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Delivering Winning Experiences for the Recessionary Customer Mindset

Layout 1I just received an interesting advertisement from Mimi’s Café.  Mimi’s is a 115-store chain of upscale casual dining establishments known for generous portions of predictably high quality entrees.  In an unusual twist, Mimi’s is promoting a “Just Enough Menu” focused on smaller portions at prices that range from $7-9 for lunch and $8-12 for dinner.  While most advertisements you see promote “more for less,” this advertisement promotes “less for less.”   Although this may be surprising, I believe it’s an astute move.  Not only does it provide a low price incentive but the “less for less” approach strikes a chord with a recessionary mindset that has been taking hold.

The National Bureau of Economic Research (NBER) announced yesterday that the United States has officially been in a recession since December 2007.  I don’t think many people were surprised.  “I think that we’ve got a ways to go, that this is going to be probably a deep and long recession,” said Jeffrey Frankel, a Harvard University economist who sits on the NBER.

Over the past year or so, the focus of our work on customer experience design has transitioned from the strategic to the urgent.  We’ve spent more time helping clients focus attention and investment on collaborating with and retaining their best customers, surfacing and quickly addressing the reasons for customer attrition, and on continually reinforcing that, although everyone seems to have become more conservative,…

Customers are NOT NOT spending!  They are just changing how and why they spend.

Customers are continuing to opt for and engage in experiences that are designed to meet their needs.  It’s just that their needs and priorities are changing significantly.  Organizations that understand and quickly adapt to these changes can not only preserve but enhance revenue in the short term.  Organizations that hang onto outdated beliefs regarding their customers’ priorities will not only lose revenue but will ultimately be seen as out of touch and irrelevant.

While every industry and situation has its own unique behavioral shift to understand, we’re seeing a few overarching patterns that represent a solid starting place.  Increasingly, customers are:

1. Rejecting Conspicuous Consumption

The recession may just provide a cure for a wicked case of Affluenza!  In light of the current conditions, our past consumer behavior looks a little embarrassing; like our evolutionary predisposition to acquire has been running amuck.  The Times of London columnist, India Knight wrote, “I am happy to observe that the decades of vulgar excess are finally over… There is a strong collective sense of us all coming back down to earth. It’s like a huge national reality check and, unwelcome as it may be, there is a possibility that it will result in us straightening out our priorities.”   (See:  Dear Prudence: Recession May Bring Return of Traditional Values).

blingwater_1We’re seeing early indications that there may be an aggressive backlash against indulgent and conspicuous consumption.  Think about it.  How many families need a 5,000+ square foot house other than to store all the stuff they buy to fill it to the rafters?  Is it really necessary to spend between $40… and even $400… for a case of 12 liter bottles of water?  Have I got a deal for you?  A case of Bling H20 (water corked in frosted glass bottles adorned with Swarovski crystals) is currently on special for less than $400/case.  Even at this discounted price, it still makes the EvianPalace” water seem cheap at $15-$20 a bottle.  Similarly, is it necessary to spend three times as much on Renova’s designer toilet paper, $200 jeans, or a $690 on a Porsche baby stroller?

We’re starting to see a return to the more reasonable basics.  In the fashion industry, “the dress, which has enjoyed a lengthy reign over the market, is losing ground to more conservative, versatile, basic pieces that can blend and carry their owners through several seasons. Retailers report excellent sales in practical items such as blazers, denim, basic separates, and trousers.”  (http://www.slate.com/id/2191398/)

It’s starting to look more and more socially unacceptable to buy upscale goods.  A recent investment blog post provides an indicator of some of the sentiment we’re seeing.   “One company that will be hurt by the eating retrenchment is Whole Foods (NASDAQ: WFMI), a favorite of the upper middle class who wants to look down their noses at people who go to regular grocery stores.”  (My emphasis added).  The point isn’t whether Whole Foods shoppers believe in the health and environmental benefits of organic and natural foods; the point is that non-Whole Foods shoppers perceive the Whole Foods shoppers as “looking down their noses at them.”

As I mentioned in a previous post (When the Going Gets Tough… The Tough Get Closer to Their Customers), as customers that are struggling will buy up in order to keep up appearances, the ones that aren’t will tone it down.  I expect we’ll see an echo of the “grunge” music, fashion, and lifestyle movement that arose out of the recession of the early ’90s.  This will create opportunity for new products, entertainment, fashion, and retain outlets.

As we head into the holiday season, we’re starting to see an increased tendency to give “practical” gifts rather than the more luxurious and exotic gifts.  Look for high end companies to jump on opportunities to introduce more discreet chic alternatives.

2. Making Value-Focused Tradeoffs

As the recession has taken hold, most customers are more willing to postpone purchases, trade down, or buy less.  For many customers, yesterday’s “must haves” are becoming today’s “can do with outs.

In the course of making these tradeoffs, customers are buying more quality non-branded or store-branded alternatives.  Michael Barbaro and Eric Dash wrote in the New York Times “Recession Diet Just One Way to Tighten Belt” that, “Over the last year, purchases of brand name cookies and crackers have fallen, according to Information Resources, which tracks retail sales.  Sales of Nabisco graham crackers have dropped 7.5 percent, and Keebler Fudge Shoppe cookies have slipped by 12.3 percent.  Not even beer is immune.  Sales of inexpensive domestic beers, like Keystone Light, are up; sales of higher-price imports, like Corona Extra, are down, the firm said.”

