but only at a rudimentary level. They may even have a Customer Experience department only because everybody else has one.

Transactional companies are reactive to customer demands. However, it’s uncoordinated and still inside out. They also have some customer metrics, but mainly on things like, did we deliver things on time? How quickly do we answer the phone? How quickly can people place an order? They have customer service teams but treat them as second-class citizens.

Transactional companies only look at the physical, rational aspects of customers’ expectations, with no complete view of the customer. They also don’t define their Customer Experience.

They look for people in recruitment who have the right attitude and do training on how to deal with difficult customers. But it’s not sufficient. Often, it’s only half a day at the end of weeks of training—hardly enough to master managing customers to a satisfying outcome. Moreover, the employees have limited authority but are not empowered to make decisions.

Most financial services companies and retailers fall into this category. It was likely transactional if you feel like your experience was a process.

Enlightened

At this point, we are describing organizations not in the majority. An enlightened organization recognizes a more holistic need for a Customer Experience. So they’re trying to provide a more coordinated and deliberate experience.

They’re proactive towards the customer and recognize that they need an emotionally engaging experience. Enlightened organizations have also defined their experience, focusing on stimulating planned emotions. They’re also measuring those emotional outcomes.

Enlightened organizations employ empathetic people who are naturally good at recognizing customers’ emotions. They also typically get customers involved in the design of their processes. Additionally, they are working on the subconscious aspects of their experience using tools like journey mapping. From a systems perspective, they have a complete view of the customer rather than just product silos.

Starbucks and American Express are companies that I would put in this category.

Natural

Natural organizations are proactive towards customers and focused on a complete experience. They have also clearly defined their experience and created memorable experiences, using the five senses to evoke those planned emotions.

They design and align the culture, linking the employee experience with the customers on the Journey Mapping exercise. They also consider the behavioral science concepts regarding how customers make decisions. Natural companies also consider the subconscious experience, bringing all those aspects together.

Let me be clear: Natural companies account for about two to five percent of the total. A great example is the Mandarin Oriental hotels. I love one of their customer survey questions asking, “How well did we anticipate your needs?” That question tells me a lot about the organization’s mentality regarding customers.

Other Natural companies are Disney and Apple. They always have their customers at the center of everything they do.

So, What Should You Do Now That You Know This?

It’s a lot to think about, I realize. The first step in practically implementing this is to understand where you are and decide where you want to be and what you can change to get there in the nine areas I defined. Then, working with a cross-functional team, you can educate the rest of the organization about the project and get buy-in for change.

Once you get people on board with the idea that customer centricity needs improvement at an organizational level, you need practical implementations in the nine areas. Maybe it’s time to change what you measure or how you recruit. Perhaps the vision of the company needs reworking to include customer goals. Sometimes, marketing and branding need adjusting to be something the company can promise and deliver rather than only promise. These changes will depend on the organization and how committed they are to moving this project ahead.

Remember, you don’t need to do all this simultaneously. You would probably break your organization if you tried to do all this simultaneously. Instead, plan the first steps, building on the successive projects to climb closer to Natural.

There you have it. Twenty years of experience helping organizations manage their experience relayed to you in just under 1500 words.

All joking aside, there is a lot to this Naïve to Natural model. It can help organizations move the needle on customer satisfaction—and after over 25 years, it’s about time to try.

This review sums it up: “The dynamic between the two hosts absolutely makes this podcast. Each brings a unique take on the topic, their own perspective, and plays off each other’s sense of humor. I come away after each episode with a feeling of joy and feeling a bit smarter”.

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We are frustrated. Despite years of effort across industries, customer satisfaction has only seen marginal improvement since the 1990s.

By marginal improvement, we mean it went up four points. That’s right, four.

This stagnation suggests a need for deeper cultural and operational changes to prioritize customer experiences truly.

Our discussion in this episode revolves around four key customer-centricity levels: Naive, Transactional, Enlightened, and Natural. These stages represent an organization’s maturity in focusing on customers, from the least to the most advanced.

1. Naive Organizations focus internally and lack regard for customer needs, often viewing the customer as secondary to operational goals.
2. Transactional Organizations acknowledge the importance of the customer but treat interactions as isolated transactions, usually emphasizing efficiency over empathy.
3. Enlightened Organizations offer a more cohesive and emotionally engaging experience, understanding that customers seek meaningful interactions.
4. Natural Organizations are the pinnacle of customer-centricity, with cultures that fully align employee and customer experiences. These companies anticipate customer needs and prioritize creating memorable, personalized moments
   

Organizations are encouraged to evaluate where they stand on this spectrum and start implementing changes in nine core areas: people, customer strategy, systems, measurement, channels, expectations, marketing and branding, processes, and leadership. Embracing these changes may require a cultural overhaul, but the rewards include increased customer loyalty and satisfaction.

In this episode, we dive into the concept of customer centricity and explore the journey organizations must take to shift their focus more closely to the customer. The journey from Naive to Natural isn’t easy, but it is essential for brands that want to build genuine, long-term customer relationships.

Here are a few other key takeaways from the discussion you will learn:

• Customer centricity is not just about enthusiastic service—it requires a deep cultural shift within the organization.

• Organizations must balance rational, efficiency-focused goals with emotional aspects to create a holistic customer experience.

• Success depends on how well leadership integrates customer-focused values into every level of the organization.

• The nine organizational areas identified help companies assess and improve their customer focus.

• True customer-centric brands are often those that consider both customer and employee experiences as interconnected.

• Moving towards “Natural” status requires significant effort and incremental improvements rather than a one-time overhaul.

The post Here is How to Get Your Organization to Be More Customer-Centric appeared first on Beyond Philosophy.

