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InPsych 2017 | Vol 39

Cover feature : Consumer psychology

Why is being customer-centric so difficult for organisations and what can they do about it?

Attracting and retaining customers is expensive, but it is the lifeblood of companies that promote and sell their products and services. Companies spend exceedingly large sums of money on marketing communications that both promote their products and services, and outline how the experience they provide is the best consumers will find.

The problem to solve

A study by Schmidt-Subramanian and Stern (2016) was influential in focusing companies on the consumer experience. They found that consumers who rate their experiences as satisfied/very satisfied with the product or service:

  • are five times more likely to stay with the company
  • are eight times more willing to take up new or future services
  • cost the company six times less to provide acceptable or good service (satisfied customers don’t have problems or complain as much as dissatisfied customers which means the company spends less money)
  • are three times more willing to recommend that company to others.

The question remains: Why do so many companies find it hard to provide consistently good customer service when the benefits are obvious? A survey of companies in the United States (US) highlighted that 84 per cent prioritised customer experience as one of their top priorities, if not their top priority, but only one in five companies demonstrated that they had the organisational capabilities to deliver a great customer experience (Burns, Gazala, Zoia & Hartig, 2016).

This article discusses what drives consumer/customer satisfaction1, why it has become increasingly important to companies, and what leading organisations do to make this happen. It highlights the critical role consumer psychologists play in enabling companies to become leaders in customer experience. Specifically, their expertise is evident in the work they undertake to:

  • design and analyse qualitative and quantitative customer research that uncovers the customer insights that underpin the customer experience evidence
  • use dynamic customer-centric ways of thinking, such as design thinking and human-centred design, to help companies apply customer experience design
  • develop and deliver customer-centric culture change and transformation that embeds and sustains ongoing customer experience performance outcomes.

Rating customer satisfaction

Consumers rate companies on their level of customer satisfaction. For most products and services, consumers take into consideration the following dimensions:

  • Brand – this predominantly relates to the company’s brand reputation in the market.
  • Price – the importance and relevance of the price of the product or service.
  • Product – the range of features and choices offered with the product or service.
  • Processes – how easy it is to deal with the company.
  • Interaction – the range and quality of delivery of the services by the channels available such as phone/contact centre, store/branch, website, app, web chat, email, text and social media.

The challenge companies face is prioritising the allocation of resources, time and focus to these different elements to improve customer satisfaction. Traditionally, companies placed considerable effort and resources into brand, price and product design. This was considered the most effective way to attract customers and acquire higher market share. The problem for many industries, especially those industries with low barriers to entry for competitors, is the opportunity for consumers to switch when they are not satisfied. This was a challenge for banks and telecommunications since the 1990s and more recently other industries such as health insurance, utilities and superannuation.

Research into the drivers of customer satisfaction shows that although brand, price and product are important, customer service and quality of interactions account for more than 50 per cent of variance (Anderson, Srinivasan, & Mehta, 2013). The field of consumer psychology regularly involves the use of qualitative and quantitative experimental design to analyse the factor models that drive customer satisfaction. This, in turn, has enabled this shift in customer experience to be explained.

The elevated importance of the voice of consumers

Consumers have a significantly stronger say on what brands and products are purchased than ever before. These newly emerged avenues of consumer advocacy provide insights to consumers on aspects of customer experience valued by existing and potentially new customers.

The proliferation of social media in the digital age has been a goldmine for consumers. The range of social media channels including websites, blogs and purpose-built apps have become the first point of reference for many consumers. This is not just limited to younger generations. People of all ages use social media. Recent survey results from the US show that 79 per cent of US adults use Facebook, including 62 per cent of people over 65 years of age (Greenwood, Perrin, & Duggan, 2016).

We have seen the rise of ‘prosumers’ who talk about and advocate for brands and products. In essence, they are very active consumers skilled in specific product domains and vocal about products and services offered in the marketplace. They are savvy with social media and know how to gain the attention of buyers, talking about and advocating on behalf of the companies that develop these products if considered worthy. Companies now actively use prosumers in the co-design of products through product design and beta-testing processes.