Customers are also making tradeoffs in convenience for price.  This includes shifting from the Marriott to the Fairfield Inn and looking for cheaper flights at off peak times, such as mid afternoon and late evening rather than early morning.  As Barbaro and Dash write, “Spending data and interviews around the country show that middle- and working-class consumers are starting to switch from name brands to cheaper alternatives, to eat in instead of dining out and to fly at unusual hours to shave dollars off airfares.”

In a great article, “Dollar’s fall forces new standard of frugality,” San Francisco Chronicle writer Sam Zuckerman writes, “Now, that shop-till-you-drop, I-want-it-all-and-I-want-it-now era may be coming to an end. It couldn’t last because it was built on a mountain of money borrowed from overseas.”  Zuckerman goes on to summarize some of the ways that customers are throttling back:

IN OUT
Saving Borrowing
Cooking at home Eating out
Fixing the old car New car
Staying at home Foreign vacations
20 percent down No down payment
Debit cards Credit cards
Working past 65 Early retirement
Library Bookstore
Tap water Bottled water
BART Bay Bridge
Patching Remodeling
Public park Theme park
Eyeglasses Lasik surgery
Poker night Weekend in Vegas

We’re also finding that business customers want to see products and services unbundled and priced separately.  Customers want and need to evaluate the individual contribution of each component and are placing a premium on reliability, predictability, and performance.  New products and services that address new customer priorities and put pressure on competitors can be effective but advertising and sales efforts must stress differentiated value and superior price performance.

3. Smaller Scale, Do it Yourself Alternatives

During more optimistic economic times, customers often find I easier to justify making investments in major projects.  For example, homeowners might invest in renovating their home with the expectation that it’ll have a positive impact on their home’s value.   However, as home values are shrinking, homeowners are opting for smaller scale and more focused and necessary improvements driven by livability and value preservation rather than economic gain.  For example, at Home Depot, sinks, faucets, and bath accessories are selling briskly as consumers switch from full makeovers to more focused refreshes.

Barbaro and Dash go on to cite an NPD study that provides another example:  “Carl Hall, a retired construction worker in Detroit, wants to buy a fence for his backyard. But he decided not to buy a finished product at Lowe’s, the home improvement chain where he was shopping recently. With money tight, “I am looking to put it together myself,” he said, adding that he hoped to save $200.”

We’re also seeing anecdotal evidence of a similar pattern with business buyers.   It seems like more companies are breaking consulting and business services projects into smaller pieces and looking for parts that they can do themselves.

Agile companies will create offerings and experiences that provide customers both smaller scale and “do it yourself” alternatives… in addition to offering fully integrated options for those who may continue to prefer that.

4. Regaining Control

People experience an emotional loss of control during unpredictable times.  As a result, we typically see people acting in idiosyncratic ways driven by a deep psychological need to regain control.  For example, people often engage more in collecting hobbies when they feel out of control in their lives.  Depending on their individual interests, they’ll collect figurines, CD, DVDS, coins… just about anything.  Conway’s Vintage Treasures blog, stated, ” “Collecting is a passion and a distraction to a better place, a better quality of life then we can get from say for example, following stock prices everyday…”   Our research points to a deeper reason that has to do with control.  The more people feel their situation is out of control, the more they compensate by engaging in behavior that helps them regain their sense of control.  Collecting is one of those things.   What’s the benefit of collecting another figurine when you already have 200 of them?  Well, it makes them feel like they’re on top of their collection and making progress in small steps towards improving it.

Aside from these deeper control issues, we also see more obvious ways of regaining control.  For example, programmable thermostats and insulation which help gain control over fuel bills are another top seller at home improvement stores.

Another way that customers regain control is by taking advantage of packaged offerings that reduce the actual or perceived costs or level of uncertainty.  These bundled offerings can provide the comfort of “no surprises at a set price.”   For example, while travel agencies report that although overall demand for travel is down, there has been a shift to U.S. and even local destinations, with a rise in popularity of “all-inclusive” stays.  (See:  Americans Flee Looming Recession).  The opportunity for a local bed-and-breakfast might be:  they could offer a package that included dinner at a local restaurant; bicycle rental, horse carriage tour or the like; and tickets to a local attraction or museum.  Those establishments could provide the goods and services at a discount to the B&B (as a “cost” of marketing for the increased business), and the B&B could offer the full package below the retail cost of the individual items while guaranteeing the usage of their rooms.  A win-win situation for all of the businesses!

5. Cocooning, Insperiences, and Staycations

As hard times loom, we tend to retreat to the comfort of our friends and family.  We connect with cozy hearth-and-home scenes in advertisements rather than images of extreme sports, adventure, and rugged individualism.   As we cocoon, insperiences tend to boom.  According to trendwatching.com, Insperiences represent “consumers’ desire to bring top-level experiences into their domestic domain.” This can include high-end entertainment systems, in-home spas, exercise facilities, etc…

As a result, telephone use and discretionary spending on home furnishings and home entertainment should continue to hold up well, as uncertainty leads us to stay at home but also stay connected with family and friends.   Sales of big-ticket electronics, like $1,000 flat-panel televisions and $300 video game systems, are on the rise, according to retailers and research firms. Falling prices for such devices and a looming government deadline to convert to digital television have helped. So has the view, sensible or not, that the technology is a good investment.

Staycations often replace vacations.  Vacations at or around home rather than traveling can be significantly less costly since there are no lodging costs and minimal travel expenses.  Costs may be limited to gasoline for local trips, dining, and local attractions.   In addition, Staycations do not have the stress associated with travel, such as packing, long drives, or waits at airports.  They may also appeal to people who are stressed about being away from work.  (However, it also leads to the downside of working on your vacation.)