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My podcast partner, Ryan Hamilton, has written a book without me. His co-author,  Annie Wilson, Ph.D., a senior lecturer of marketing at the Wharton School at the University of Pennsylvania, is undoubtedly an upgrade. We had them both on the podcast to discuss the book coming out next June. I thought I would share what we discussed here with you, too.

The Growth Dilemma is about the idea that as you grow by customer acquisition, it changes your brand. So, when you invite people with different preferences, personalities, values, and images, they bring all of those features of themselves to the brand. The dilemma of growth is how you can grow without limits or leading to conflict between customer groups.

Managing customer relationships is important to growth, and many brands miss this. Many disastrous things can happen to brands when their customer segments conflict.

Unfortunately, brands often close their eyes to the risks of conflict when trying to attract a new segment. Brands don’t consider the consequences of other customers getting upset about the new segment, whether because they’re not like them, have different values, or use it differently. They also don’t realize how this new segment can alienate current customers.

The Four Types of Conflict

Imagine you are planning a family vacation for you and your teenage children. You’re going to the beach and determining what to do with that time. You could do that; you’re a parent. You understand your kids. You know what that age group wants.

Let’s say your parents decide they want to go, too. Grandparents have different wants and needs, which might affect your planning. You’re dealing with three segments of this family: Teenagers, you and your spouse, and your parents. Now, planning your vacation is much trickier.

The same thing happens when you’re acquiring customers. You grow by adding new customers to your customer base. At some point, some of those customer segments will want different things.

So, how do you manage all of that under a single brand? Various types of conflict require different solutions. Let’s take a closer look at the four types of conflict, as identified by my cohost and his co-author.

Conflict #1: Functional Conflict

The first type between customer segments is functional conflict. It is the idea that how one segment uses or behaves using a brand’s offerings creates conflict with or interferes with another segment’s ability to use them.

Functional conflict is becoming more common with omnichannel distribution and marketing. For example, mobile orders often collide with those who order in the store.

You see this type of conflict everywhere. You see it happen in restaurants where dine-in orders conflict with carry-out. I’ve often sat in a restaurant waiting for my food. I can see that the kitchen is busy, and orders are going out, but they are not coming to the tables. It’s all going out the door. I have wondered if I should order it to go to get my food faster. Then, I could walk over and eat it at the table.

Starbucks solved this problem of functional conflict early before mobile ordering became such a phenomenon. Some customers came in to order coffee and read or work at one of the tables inside the store, and some were commuting and just wanted coffee to go.  Starbucks recognized the different functional goals and created different store formats. So, you had takeaways or drive-through stores and then lounges meant for lingering while having a cup of coffee and doing some work.

Functional conflict may be the most common type of conflict. It also tends to be the least emotional form of conflict.

Conflict #2: Brand Image

The second type of conflict is Brand Image. The idea is that firms don’t get to decide their brand image. They make suggestions, and then the brand image is negotiated between the company and the customers. In other words, customers form their opinions about a brand’s meaning.

Also, part of the brand image is who is buying the brand. Suppose you see certain people wearing a clothing brand, driving a car, or talking on a mobile phone brand. That image registers and associates with people’s perceptions of those groups. Brands are memory structures, and all of that information gets stored in the memory structure associated with that brand.

Brand image conflict happens when a new group of customers starts using a brand in a way that stretches its meaning. For customers who are already happy with what that brand means now, stretching it in a new direction can cause conflict. Customers might think, “I don’t want the brand to be associated with that group of customers because they change what it means to me, and I like how it is now.”

We tend to look at brand metrics in aggregate or focus on that one segment we want to attract. We don’t think about what the segments believe about each other and their presence in the brand.

For example, finance and tech employees began wearing Patagonia vests in large numbers, so much so that television shows and meme accounts mention the Chads and Brads going to their Wall Street or their Silicon Valley jobs in their Patagonia vests. This new group’s adoption of their attire started to grate on Patagonia’s environmental sustainability brand.

The company was to blame; Patagonia was creating corporate-branded fleeces. So, these companies ordered them in bulk and then gave them to their employees or clients. Everybody had these Patagonia fleeces. It caused conflict for passionate environmentalists and other groups, the foundation of Patagonia’s fans.

Patagonia solved it by stopping the corporate embroidered fleece sales. Later, they brought that program back with different constraints. Patagonia evaluates each company, decides who gets them, and ensures the fleece can be recycled and go through their Worn Wear program. Patagonia sets a great example of solving Image Conflict clearly and directly.

It is important to note that this conflict could originate in something the brand has done, a segment they set out to attract, or the customers themselves. A group of customers starts using the brand in large numbers or associating themselves with it, which is where the conflict originates.

Conflict #3: Identity Conflict

Identity conflict is rooted in the identity-signaling value of a brand. Let’s say I use a brand to signal my identification with a certain group. Then, someone from a different group I am not part of and don’t like uses the brand, inhibiting my ability to use it as an identity signal. Now, we have an Identity Conflict.

The Brand Image Conflict relates closely to Identity Conflict; these conflicts often happen simultaneously. However, one type of conflict is rooted in grappling over the brand’s meaning and more about setting boundaries around yourself and the other groups that use it.

In other words, one group of customers doesn’t want to be associated with this other group. They think, “I am not that type of person.” It’s not necessarily because they hate that group, but they don’t see themselves as part of it, which can create conflict.

Facebook is a good example of this. Many younger generations don’t want to use the platform because their parents and their parents’ parents do. Younger people don’t all hate those people; they just don’t want to be on their parents’ and grandparents’ social platforms. Facebook is chopped.