The increase of comparative sites such as Compare the Market; Webjet; trivago and iSelect are amongst the many sites that provide a summary of products and services available in different product ranges from health insurance to energy to travel. Sheehan (2014) reports that 92 per cent of consumers will use a search engine at some stage when considering which motor insurance to purchase – and while 30 per cent will then move on to the brand website, almost half will go to a comparison or aggregator site.

Consumer psychology, in conjunction with other professions such as market research, digital design and business strategy, have been at the forefront in using creative techniques such as design thinking and human-centred design to engage with consumers to better understand their needs and expectations.

High-performing service companies

Digging under the covers of the high-performing service companies provides an insight into what they do to achieve high consumer satisfaction ratings. Customer experience management firms have researched what these companies do that makes them leading service organisations (Arussy, 2010; Burns et al., 2016; Temkin, 2017). Synthesising their research shows a core set of characteristics present in leading service companies.

Figure 1 compares companies that demonstrate consistently high customer satisfaction ratings and those companies that have average customer satisfaction ratings.

Case study reviews of high-performing companies show that it takes five to 10 years to achieve consistently high levels of customer satisfaction. Although each of the characteristics outlined in Figure 1 is important, there is a sequencing that is worth outlining. Initially, there is a requirement for customer experience foundations to be in place and these include:

  • having a clear vision
  • researching customer needs
  • mapping customer journeys
  • investing in and delivering actions
  • leadership buy-in.

Once these characteristics are evident, the sustained effort of measuring benefits, ongoing leadership commitment and transformation to a high-performing customer culture take priority (Duncan, Neher, & Tucker-Ray, 2017).

InPsych

Figure 1. Characteristics of high-performing customer service companies.

Creating a customer-centric culture

Customer-centric culture is at the heart of high-performing service companies. It’s the most enduring and distinguishing element that makes them unique; it is also the hardest to replicate.

Culture comprises:

  • The ways in which people work together to deliver customer outcomes – including defined behaviours and habits that deliver a customer-focused strategy and enable people to do their best work.
  • The way companies conduct management practices and processes to deliver customer outcomes – e.g., how companies communicate the direction, make decisions, lead change, collaborate, and enable the workplace customer experience.
  • Customer-focused culture with actionable behaviours about what’s expected – for example, the symbols that define the ‘personality’ that people identify with.

Consumer and organisational psychologists have been central in helping companies explore and discover the components that bring about transformational change. When it comes to transforming customer-centric cultures, the shift in culture occurs at three levels:

  • senior leadership – critical to get traction
  • middle management – the most challenging
  • frontline teams – don’t just leave it to them.

Table 1 provides examples of the typical culture initiatives that are delivered and embedded at three levels within organisations. The sequence and requirement will vary from company to company, and this can be identified once an initial customer culture assessment is conducted that would baseline the current culture levels and identify the areas most in need of cultural change or transformation. Senior leadership is mandatory and must be achieved first. Usually, frontline teams are engaged next, quickly followed by embedding change with the middle levels.

Table 1

Customer-centric culture initiatives frequently used to transform a customer culture.

InPsych

Wrap-up

The clear message for companies arising from consumer research and practice is that understanding the end-to-end consumer experience is critical and knowing how the company focuses on and delivers customer satisfaction is paramount. This emerging area shows how consumer psychologists are playing an increasingly valuable role in communication and marketing strategies and business innovation.

The author can be contacted at damian.cotchett@gmail.com

1 Although the terms have slightly different meanings, for simplicity, consumer satisfaction and customer satisfaction will be used interchangeably in this article.

References

Disclaimer: Published in InPsych on June 2017. The APS aims to ensure that information published in InPsych is current and accurate at the time of publication. Changes after publication may affect the accuracy of this information. Readers are responsible for ascertaining the currency and completeness of information they rely on, which is particularly important for government initiatives, legislation or best-practice principles which are open to amendment. The information provided in InPsych does not replace obtaining appropriate professional and/or legal advice.