6. Small Understated Indulgences

In parallel with reverting to the practical, customers will look for small understated indulgences.  They seek diversionary yet affordable experiences that can make them temporarily forget their worries.   This includes things like going to the movies.  During the height of the great depression, when 25% of families had no income and unemployed labor reached 40%, movie receipts still increased by 22%.

Big indulgences like higher-end restaurant chains, including Ruth’s Chris and Morton’s, will be off since they are either actually too expensive or appear to be extravagant.  In addition, frequently small indulgences that have become habits, like Starbucks, will also take a hit since the total expenditures on those items tends to add up.

There are also a range of interesting anti-recessionary small indulgences.  Chocolates and alcohol generally sell well during a recession.  Another interesting affordable luxury that generally performs well during a recession is lipstick.  The “Lipstick Index” is the result of a time-series analysis that suggests that lipstick sales are inversely related to the strength of the economy.

7. Looking for Empathy

Customers are looking for companies that understand what they’re going through and are ready to help.  In the outstanding New York Times article, “Thriftiness on Special in Aisle 5,” authors  Stephanie Rosenbloom and Andrew Martin write:

“While it might seem counterintuitive for stores to teach shoppers to cut their spending, several chains have concluded that providing such knowledge can spur loyalty and keep customers from trading down to cheaper competitors.

So the Stop & Shop grocery chain is offering “affordable food summits” where consumers are taught how to lower their grocery bills. Home Depot offers classes on how to cut energy bills. And Wal-Mart Stores hired a “family financial expert” who has used online chats to teach several thousand shoppers how to save money for college, whittle away debt and sell a house.”

Whole Foods has redesigned their customer experience around the “Whole Deal” theme targeted at customers who remain committed to natural and organic foods but are feeling a heightened attention to cost.  This experience includes several creative elements that match customers’ shifting priorities : an expanded selection of lower-priced alternatives marketed under their “365″ store brand,  “Money Saving Meal Plans” and “Budget Friendly Recipes” that provide advice for containing costs while maintaining a focus healthy natural and organic foods.   They are even offering “Value Tours” through the store in order to help customers find the most cost-effective solutions.

Another way customers are looking for understanding is pricing.  Astute providers do not necessarily have to cut list prices but they may need to offer more temporary price promotions, reduce the thresholds for discounts, extend credit to long-standing customers and price smaller sizes more aggressively.

Rosenbloom and Martin very eloquently summarize that…

“The golden trend tip for brands in a downturn? Care about your customers. Deliver. Sympathize. Surprise them. Talk to them.”

These seven patterns provide a solid starting place for identifying the specific shifts in customer needs, priorities, and behaviors that may be relevant to your industry and situation.  In the end, companies that focus attention and investment on collaborating with and retaining their best customers, surface and quickly address the reasons for customer attrition, and remember that…

Customers are NOT NOT spending!  They are just changing how and why they spend.

Those companies will be in the best position to deliver winning experiences that resonate with their customers’ changing needs and priorities… and, maybe even, turn a downturn into an upturn.

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When the Going Gets Tough… The Tough Get Closer to Their Customers

Whether we like it or not, the current recession will separate the weak from the strong.  For many organizations, I believe the deciding factor will be how well they recognize…

The linchpin of an effective recessionary strategy is aggressive customer focus!

In a downturn, customers’ assumptions about the future are driven by fear and uncertainty more than objective financial realities.  Any recession generates the obvious and predictable belt-tightening; customers delay necessary purchases, choose more inexpensive options, and avoid discretionary spending.  However, it’s critically important to recognize that, beyond these generalities, each recession produces it’s own unique pattern of changes in customers’ needs, priorities, and behaviors.  As a result, a recession can create opportunities for organizations that can understand these changes, think creatively, and use the situation as an opportunity to strengthen relationships with their most valuable customers.

One of the worst things an organization can do during a recession is to take its eyes off of their customers.  However, when threatened, most organizations have a tendency to adopt an inwardly-focused, “survival mode,” mentality.   They focus on operational and financial controls and stop investing in what appears like discretionary initiatives aimed at strengthening relationships with customers.  By taking their eye off of the customer, they end up accelerating customer and revenue attrition while undermining their longer-term competitive strength.  There are three things we’d recommend based on the work we’re doing to help our clients deal with this challenge:

1.      The first priority is aggressive focus on and investment in your best customers and prospects.  During a recession, a relatively small number of your best customers will provide an even larger share of your profits, while the often larger ranks of marginal or unprofitable customers will create even more of drain on the system.   The first thing to do in a recession is to clearly identify who your most valuable customers are and invest in strengthening relationships with those customers.   This includes collaborating with those customers to understand and address their changing priorities, restructuring your offerings around their unique needs and, as necessary, restructuring financial terms.  It also includes focusing sales efforts on the most valuable, winnable customers and making sure that you’re not wasting resources on customers that are not going to buy and that are unlikely to be profitable.

There are many classic examples of the benefits resulting from aggressive, customer-focused investment during times when competitors are retrenching.  For example, Dell invested in their customer-centric telephone ordering and pull production systems during the 1990-1991 downturn.  As a result, Dell was able to capture the strongest competitive position when the economy sprang back.  Singapore Airlines invested $300 million in new seats, entertainment, meals, flight attendant training all aimed at their most profitable first-and business-class customers.  As a result, they were able to not only survive, but remain profitable in the aftermath of the 1997 Asian currency crisis and emerged in stronger competitive position.