To be clear, Wilson and Hamilton don’t argue at any point in the book that you need to be forever true and loyal to your existing customer base despite any other opportunities. Sometimes, it makes sense not to serve your current customers as well so you can pursue an opportunity with another customer segment because the tradeoffs are worthwhile. For example, sometimes, the new growth segment is worth more money or perpetuates a different brand image an organization wants to project. In that case, the company is fine alienating and losing those existing customers.

The problem occurs when the company attracts a less profitable audience that moves on quickly or will not be as loyal. Then, the company alienated its existing customers and lost new customers, translating into a long-term loss rather than a gain.

Conflict #4: Ideological Conflict

The last of the four types of conflict is ideological conflict, where multiple segments have fundamentally different values, beliefs, and orientations and become aversive. The various segments don’t want to be associated with others.

This conflict is increasing in frequency because we live in polarized times. It is also potentially volatile and dangerous for brands because people’s reactions to ideological conflicts can be extreme.

Ideological conflicts hit the news cycle more forcefully than other forms of conflict. You might see different forms of conflict in the news, but they marinate over time until they become a problem. Ideological conflict tends to happen fast and furious.

For example, Bud Light partnered with an online influencer, Dylan Mulvaney. That association caused a rift in their established customer base. By a rift, I mean the sales dropped 30%.

New Balance, a shoe manufacturer in the US, supported a Trump policy that made it more expensive for other shoe companies to import into the US in 2016. However, some extremist groups, Neo-Nazis, took that support to mean that the shoes could be a signal amongst them that identifies fellow members.

New Balance didn’t want this association. They made a statement against the organization and maneuvered away from the ideological conflict. Now, the New Balance brand is quite popular with many groups, who are far less extreme and contentious.

So, What Should You Do with This Information?

We wanted to break down these four conflict types so they could identify what they were dealing with in their organization. However, a general solution exists to deal with all of them.

If there is a conflict or risk of it between segments, do everything you can to separate those groups, whether physically in a storefront or psychologically, through expanding your product line. For example, a physical barrier could be like Starbucks’ version of its retail offerings, focusing on carry-out or lounge settings. Psychologically, sub-brands can create a distance between these segments in your product line.

However, it is important to note that it is not the time for nuance when you encounter conflict. Throw the kitchen sink at this problem and use as many tools as possible to separate these segments to cool the temperature slightly.

Also, be sure to recognize the potential sources of conflict to have a clearer insight into where it could crop up. These conflicts are most problematic when they are unexpected because that’s when brands falter or flinch and don’t know what to do with them. Then, it brews for so long that it becomes a real problem.

Conflict is a possible consequence of brand growth. So, does that mean you should pursue growth for your organization? Of course, it doesn’t. However, being aware of potential conflict and acting early can significantly affect the outcome. So, be sure to monitor and react quickly.

Be the first to hear about pre-order and launch dates, as well as invitations to exclusive book launch events for The Growth Dilemma, published by Harvard Business Review Press!

Colin has conducted numerous educational workshops, on how to improve your Customer Experience, to inspire and motivate your team. He prides himself on making this fun, humorous, and practical. Speak to Colin and find out more. Click here!

The post The Art of Balancing Customer Segment to Avoid Conflict to Gain Growth appeared first on Beyond Philosophy.

Growth is essential for businesses. However, new customers with varying needs, preferences, and identities often accompany growth. Worse, these new customers can annoy or alienate your current customers.

So, how do you grow without making your current business blow?

Today, we explore the central challenge of growth: expanding your customer base without sparking conflicts between different customer segments. Ryan’s new book, The Growth Dilemma, which Ryan co-authored with Wharton Senior Lecturer in Marketing Annie Wilson, Ph.D., addresses this dynamic in-depth, and we discuss how companies can better manage these conflicts to keep all customers satisfied and engaged.

As brands grow, they tend to attract diverse customer segments with unique expectations and behavior. This diversity can create tensions between groups, especially when one segment’s actions or values clash with another’s.

For instance, a brand known for its exclusivity may see conflict when a more mainstream audience starts to adopt it, or a company that appeals to one political ideology may face backlash when it attracts customers from an opposing one.

We delve into the four main types of conflict that can arise between customer segments and explore solutions for each. For example, these brands dealt with some of them when:

• Patagonia faced a brand image shift when corporate buyers began over-associating the brand with Wall Street, diverging from Patagonia’s environmental ethos. The company responded by limiting corporate orders, thereby preserving its original image.
• Younger users leave Facebook because their parents’ generation heavily uses it. Exclusivity can be key to maintaining engagement from specific age groups or communities on social platforms.
• New Balance once faced a backlash after a policy stance was misinterpreted by extremist groups, forcing the brand to distance itself from these associations publicly.

Ultimately, understanding and managing these potential conflicts requires brands to identify sources of friction early on and employ various strategies to keep segments separate when needed. Segmenting offerings, using sub-brands, or creating distinct product lines are all ways to cater to different groups without diluting brand identity or customer satisfaction.

In this episode, we also offer actionable advice on navigating the complex terrain of customer segments and brand management and setting up companies for smoother, more inclusive growth. Whether you’re a business leader or a marketer, this episode is packed with insights into balancing growth with customer harmony, ensuring each segment feels valued without alienating others.

This episode also includes ways to:

• Recognize the importance of managing inter-customer relationships to foster sustainable growth.
• Understand how Functional Conflicts often arise in omnichannel setups and ways to resolve them.
• Learn about Brand Image Conflicts and how brands can address image tensions, as Patagonia did.
• Distinguish between Identity and Ideological Conflicts and why one often influences customer group dynamics more than the other.
• Gain insights into using segmentation strategies, like sub-brands or distinct service channels, to reduce conflict.
• Discover how a clear brand identity can attract and repel certain customers and why that might benefit or hinder growth.

