Continuing our 2 part series, on where leaders should focus for growth; in our changing world, full of new technology.
This post builds on our first post. That covered major trends, the need for customer insight & what is required to manage your data effectively.
Aligned to learning from Insight Leader events in London & Barcelona, a key theme was the need to focus on your customers (not just technological opportunities)
Our attention now turns again to your customers, but this time also considering the issue of their irrational behavioural biases.
How should this trait of human nature influence your plans or focus for growth?
Irrational Customers, what should you do?
Finally, let me turn to the topic of irrational customers. With the Financial Conduct Authority, both focussed on Behavioural Economics (BE) & expecting providers to take it into account, the days of assuming customers will act rationally are numbered.
I’m sure most of you have at least heard of BE. The success of popular books on the subject, from the easy to read ‘Nudge‘_ to the slightly more challenging ‘Thinking Fast and Slow‘_, have ensured plenty of media coverage and social media debate on implications and appropriateness for policy and action.
As with many academic disciplines, different experts use slightly different nomenclature to order the different irrational behaviour or biases observed. However, for Financial Services clients, a good place to start is the list of 10 biases published by the FCA. My own experience, in helping clients test communications or design marketing to take irrational biases into account, suggests these cover the bases.
Do you test your comms?
Of course, the focus of FCA regulatory action is ensuring the customers receive positive outcomes through products & services suitable for their needs. Unfortunately, some agencies offering to help businesses understand & act to protect customers from BE biases, pitch by seeking to ‘rubbish’ traditional research or the role of customer insight teams. This is so misguided. Most successful BE projects require well designed research, as well as behavioural analysis, data capture & Database Marketing skills in experimental design. In other words, it is probably your existing customer insight team who are best place to take forward such work.
Given that most firms focus first on ensuring their communications could not be accused of manipulating such biases, two (in particular) are often worth considering:
- “Framing, Salience & Limited Attention” is the bias such that different decisions are made if information is presented/structured differently (as sommeliers know well).
- “Present bias” is the over valuing of the present compared to the future (i.e. I would accept a smaller pay-out now, compared to delayed gratification with better return).
But, others matter as well & do occur from time to time. For a fuller list, see this previous post summarising all 10 biases.
Conclusion (from both parts)
In conclusion, let me summarise this collection of musings on where you should focus to be ready for the future. There are many different & exciting innovations happening, including use of blockchain, robotics, virtual reality & machine learning. But, having seen innovators who go on to thrive & those who do not, I am making the case to focus on people not technology.
Developing a strong Customer Insight capability, supported by well-managed data, that is used to guide all interactions with customers is a sustainable route to growth. But, beware, to achieve both customer loyalty & the approval of regulators, you will also need to consider irrational customers. We are practically in a ‘seller beware’ market, so to truly protect your business, ensure you know (better than your competitors) how to help your customers achieve positive outcomes. Oh & learn how to tell them in their language.
Such a human-centred-design approach to business isn’t easy, but it is fulfilling. Focus on understanding & serving your customer better. When you have a compelling story to tell, about how you will do that, you’ll also be able to mobilise one of your biggest weapons. That, of course, is all those human beings who work in your business.
To modify the oft quoted line by Bill Clinton, about what matters most, “It’s the people, stupid”.