A lot of the work we’ve been doing is focused on helping clients collaborate effectively with their best customers.  This starts with the analysis required to clearly determine who their best customers are and continues with the implementation of joint planning processes, closed-loop satisfaction management practices, as well as, more agile, open, and collaborative product development and service processes.  In addition, we’ve been helping clients optimize their selling activities by starting with a clearer understanding of how their customers’ buying priorities are changing.

2.      The second priority is watching, talking with, and listening to customers more closely in order to identify creative ways to address subtle changes in their needs, priorities, and behavior.  It’s critically important to NOT rely on your traditional assumptions about what’s important to customers.  Instead you need an informed view of how your customers’ needs and behaviors are changing as dark clouds appear on the horizon.  You need to think creatively about ways to meet those changing needs and address those changing behaviors in order to strengthen the relationship, generate more value, make their lives easier, or make their businesses easier to run.  Not surprisingly, customer behavior will increasingly be driven by emotion rather than rational consideration.  By getting closer to customers you can identify ways to proactively address customers’ emotional needs and reactions.  Here are a few of the overarching behavioral shifts we’ve been observing as the recession continues to take hold:

  • Sympathetic Frugality and Inconspicuous Consumption. Most people who are struggling don’t want it to show; they’ll make compromises in order to keep up appearances.  However, even the customers that are doing well are becoming more cautious as they see friends and colleagues cutting back or losing their jobs.  Appearances matter.  Inconspicuous consumption refers to purchasing goods or services that convey a lower socioeconomic status. People who have, so far, been unaffected directly by the recession don’t want to rub it in.  As a result, we are starting to see a regression towards a more socially-neutral mean.  While the customers that are struggling will buy up in order to keep up appearances, the ones that aren’t will tone it down.  I expect we’ll see an echo of the “grunge” music, fashion, and lifestyle movement that arose out of the recession of the early ’90s.  This creates opportunities for clever, customer-centric marketers.
  • Exercising Control. People are starting to cut corners in ways that give them the feeling of being in control and of acting responsibly. All inclusive and bundled pricing that creates more predictable and budgetable expense streams will have an advantage.  Companies need to look for ways to help their customers regain a feeling of control. This might include measuring the benefits and savings associated with programs, locking in discounts for the future, etc…
  • Inexpensive Luxuries. During the height of the great depression, when 25% of families had no income and unemployed labor reached 40%, movie receipts still increased by 22%.   As stress and uncertainty levels rise, people naturally look for more inexpensive ways to meet their personal and social needs. This includes affordable entertainment alternatives. Beer, liquor, movies and home entertainment tend to do well during a recession. Product and service organizations that provide affordable alternatives to premium pleasures can benefit from promoting these options.  This includes everything from buying your latte at McDonalds or Duncan Donuts rather than Starbucks… to more economically-oriented entertainment, restaurants, hotels, and vacations.

whole-deal

I walked into Whole Foods yesterday and noticed how effectively they’ve redesigned the experience.    They’ve launched “Whole Deal,” a more value-focused experience targeted at customers who relocal-producer-loanmain committed to natural and organic foods but are feeling a heightened attention to cost.  This experience includes several creative elements that match customers’ shifting priorities : an expanded selection of lower-priced alternatives marketed under their “365” store brand,  “Money Saving Meal Plans” and “Budget Friendly Recipes” that provide advice for containing costs while maintaining a focus healthy natural and organic foods.   They are even offering “Value Tours” through the store in order to help customers find the most cost-effective solutions.  In addition, they are promoting a “Local Producer Loan Program” that highlights the support they provide to suppliers.   Overall, they are meeting a challenging situation by finding ways to add more value for customers, rather than just cutting costs.

3.      The third priority is identifying and eliminating the negative experience elements that drive attrition. Most organizations unintentionally frustrate and annoy customers in ways that they can’t even begin to understand.  Recent studies have shown that, while the economy has been weakening, their tolerance for bad service has been diminishing.  For example, a recent Customer Experience Study (conducted by RightNow and Harris Interactive) found that:

  • 87 percent of consumers have stopped doing business with an organization after a bad customer experience, up from 80 percent in 2007 and 68 percent in 2006.
  • 84 percent of consumers indicated they would tell others about a bad experience – up from 74 percent in 2007 and 67 percent in 2006, In fact, blogging about a negative customer experiences is on the rise: 22 percent of consumers this year have posted negative feedback about a company, vs. only 13 percent in 2007.
  • 58 percent of U.S. consumers said that in a down economy, they will always or often pay more for a better customer experience

In many cases, the negative experience elements that contribute to attrition may be relatively easy to fix without major investment.    The trick is to be able to clearly identify these things with an unbiased and unfiltered, outside-looking in perspective.  Over the past decade, we’ve worked with several organizations to conduct an Urgent, Short-Term Customer Retention Program.  Typically, over the course of 6-8 weeks, we can quickly diagnose the specific breakdowns in the experience that are leading to defection or lost new business opportunities.  For example, we worked with a business-to-business financial services provider to uncover the root causes for why customer attrition was increasing.  Over the course of an 8-week effort, we were able to identify 7 things they could immediately to 3 point increase in retention.  This translated into a 12% improvement in the business’ bottom line.   These improvements included a new template for on-boarding and initiating new customers, an early warning system for changes in customer behavior that preceded attrition, and expanding the schedule of follow up training for customers.