Be the first to hear about pre-order and launch dates and invitations to exclusive book launch events for The Growth Dilemma, published by Harvard Business Review Press!

The post How to Avoid Conflict Between Your Customer Segments to Gain Growth appeared first on Beyond Philosophy.

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I fly a lot with Delta, so much so that I have three million loyalty points or SkyMiles with Delta. But I don’t use them. Delta ostensibly designed the SkyMiles system to generate customer loyalty. However, is Delta’s loyalty scheme working if I don’t redeem them?

One of our podcast listeners, Deborah, had the same question. She wants to know why and when she should implement a customer loyalty program for her company. I wanted to share that discussion we had here as well.

Loyalty programs can be a good thing from a business standpoint, such as motivating purchases. However, they rarely motivate loyalty. A more accurate name for this customer product is a rewards program rather than a loyalty program.

That’s because loyalty is emotional. The people you might consider yourself loyal to in your life are people to whom you have an emotional tie. Therefore, loyalty to a company is an emotional attachment. To be clear, I don’t put my Delta SkyMiles ranked up there with my wife, loyalty-wise. But my loyalty to Delta is not based on those SkyMiles either.

Don’t Get Me Wrong, Rewards Are Great

Before we dive deeper into this, I want to clarify that rewards programs are great. People respond to rewards. Rewards work great for generating repeat business from customers.

However, an organization shouldn’t fool themselves into thinking that people who receive the rewards are loyal. You cannot buy loyalty (most of the time); it’s a different type of relationship.

Consider my SkyMiles. The miles are a transactional reason why I deal with Delta. Do I book flights because of them? Yeah, I do. I like the benefits of the program.

I know that the rewards do not create loyalty because I know that if another company offered me the same benefits, I would consider moving. So, I don’t love Delta, but I like earning miles to fly with them.

Now, the fact that I booked flights with them to get the rewards means that Delta has a chance to win my heart. The more times I fly, the more chances they have to deliver the experience that creates an emotional attachment to the brand.

Many psychological theories explain the nature of this relationship regarding the intersection between loyalty and rewards programs. Research teams attacked this idea from many angles.

For example, I realize it’s weird to hang onto those miles instead of spending them on some of my flights. I am storing them in an electronic bank account, checking the total occasionally.

This behavior is called Medium Maximization. The idea behind this concept is that a medium exists between two things, and we want to get as much out of them as possible. In this case, the SkyMiles are the medium between the rewards (i.e., free flights) and me. By storing them all in this account, I know in the future, my flight (or, in my case, flights) will be free, which feels nice. What doesn’t feel nice is the idea of spending them and not having those miles anymore. So, I hang onto them.

Having a medium is also a little like having to use foreign currency. It doesn’t look like what you are used to spending, so we mistakenly assume it’s not the same as spending our usual currency. The foreign nature of the currency disconnects you from the value, making it feel less real, which can lead to changes in how you spend it. Or, as in my case, changes in how you hang onto them.

Hanging on to the medium is a benefit to companies. So, to Deborah’s pickle, the time to start a loyalty program could be now since there is a good chance your loyal customers will never spend their rewards.

However, it doesn’t mean that there is not a cost to loyal programs. There are likely many of them, at least from an administrative perspective. The rewards themselves would have fees associated with them, in whatever form they took, whether physical or opportunity costs. I also imagine a sizeable team managing the details of Delta’s SkyMiles program, which adds to the total cost of the rewards.

Companies can sometimes make the rewards program sound fantastic, but in reality, they aren’t quite as whoopie as the customer thought. For example, a customer might want to use the points for something and discover that the purchase is ineligible or blacked out for some reason. Now, the loyalty program seems less like a reward for loyalty than before, and the points/miles/medium lose value in the customer’s mind. Worse, the negative feelings from the failed use of rewards aren’t doing your experience any favors.

On the other hand, transparent and easy programs can enhance the experience. My Starbucks app is a great example. I can see my many points and what I can use them for in the store.

Check or Credit: Which is Better?

Some might recall that my house in Sarasota flooded this past summer. We are rebuilding, which has a lot of costs associated with it, from drywall to mattresses, to name a few. We put them on credit cards and get cash back on our purchases.

Years ago, the credit card company sent us a check every time we reached $100 in cash back from our purchases. I always enjoyed getting the check. I celebrated getting the money back from all my diligent spending. I would tear it off and deposit it into the bank with a big smile.

Now, they don’t send a check. So, Lorraine told me this morning how much we had in the cashback and that she decided to use it by applying it to the outstanding balance.

I shouldn’t care; we still get the money, but I am a little sad. I liked the check version of this exchange. It felt like getting cash for doing nothing, even though I only got the check because I spent more than that amount already. Taking an amount off the balance isn’t as fun.

Pros and Cons of Rewards Programs

Before, we discussed some of the cons of the rewards programs, like the rewards costs, the administrative fees, and the risk of damaging the customer experience with a bungled or complicated redemption process. There are obvious pros, too, like the value customers feel by collecting the rewards in the given medium and the value they assign to it.

Another significant pro is that rewards programs incentivize the behavior you want from customers, i.e., more spending. Research refers to this as the Goal Gradient Hypothesis, which describes how, once we get closer to a reward, we move toward it faster.

They discovered this concept very cleverly. Researchers at Columbia University worked with a coffee shop to implement a punch card that earned rewards. So, after ten purchases of coffee, you get a free coffee. They measured the time between punches on customers’ cards. The team discovered that the closer customers got to the free coffee, the shorter the distance between the visits and the punches.

However, there is another significant con regarding intrinsic versus extrinsic motivations. Intrinsic motivation comes from within; you do it because you feel a certain way when you do it. Extrinsic motivation is external, so you do something because you get something in return. Rewards programs are extrinsic motivations, which isn’t a problem.

The problem is that research indicates that extrinsic motivations can kill intrinsic motivations. For example, a daycare center chain started imposing a fine for picking up kids late in the hopes of decreasing the occurrence of late pickups. However, the opposite happened; the late pickups increased dramatically after the fine. The assumption is that parents thought the fine, which was $3 per occurrence, showed that late pickups were not that big of a deal. So, they bought themselves some extra time by paying a late fee.

The daycare chain saw the results and decided to end the program, no doubt hoping to reverse the trend toward late pickups. Unfortunately, late pickups became the norm. The extrinsic motivator killed the intrinsic motivation to pick up kids on time because it was the right thing to do. Now, no one thought being late was that big of a deal.

The Last Theory That Applies to Our Behavior with Rewards Programs

Psychologists have another theory that might apply to Deborah’s customer behavior: the Idiosyncratic Fit. This concept describes how we feel we can achieve a goal or outcome with an advantage.

So, if you fly a lot and the rewards are points towards flights, you might not know whether the points were good or bad, but you do know that you would earn a lot of them, and probably a lot more than the average bloke. Therefore, because you already fly a lot, you have an advantage in earning rewards, which makes it feel like something you want to do.

When you have an idiosyncratic fit at play with customers, it is essential to understand the other loyalty offerings in your market. What do the competitors call their rewards, and how does the program work?

So, What Should Deborah (and You) Do?

When deciding how to implement a rewards program, I advise keeping it simple; the simpler, the better. Also, the more transparent you can make it, the better. By avoiding blackout dates and complex redemption processes, you also avoid shooting yourself in the foot with a compromised experience.

Also, remember that loyalty schemes are not about loyalty; instead, they are about incenting customers. Loyalty is emotional, but rewards are transactional. That said, if you get people to buy more to earn more rewards, it allows them to attach emotionally to you and become loyal.

Maybe Delta will get the chance to do that when I fly around the world with my three million SkyMiles. Twice.

Do you have a pickle you want our help with? Share your business problem with us on the website here, and we’ll address it on the podcast. 

Colin has spoken at hundreds of conferences, including some of the world’s largest brands. Talk to Colin about how he can speak ‘in person’ or ‘virtually’ at your conference. Click here.

The post In What Situation Should We be Implementing a Customer Loyalty Scheme? appeared first on Beyond Philosophy.

Deborah has a pickle. She is considering implementing a Loyalty Scheme but isn’t sure when and how to do so. She thought we could help. 

We can help. The first question, then, is easy. Now. These things work. They don’t create real loyalty, but they get people to keep buying from you, giving you more chances to earn loyalty.

It’s the second question, how, that’s a little trickier. 

Many companies create these programs to foster loyalty, but often, they work more as reward systems, encouraging repeat transactions rather than building emotional attachment.

For example, although frequent flyer points, like Delta’s SkyMiles, incentivize repeat bookings, they don’t necessarily create genuine loyalty. Loyalty, we argue, is a deeply emotional connection rather than just a series of repeat transactions.

We explore the psychological principles behind why customers participate in rewards programs and why they might hoard rewards rather than redeem them. A concept called Medium Maximization explains why people often “save” points or miles, viewing them as a bridge to future rewards and experiencing reluctance to part with them. This phenomenon works in favor of companies, as it increases customer engagement without necessarily incurring a cost. 

Additionally, the Goal Gradient Hypothesis illustrates how people accelerate their efforts toward a reward as they approach it, which is why punch-card systems, for example, are so effective.

While rewards programs have significant benefits, they can also have downsides. Complex or restrictive redemption policies can damage the customer experience, as can the use of extrinsic motivations that may unintentionally reduce intrinsic motivations. 

For instance, when a daycare chain imposed a fine on late pickups, late arrivals increased as parents viewed it as a trade-off rather than a rule. Companies should, therefore, be cautious about unintentionally undermining genuine, behavior-based loyalty with overly complicated or restrictive rewards systems.

In this episode, we discuss customer loyalty programs’ true purpose and impact. Ultimately, we recommend keeping loyalty programs simple and transparent. Avoid blackout dates or complicated redemption processes, as these can frustrate customers and reduce the program’s value. At their core, loyalty schemes are tools to encourage spending rather than create loyalty, so Deborah—and you—should design them with that goal in mind.

Additional Takeaways to Listen for In This Episode:

• How extrinsic rewards, like points, can decrease intrinsic motivation and affect customer behaviors.

• The importance of aligning a rewards program with customer behavior patterns and preferences.

• How Idiosyncratic Fit influences customers to engage more deeply in programs where they feel they have an advantage.

• Examples of how poorly designed loyalty schemes can backfire and damage customer relationships.

• The pros and cons of different reward types, like points versus cashback, and how this impacts customer satisfaction.

• Understanding competitive rewards programs can help you refine your offering to stand out.

The post When Is The Right Time To Implement A Customer Loyalty Scheme? appeared first on Beyond Philosophy.

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The other day, I was waiting for our food at a restaurant with friends, which was taking too long. Luckily, before we complained, they delivered the food. Later, the manager came by twice and asked how everything was. In both cases, we all said, “It’s fine.”

Why didn’t we tell him about how long we waited for the food? What compelled me to reassure him that we thought everything was fine?

I am not the only customer that does this. Dave Hillman wrote us with a pickle. His customers tell him one thing but then give us a bad score later. He wants to know how to get the feedback upfront.