The way through many tough times is finding ways to intelligently create more value for others.  One of the surest ways there is for making sure that you end up being the strong rather than the weak is avoiding the tendency to become self-absorbed and maintain a clear focus on the customers that are, ultimately, the source of your success.

Experiential Processing: Designing for Reactive, Deliberative, and Reflective Experiences

In a previous post, Optimizing the Most Critical Elements of the Customer Experience:  Customer Choices, I shared a set of frameworks for understanding the decision processes that customers use to make choices.  In this post, I will build on this foundation to further describe the way customer process their experiences and outline an overall strategy for designing experiences that fit with the way customers think and act.

How Do Customers’ Process Experiences and Make Decisions?

People generally have a gut feel for the situations they are in and what they want to do.  In these situations, customers’ may have already subconsciously made a provisional decision before they even begin to consciously and rationally consider tradeoffs and their ability to justify that decision.

The leading neuroscientist, Antonio Damasio, has made a series of surprising discoveries regarding the extent to which subconscious feelings are a precursor to rational thinking.  In an ingenious experiment, Damasio demonstrated that subconsciously generated physical changes in the body significantly precede a person’s deliberate and rational thinking. (See Iowa Gambling Task)

In this experiment, participants were given four decks of cards along with $2,000 in play money.  The participants were told that each time they chose a card they will either win or lose money.  The goal was to win as much as possible.  What the participants didn’t know is that the game was rigged.  Two of the decks were “high risk decks” with larger payouts and much larger losses.  The other two decks were “low risk decks” with smaller payouts but even smaller losses.  If participants consistently drew from the low risk decks, they would end up way ahead in the end.

As expected, participant’s initial card selection was random; they had no reason to favor any of the four decks.  On average, participants turned over approximately 50 cards before they began to draw more consistently from the low risk decks.  It took about 80 cards before the average participant could explain why he was drawing from these two decks.  However, the most interesting part of the experiment was that Damasio had attached electrodes to the participants’ palms.  These electrodes measured electrical conductance of the skin which correlates with nervousness.  Damasio found that, after only 10 cards, participants began to show signs of stress when reaching for a card from one of the high risk decks!   As signs of stress began to increase, the participants started to draw more frequently from the low risk decks.  The most interesting observation about these findings is that the participants began to have a preconscious feel for the game 40 cards before they consciously recognized what was happening and 70 cards before they could articulate the reasons why.

This experiment illustrates an experience that occurs on three different levels: 1) subconscious and automatic reactions, 2) deliberate planning and action, and 3) reflective thinking.  These three levels correspond with a model created by the brilliant cognitive scientist and artificial intelligence pioneer Marvin Minsky.  Along with Seymour Papert, Minksy has developed a modular theory of the mind (called “The Society of Mind“) that attempts to explain how intelligence can emerge from the interaction of large numbers of non-intelligent agents.  (See:  The Society of Mind and The Emotion Machine).  In essence, the mind can be modeled as the integration of a reactive layer (A-Brain), a deliberative layer (B-Brain), and a reflective layer (C-Brain).  This is illustrated as follows:

A-B-C Brain
  • The A-Brain (Reactive Level) is the only part of the brain that receives signals directly from the external world. The A-Brain continuously predicts what will happen next and compares the signals it receives to these predictions. If there is a significant difference between the prediction and the actual signals, the A-Brain reacts by shifting attention, making muscles move, and/or stimulating systems that affect the person’s level of physical arousal. This A-Brain has no sense for what external events “mean.” It just responds with some combination of instinctual and learned reactions:
    • Instinctual reactions include automatic physical responses to sensations of temperature, hunger, thirst, pain, etc… It includes things like quickly removing your hand from a hot surface or focusing on finding food when you’re hungry.
    • Learned reactions can include everything from jumping out of the way of a moving car, to executing the sort of automatic behavioral scripts involved in driving a car, playing an instrument, making coffee in the morning. Learned reactions also include a wide range of subconscious associations with environmental clues… like the physical stress reaction you have when you hear someone you care about talk to you in “that tone of voice.”
  • The B-Brain (Deliberative Level) is connected in such a way that it can receive signals from the A-Brain and can respond by sending signals to the A-Brain. However, B has no direct connection to the external world. The signals that the B-Brain receives from the A-Brain are often focused on differences between the A-Brain’s predictions and what it sensed in the real world. The B-Brain then interprets what the A-Brain senses but mistakes these interpretations for the real thing. The B-Brain does not realize that what it perceives are not real objects in the external world but are merely events that occur in the A-Brain itself.” In addition, the B-Brain cannot directly perform any physical action on it’s own but it can influence the way A reacts. The B-Brain is responsible for our ability to achieve more complex goals. It applies all sorts of knowledge in order to create and carry out more elaborate plans. This knowledge is accumulated and generalized from personal experience and what we learn from others.
  • The C-Brain (Reflective Level) supervises the B-Brain while the B-Brain is dealing with the A-Brain world. Reflective thinking often begins when our usual strategies start to fail. The brain is able to reformulate and reframe its interpretation of the situation in a way that may lead to more creative and effective strategies. The C-Brain includes several levels of processing:
    • Reflection: The C-Brain reflects on it’s recollection of thoughts in the B-Brain. This includes predictions that turned out wrong, plans that encountered obstacles, and failures to access or apply the knowledge that was needed.
    • Self-Reflection: The C-Brain reflects not only on the thoughts of the B-Brain but on the self that had those thoughts. Self-reflection incorporates our model of our self with our model of the external world. For example, a person might recognize that, in the course of doing something, he’s stuck or confused. This may lead them him to recognize that: his plans have gone off track, he’s paying attention to too many details, or he’s pursuing a goal that could be revised. This self-reflection leads to a shift in perspective that allows people to work around obstacles.
    • Self-Conscious Reflection: The C-Brain also reflects on how well our actions match the values, ideals, taboos, and identify we apply to ourselves. In order to do that, the brain must have built models about the kinds of ideas and behavior one ought to have.