Now, I can’t speak for all of Hillman’s customers, but in my restaurant example, I blame my lack of upfront feedback on being British. We don’t like conflict as a country; we find it embarrassing.

Plus, there is a lot of embarrassment to follow if you complain in person at a restaurant. First, the waiter apologizes. Then, the manager will come over and apologize, maybe even offer a free dessert or drinks or something. It’s all right to do, but it’s also embarrassing. Plus, then I feel guilty that I might have overreacted.

I also feel terrible complaining to an employee because it’s not always that employee. Sure, they’re the ones who are interfacing with you, but it might have been someone else in the chain that caused the problem.

Therefore, be aware that in-person complaints have a lot of personal costs, and not everyone is willing to pay them. Anonymity is key for many people. It allows them to be honest at a much lower personal cost.

Sometimes, the complaints process exacerbates the problem with getting real feedback. For example, I have private insurance in the UK and have noticed a decline in customer service over the past few months. I wanted to tell the agent’s manager as much but learned that she could only do that if I filed one through a formal complaint process. I didn’t want to do all that, so I skipped it.

Let’s take a closer look at that policy. For a customer to give honest feedback that could be potentially useful to the company, the company places an extra burden on the customer to “allow” them to do that. Not bloody likely that they are going to get the feedback then, is it?

A few weeks ago, you might recall that I told you about our discussion with Tim Waterton of Happy or Not where we discussed the importance of getting feedback quickly after the experience. That’s because right after an experience, or even during it, we have different perceptions of the experience. If we have just waited a long time for food in a restaurant, we will feel more strongly about it at the moment then we will later in the day or week that follows. Therefore, collecting that data earlier means it will be more relevant or accurate for how the experience makes one feel.

So, Why Is The Feedback Different?

The reasons we discussed above might cause the difference in feedback our listener receives. However, it is also important to remember that both sets are valuable. If you are getting complaints anywhere, they are worth listening to; if they are different over time, there is value in that, too. Perhaps you need to incorporate both into your customer feedback.

Also, it could be that the customer’s view changes. For example, when I watch my favorite football team, Luton Town, at a match, I might think they played very well. But then, after I discussed the game with my children, who pointed out that they only took two shots at the goal, I think my kids made a good point. Then, I hear the match coverage that echoes the sentiment that the team could have played better than they did, further cementing the idea that they didn’t play well. By the time a day or so passes, I might have changed my view of their playing from “very well”  to “just okay” or even to “pretty poorly.”

If there were a survey for the football team, they would end up with positive feedback from me immediately after and then negative feedback later. Lucky for them, nobody cares what I think about their playing.

However, it is important to consider if the problem with the feedback isn’t the experience, but the way the company requests input. Is the problem in the phrasing of the questions or the type of questions?

Plus, who is asking the questions? When I was in corporate, we used to have an annual customer satisfaction survey for the largest corporate telecoms accounts. Salespeople did the survey.

However, the interesting bit was that the survey results contributed to the salespeople’s bonus. I bet you can imagine how those scores looked.

The salesperson story is an example of sampling bias. Choosing who in an organization gets to fill out the satisfaction survey is a form of sampling bias.

Sampling bias is also when you don’t get feedback from all your customers but only a few. For example, your survey might go to everyone, but only those who had a great experience and a really bad one will respond. So, everyone who said their experience was great or fine at the time probably didn’t respond to the survey unless they fell into one of these camps.

If questions on the follow-up survey differ from those you ask in person, it can affect the responses, even if the questions are the same. If somebody comes to my table and asks how my meal is, I might respond to that in terms of how it tastes. How does the food taste? The food tastes great.

However, when filling out a survey about the dining experience later, I might include other areas besides the taste of the food. I might include that the parking or the wait was a hassle. Maybe the table where I was sitting was drafty or had a wobble. All these things can contribute to that overall experience. However, the food was great. So, in this case, I was consistent in my evaluations; my varying response was to different parts of the experience in the subsequent survey.

One of the most significant considerations is determining what you want to measure. If you aren’t sure, decide what’s driving value for customers. It could be the food, but it also could be the convenience or speed from ordering to eating. The value could also be the live music you feature or the ambiance of your dining room. Whatever the value is, that’s where you want to direct your queries for feedback.

So, What Should You Do With This?

Our listener has a few things he can do to reconcile these mismatching feedback streams. First, consider that any feedback is a gift, no matter when it comes. If a person offers suggestions or complains that something you are doing isn’t working, you need to be grateful for it, even if it comes after a stream of positive feedback and you didn’t expect it.

However, regarding his actual question about why customers tell him one thing in person and another later, he should consider whether he is asking the same question at each survey point. How you phrase and what you ask will affect the responses.

Also, remember the constrictions around in-person feedback. Some people might want to avoid conflict or embarrassment, so they avoid giving real feedback. Anonymity in a survey later might bring out the honesty in some folks.

Additionally, if the experience was good, customers who gave positive feedback in person might not take the time to complete official surveys later. Most surveys later come from the extremes, meaning they come from customers who either loved or hated it. The customers who thought it was good, fine, or “as I expected” probably won’t bother filling out a survey later.

Another key thing for me is to ask about what drives value. It is essential to get customer feedback about your various attempts to enhance the value and find out if it is working.

Also, based on my salesperson story, where the salespeople were completing the surveys about themselves (and securing their bonuses), have an independent party survey customers. It removes all the conflict of interest if the feedback is from an uninvolved third party. Plus, no one has to worry about upsetting their point of contact at the company by offering them a bad review that keeps them from making their bonus.

So, with all that said, what did you think of the newsletter? I’d love to hear your feedback in the comments below. And my bonus has nothing to do with your answers, so feel free to let it rip.

This review sums it up: “The dynamic between the two hosts absolutely makes this podcast. Each brings a unique take on the topic, their own perspective, and plays off each other’s sense of humor. I come away after each episode with a feeling of joy and feeling a bit smarter”.

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The post Why Customers Say One Thing but Then Give You a Different Score appeared first on Beyond Philosophy.

Why do customers tell you everything is fine when you ask them face-to-face but then give you a less-than-optimal rating later in a survey? Is everyone duplicitous, or are customers stricken with experience amnesia as soon as they make it to the car park?

It turns out that it is neither a character flaw nor a medical condition that causes it. We explore what does in this episode. 

Let’s face it. It’s a frustrating issue that can make getting accurate and timely customer feedback hard. We begin with a real-life example: a restaurant experience where Colin and his friends told the manager everything was fine with their dinner despite a long wait for food. Later, they reflected on the experience more critically, but the moment to provide that feedback had passed. 

Colin blames it on being British. That may be part of the cause, but other things are happening here, too, and it isn’t uncommon. 

Our listener, Dave Hillman, has encountered this dilemma in his business. His customers express satisfaction face-to-face but provide lower scores on feedback surveys. Why does this happen, and what can businesses do to get more upfront and honest feedback?

We unpack several reasons why in-person feedback can differ from post-experience feedback. We explore factors like the fear of conflict, the desire to avoid awkwardness, and how personal guilt can deter customers from raising issues. We also look at how companies might unintentionally make it harder for customers to share feedback at the moment.

Anonymity, timing, and how feedback is solicited also play significant roles. For instance, collecting feedback immediately after the experience can result in more accurate data as perceptions change over time. We also discuss how phrasing questions differently in person versus on surveys can lead to varying responses.

In this episode, we also provide strategies for businesses to balance both types of feedback—immediate and delayed—and ensure that all input, regardless of when it arrives, is valuable and actionable.

In this episode, you will also learn:

• The cultural reasons behind why people avoid giving critical feedback in person.

• How post-experience reflections, like a football match example, shift perceptions over time.

• The role of sampling bias and how it can skew survey results.

• Why anonymity encourages honesty and how it lowers personal costs in sharing feedback.

• The importance of identifying what truly drives value for customers to guide feedback collection.

• The benefits of using independent third-party surveys to remove bias and get more accurate results.

The post Why Do Customers Tell Me One Thing But Give Me Feedback That Is Different? appeared first on Beyond Philosophy.

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Let’s talk government. Mind you, I said government, not politics. Specifically, let’s determine whether the government should optimize its Customer Experience. Also, I want to explore what role the government should have in any experience.

Organizations must abide by regulations, many of which affect the Customer Experience. Some are good, by the way. Others, well, we’ll get to that.

Let’s begin with whether governments should worry about the Customer Experience they provide their constituents.

For my part, it probably should. A government that provides a truly terrible customer experience might find itself with a revolt. The Boston Tea Party wasn’t exactly a ringing endorsement of the British Crown in the American colonies, was it?

Some parts of government want to improve, but probably not for the reasons you think. About twenty years ago, the water company in the UK hired my global Customer Experience consultancy to help them improve their experience. I’ll admit I was puzzled when they did. While the water company didn’t have a great reputation, it also had no competition. I asked the CEO why he wanted to improve the experience since he had a monopoly and people needed water (and sewage services).

His answer surprised me. He wanted to become the best water company to get all the best people to work for him. If you have the best people, they will provide the best services, making it easier to collect the bills. I hadn’t considered this angle before.

I’ve recently had some good experiences with the government. I needed a new British passport. I thought it would be a real pain with many obstacles, but I was wrong. I got it delivered in a week.

Another good experience with the government was at the Tampa Airport. We have global entry, which helps us get through passport control quickly and without queuing up. The face scanner admits us. We pay for this service, but it was money well spent; the other poor blokes were in for a three-hour wait.

Why Governments Should Care About Their Experiences

Governments that run efficiently and consistently are important for several reasons. First, it’s like my client at the water utility said, you get the best people. Plus, those great people are proud to say where they work, which also recruits more great people. Also, being good saves money, and even the government can’t ignore that benefit. Additionally, people’s experience with the government drives life satisfaction to a surprising degree.

The customer experience with the government matters in many ways, including facilitating economic growth. For example, businesses don’t want to establish themselves in a country where the government is corrupt or inefficient. Fewer businesses means a further depression on the economy. A poor economy means that great people won’t stick around.

The Role of Government in the Regulation of Experiences

I have a libertarian streak that runs through me. I believe that markets are efficient on average and solve many problems. People favoring market-based solutions must allow markets to solve problems by providing the market-generated solutions.

However, these solutions require a certain amount of information transparency, trust, and compliance. Otherwise, there are not enough consequences for those who don’t do what they should. Therefore, market efficiency requires a certain level of regulation or compliance.

Let me give you some examples. I asked ChatGPT to tell me about a few governmental regulations in the States. It came up with a few, including these two from financial services:

• The Truth and Lending Act requires lenders to provide clear, standardized information regarding loan terms and interest rate fees to help customers make better decisions.
• The Consumer Financial Protection Bureau: This regulation protects consumers from unfair, deceptive, and abusive practices of financial products and services.

Both are necessary in the financial markets because there’s information asymmetry. Often, the people selling financial products are much better informed about what those products do and how they operate than the consumers that buy them. It’s easy for them to use that information asymmetry to trick buyers into purchases that aren’t good for them. The goal of both of those regulations is to level the information playing field so that people on both sides of a transaction can make a good choice.