The interaction of these three brains creates something that Minsky calls the “Immanence Illusion.”  People have the illusion that their experience is unfolding in real-time because as they processes signals from the outside world, they are also recalling and creating a comprehensive array of predictions about what they will experience.  Whenever a real object appears before their eyes, its full description is instantly available.  “Our sense of momentary mental time is flawed; our vision-agencies begin arousing memories before their own work is fully done.”  Perceptions can evoke our memories so quickly that we can’t distinguish what we’ve seen or heard from what we’ve been led to recollect.

“We don’t see things as they are.  We see things as we are.”  Anais Nin

Implications for Experience Design

The implications for experience design are profound!  At one level, the clues that customers pick up from the experience must be roughly aligned to fit with the way their reactive, A-Brain processes the signals from the world.  At the same time, the most compelling experiences include a small number of clues that are deliberately designed to get the customers’ attention; to create an “orienting response” and shape their reflective, C-Brain.  The trick is to deliberately design an experience that naturally maps to customers’ automatic behavioral reactions while reserving a very small number of salient differences; things we call “Signature Experience Elements.”

The place to start is by understanding customers’ reactive, A-Brain processes.  One of the ways to do this is to map out their Automatic Behavioral Scripts.  These automatic behavioral scripts are like little subroutines that brains execute in a way that enables people to accomplish predictable tasks without thinking too much about them.   If you’re like most people, you have automatic behavioral scripts for tasks like:  driving to work, getting a cup of coffee, going to the bank to make a deposit, etc…  You can accomplish these tasks on “automatic pilot”… allowing you to pay attention to more pressing matters.  So, when you go to the bank branch to make a deposit at lunch, you can be thinking about your meetings this afternoon or what you’ll do this evening.

Unfortunately, most companies do exactly the opposite.  They interrupt their customers’ automatic behavioral scripts.  For example: frequent changes to a travel company’s online storefront interrupts the automatic behavioral scripts of their frequent travelers; or a bank that “greets” customers as they come in to the branch to make a deposit creating a valueless distraction from their customers’ “doing it on automatic pilot” activity and interrupting their train of thought on the six other things that were more of a priority.   In addition, if you’re going to do something different (get the customers’ attention; interrupt their train of thought; create an “orienting response”), you’d better make it good!  Most companies have a hard time being creative and focused on the small set of things that will actually make a difference to customers… and be consistent with a differentiated brand story.  So, as a result, the actual experience customers have with many companies can be summarized as varying degrees of being difficult to do business with.

Beyond fitting with the customers’ reactive, A-Brain processes, the next challenge is to create a small number of Signature Experience Elements that get the customers’ attention and are aligned to tell a story that works with how they make decisions (deliberative, B-Brain process) and consider the meaning of the experiences they have (reflective, C-Brain process).  For example, Whole Foods Market has a small number of signature experience elements that reinforce their “Whole Foods, Whole People, Whole Planet” positioning and are perceived by customers’ as a difference in kind.  These include:  organic food, artful food presentation, local growers, educational signage, novelty seeking selection, and premium pricing.

For the past several years, we’ve been working with clients on designing a small set of “Signature Experience Elements” that customers will perceive as a “difference in kind” and that fit with the overarching purpose of the organization.  Typically we design to no more than 5-7 Signature Elements that are aligned with the purpose or story the experience is trying to tell.  Another client example is a major jewelry store chain, whose brand story is “The Perfect Gift, Guaranteed.”  This company’s signature elements included:  a distinctive welcome, creative and consultative gift advice, coaching the customer on how to romance the gift, and a wow process for returns.  Each of these signature elements was designed to get the customers attention and contribute to them really internalizing the desired brand story.

Novelty Seeking and the Design of Differentiated Experiences

Over millions of years of human development, our ability to predict has translated into our ability to survive.  We live in an inherently unpredictable world.  As a result, we have evolved a strong motivation to learn in a way that improves our predictions.  Not only does this motivation lead to a clear survival advantage, but, in a social setting, learning how to better predict other people’s behavior leads to small group cooperation and to attracting the fittest members of the opposite sex.  Our drive to predict leads to an overarching behavior – novelty seeking.

Brains want novelty.  This was first observed by Wilhelm Wundt, one of the founding fathers of the field of psychology, in the 19thcentury.  Wundt observed that the more complicated an experience is, the more a person will be stimulated by it.  Up to a certain level; at which point the experience starts to get overwhelming.  He described this diagrammatically as a bell-shaped curve, called the Wundt Curve, showing the state of arousal increasing as experiential complexity increases up to a point at which arousal starts to decrease as complexity continues to increase.

This explains why experiences with intermediate levels of complexity are generally the most pleasurable.  Why a movie whose plot is unpredictable, but not too unpredictable.  Why it’s pleasurable to listen to music that strikes a balance between predictability and novelty.  Why humor that helps us see things differently is inherently engaging.

Novelty seeking is actually hard-wired into the way your brain works.  Novelty seeking is stimulated by the neurotransmitter dopamine.  In a way, dopamine is the driver of all experience.  It works like a key for unlocking one of the most critical parts of your brain:  the striatum, which contains the highest concentration of dopamine receptors.  This is well described in two outstanding books: Greg BernsSatisfaction:  Sensation Seeking, Novelty, and the Science of Finding True Fulfillment and Read Montague‘s Why Choose this Book?  How We Make Decisions.

The striatum is where the interaction between you as an individual and the environment happens.  It works like a switching station with many inputs from other parts of your brain but limited capacity.  As a result, only a few signals can get through at any point in time.  What makes it through has to do with dopamine.  Dopamine is a chemical “reward” predictor that encourages your striatum to pay particular attention to novel input signals.  This interaction commits your motor system to a course of action, selected from the many different possibilities.  It produces your ability to decide what you want to do.

Doing something just past the edge of your predictability zone releases dopamine.  As a result, novel information flows through your striatum.  This, in turn, forces you to act on the information and, subsequently, reinforces the motivational system.

However, too much novel information creates an overload and a lack of attention.  The point at which too much information becomes… too much information… is related to the capacity of working memory.  It’s been demonstrated that people can maintain no more than 7+/- 2 chunks of information in working memory at any point in time.  By the way, this is why AT&T originally determined that telephone numbers should have 7 digits.

What are the implications for designing customer experiences?  For the past several years, we’ve been focusing our clients on the development of a small set of “Signature Experience Elements” that customers will perceive as a “difference in kind” and that fit with the overarching purpose of the organization.  Typically we design to no more than 5-7 Signature Elements that are aligned with the purpose or story the experience is trying to tell.  Sticking to this relatively small set of highly novel elements, it’s possible to create experiences that are closer to the optimum point of the Wundt Curve… (aka,  wundt-erful experiences).  The natural tendency for many organizations are to invest too heavily in a large number of incremental improvements that don’t stimulate the customers’ desire for novelty seeking.

For example, Whole Foods Market has a small number of signature experience elements that reinforce their “Whole Foods, Whole People, Whole Planet” positioning and are perceived by customers’ as a difference in kind.  These include:  organic food, artful food presentation, local growers, educational signage, novelty seeking selection, and premium pricing.

Another client example is a major jewelry store chain, whose brand story is “The Perfect Gift, Guaranteed.”  This company’s signature elements included:  a distinctive welcome, creative and consultative gift advice, coaching the customer on how to romance the gift, and a wow process for returns.  Each of these signature elements was designed to get the customers attention and contribute to them really internalizing the desired brand story.

In addition, predictable experiences lead to habituation.  Changes in happiness or satisfaction are driven by relative changes from our recent past.  This is why, as we adjust to any positive change in our circumstances, satisfaction or happiness fades.  Social psychologist Philip Brickman describes this as the hedonic treadmill; we need to seek higher levels of reward in order to maintain the same level of satisfaction.

Some sensations habituate more quickly than others.  For example, we tend to quickly get used to changes in their financial status.  A positive improvement in financial fortunes leads to a short term increase in the feeling of satisfaction followed quickly by a return to indifference.

This may be one of the reasons why structured loyalty or rewards programs tend to drive rational repeat purchase behavior but not necessarily higher levels of satisfaction.  People habituate to rewards quickly when the rewards are relatively predictable.  However, I’ve observed that people respond more positively to rewards when the rewards are novel, unexpected, and authentic.

Personal relationships tend to habituate more slowly.  The balance of predictability and novelty is an issue in long-term relationships.  After a long time together, two people get too good at predicting each others responses.  And they also become more certain that they “know” the other person’s underlying intentions.  This can be both comforting and highly constraining.   As people get to know each other, they may lose their sense of novel individuality.  People tend to believe that relationship harmony depends on stability and constancy.  This is an issue.  While novelty in a relationship may be inherently destabilizing, it is essential to the maintenance of any long-term relationship.  This is as true for business relationships and collegial relationships, as it is for married relationships.

In future posts, I’ll describe the implications of other neuromodulated processes (Harm Avoidance, Reward Dependence, and Persistence) that influence how people experience the world, as well as, provide guidance for the design of the most compelling customer experiences.

Experience Design and Our Search for Meaning

Customers don’t buy products, they buy desired states.  One of the most significant mistakes any organization can make is to assume customers should care about their products or services.  This doesn’t imply, however, that a company can’t play a very meaningful role in the lives of customers.  The best companies enable people to have experiences that are highly meaningful in their lives.  Customers tend to care a lot about those experiences; what those experiences accomplish for them; how those experiences make them feel.  As a result, people develop strong ties to the products and experiences that create or reinforce meaning for them.  For example, many people love the experience of going to Starbucks, using their iPod, driving their Harley, shopping at Nordstrom or Whole Foods, and going to Disney World.  Witness the level of emotional attachment customers have for experiences like…  NASCAR, Jimmy Buffet, BMWs, Four Seasons Hotels, etc…

Our search for meaning is one of the central, defining characteristics of what makes us human.  At the highest level, meaning is how we make sense of the world, interpret our desires, and put the things that happen to us in perspective.  Tapping into people’s search for meaning is the essence of understanding how to help customers have a great experience.

In his outstanding book, “The Culture Code” psychiatrist Clotaire Rapaille, describes Chrysler’s struggle to clarify the meaning of the Jeep Wrangler.  After years of distinctive positioning, the Jeep Wrangler ended up sitting in the middle of a very crowded field of other SUVs.  Many of Chrysler’s natural tendencies were to make changes that tried to make the Wrangler compete more effectively against those SUVs: more luxurious, fixed doors, enclosed, etc…  After in-depth research that dug into the deepest associations that Americans have with the Wrangler, Rapaille was able to help Chrysler see that people associate the Wrangler with a HORSE.