So, how do they get here, duping people into financial products that are not good for them? Too much pressure on people to make a profit leads to what Frederick Reichheld calls “bad profits.”

What happened in the Great Recession regarding mortgages were examples of bad profits and bad practices. Unfortunately, that wasn’t the last time we saw things like that; we still uncover similar practices.

It’s profitable to exploit people and a consistent way to make a lot of money. However, as a society, we’ve decided that’s not an appropriate way to make money.

Another example of good governmental regulation is the Americans with Disabilities Act. My mother-in-law was in a wheelchair before she passed away. It was challenging sometimes to get her in businesses, which is something you likely don’t realize until you are trying to get a wheelchair into a difficult access point. However, companies are unlikely to undertake the expenses to make everything accessible for everyone since fewer people tend to need accommodation. Therefore, regulation was required to force businesses to do so.

Another good example of governmental regulations on experiences is the Biden administration’s Time is Money initiative. Among other things, this regulation intends to make it easier to cancel subscriptions and memberships. Sure, some companies like YouTube TV and Netflix are brilliant at making it easy to do with a couple of clicks, but some organizations make it deliberately difficult.

Here are a few other things the initiative strives to do, per USA Today:

• Simplifying the process for canceling subscriptions and memberships.
• Mandating airlines to refund airfare if a flight is canceled or significantly altered, without acceptable alternatives.
• Allowing online submission of health insurance claims.
• Requiring companies to offer direct access to a human customer service agent with one button press.
• Holding businesses accountable for poor service by banning fake reviews, blocking honest reviews, or paying for positive ones.
• Reducing reliance on ineffective chatbots for customer service.
• Improving communication between parents and schools.

The White House also published a Fact Sheet about all the consumer protections they seek to enact. Among them are regulating junk fees, shrinkflation, rising prescription drug costs, and unfair pricing practices.

Of course, governmental regulations aren’t all good for experiences. Some regulations make experiences worse. Many states in the US overregulate industries and choke off competition.

Some states requires thousands of hours of training in hairdressing and oversight to get your certification to cut people’s hair. That seems unnecessary to me.

In New Jersey, you cannot pump your gas by law. You need to wait and have an employee do it for you. I suppose that’s another reason not to visit New Jersey.

Regulation Requires Balance

So, the answer isn’t to have no regulation, but too much creates situations like these that seem ridiculous or limit competition and bogs down markets. There is a role for government regulation to play in improving customer experience, but it requires balance.

Also, the government must provide a decent Customer Experience for its constituents. That doesn’t mean to say that governments must provide the best Customer Experience, but they should at least be average.

There are also areas where the government should get involved with regulations. However, lawmakers should always review them. Otherwise, you might find yourself impatiently tapping your steering wheel off the New Jersey Turnpike, waiting for someone to pump your gas.

Governments should strive for good Customer Experience because it’s the right thing to do, but also because it has a major influence on life satisfaction of people living in those countries. Life satisfaction has implications for the country’s economy and society. So, there are serious effects of incompetent, corrupt, or inefficient governments. So, it should be an aim of governments to improve Customer Experience.

Luckily, they can do so by reading this newsletter and using the same tips and techniques that any company would use.

Colin has conducted numerous educational workshops, on how to improve your Customer Experience, to inspire and motivate your team. He prides himself on making this fun, humorous, and practical. Speak to Colin and find out more. Click here!

The post Paradoxically Regulation of a Customer’s Experience is a Force For Good. appeared first on Beyond Philosophy.

Let’s talk about government and Customer Experience. It might surprise you that government and Customer Experience have a tighter relationship than you think. 

Many organizations, particularly in the private sector, recognize the importance of providing great experiences to keep customers satisfied and loyal. But should governments do the same for their citizens? Can a well-run government improve societal well-being by focusing on efficiency, transparency, and user-friendly services?

In this episode, we explore the government’s role in delivering experiences to citizens through essential services or regulatory actions that impact organizations and their customers. Historically, a poorly managed experience with the government has significant consequences (cue: the Boston Tea Party). But beyond extreme cases, day-to-day interactions with government agencies also influence our quality of life.

We start by asking why government agencies should care about CX at all. Using real-world examples, such as the surprisingly smooth process of renewing a passport or the convenience of services like Global Entry at airports, we see how an efficient government improves employee morale and public satisfaction. Plus, efficient government departments can save money, attract top talent, and increase citizen trust.

Beyond service delivery, governments play a vital role in regulating experiences for private companies. Markets can become exploitative without proper regulations, leaving customers vulnerable to poor practices. We look at examples of beneficial regulations, like the Truth in Lending Act, which protects consumers from misleading financial products, and the Americans with Disabilities Act, which ensures accessibility for all. 

However, regulation is a delicate balance. Too little oversight can lead to exploitation, while too much can stifle competition and innovation. Some laws—like those that mandate thousands of training hours for hairstylists or forbid self-service gas stations—seem overly restrictive and detrimental to the customer experience. Finding a middle ground that protects consumers without creating unnecessary barriers is key.

Join us as we discuss governments’ critical role in shaping experiences and why every government, like a business, should aim to improve the CX it delivers to its citizens.

More Key Moments in the Discussion:

• How efficient government services influence national life satisfaction.
• The impact of “bad profits” in the financial sector and their regulatory solutions.
• Why governments can’t afford to ignore inefficiency for long.
• Examples of overregulation stifling innovation in U.S. states.
• The link between government CX and economic growth.
• How the White House’s consumer protection initiatives aim to improve daily life.

The post Why Government Regulation of Some Aspects of a Customer’s Experience is a Good Thing appeared first on Beyond Philosophy.