As Rapaille states, “SUVs are not horses.  Horses don’t have luxury appointments. Horses don’t have butter-soft leather, but rather the tough leather of a saddle.  The Wrangler needed to have removable doors and an open top because drivers wanted to feel the wind around them, as they were riding on a horse.”  Subtle features like round head lights rather than square headlights were shown to positively influence sales.  After all, horses have round eyes not square eyes.  In fact, the logo for the Wrangler was redesigned to feature the grille and round headlights… like the face of a horse.

Most companies think too much about their products and what they want to say about them… and don’t really appreciate the deep meanings that influence the way customers’ think and feel.   For instance, a few years ago I had the opportunity to consult with one of the leading mattress manufacturers who, at the time, were positioning their product using the storyline… “Better Sleep Through Science.”  From the internal, mattress company perspective, science might help understand how mattress design contributes to a good nights sleep.  Unfortunately, people don’t positively associate their experience in the bedroom with science.  The company has since dropped the science angle in promoting their product.

How do you get to the bottom of what’s meaningful to people?  You can’t just ask them.  If you ask customers, much of you get are alibis for what they do.  For example, if you ask people why they go to the mall, you tend to alibis about things the customer needs to shop for rather than the deeper meanings of going to the mall to “reconnect with life,” get out of the house, see other people, explore what’s new, etc…   This is one of the reasons we’ve learned that the online shopping experience cannot replace the experience of going to a store.

Getting to the bottom of what’s meaningful requires a more holistic perspective on how people experience.  You need to watch what they do and how they react in the context of their daily lives.  You need to dig into the subconscious associations that shape the ways they perceive and interpret the world.  (see observation and elicitation).   Rapaille make the point:

“The first principle… is that the only effective way to understand what people truly mean is to ignore what they say… When asked direct questions about their interests and preferences, people tend to give answers they believe the questioner wants to hear.  (This)… is because people respond to questions with their cortexes, the parts of their brain that control intelligence rather than emotion or instinct….  They believe they are telling the truth… In most cases, however, they aren’t saying what they mean.”

Rapaille goes on to describe that, “Most of us imprint the meanings of the things most central to our lives by the age of seven.”  These early associations, formed during the most emotionally impressionable stages of our lives, create our strongest beliefs about who we are, what to expect from others, and the way the world works.  Certainly significant imprinting takes place as a result of our experiences later in life.  However, the way we process these later experiences is often highly influenced by the foundation of our earliest and most deeply entrenched beliefs.

Across many of clients we’ve worked with, we’ve observed that customers’ experiences are significantly shaped by their earliest associations:

  • The experiences people have moving with their family today are significantly influenced by conscious and subconscious memories, emotions, associations, and meaning attached to experiences they had moving as a child.
  • The experiences people have at dinner with their families are shaped by deeply imprinted of memories and emotional associations of family dinners they had growing up.
  • The current reactions many people have when a product breaks are influenced by the childhood experiences we’ve had with broken toys and how our parents responded.
  • Today’s American teen attitudes have been significantly shaped by the events of 9/11 as well as the trailing emotional turmoil and extended war that has impacted the entire country.

This list goes on.  Although these associations are uniquely personal, many of these experiences are fairly consistent across a culture.  In any given culture, individuals that have grown up at a similar point in history have relatively consistent imprinting of experiences with respect to world events, safety, family, working, food, home, shopping, sex, etc…   Understanding this imprinting is critical in designing customer experiences that attach with people’s search for meaning in their lives.

What are people looking for?  Here is a list of the most meaningful basic desires many people are attached to… find a way to help customers connect with one or more of these things and you’re really on to something:

  • Achievement. The need to accomplish difficult feats; to perform arduous tasks; to exercise skills, abilities or talents.
  • Affiliation. The need for association with others; to belong or win acceptance; to enjoy satisfying and mutually helpful relationships; to be accepted by those we admire; to act in a socially acceptable or justifiable manner.
  • Consistency. The need for order, cleanliness, or logical connection; to control our environment; to avoid ambiguity and uncertainty; to predict accurately; to have things happen as one expects.
  • Diversion. The need to play; to have fun; to be entertained; to break from the routine; to relax and abandon one’s cares; to be amused.
  • Dominance. The need to have power or to exert one’s will on others; to hold a position of authority or influence; to direct or supervise the efforts of others; to show strength or prowess by winning over adversaries.
  • Exhibition. The need to display one’s self, to be visible to others; to reveal personal identity; to show off or win the attention and interest of others; to gain notice.
  • Independence. The need to be autonomous, to be free from the direction or influence of others; to have options and alternatives; to make one’s own choices and decisions; to be different
  • Novelty. The need for change and diversity; to experience the unusual; to do new tasks or activities; to learn new skills; to be in a new setting or environment; to find unique objects of interest; to be amazed or mystified.
  • Nurturance. The need to give care, comfort, and support to others; to see living things grow and thrive; to help the progress and development of others; to protect one’s charges from harm or injury.
  • Recognition. The need for positive notice by others; to show one’s superiority or excellence; to be acclaimed or held up as exemplary; to receive social rewards or notoriety.
  • Security. The need to be free from threat of harm; to be safe; to protect self, family, and property; to have a supply of what one needs; to save and acquire assets; to be invulnerable from attack; to avoid accidents or mishaps.
  • Sexuality. The need to establish one’s sexual identity and attractiveness; to enjoy sexual contact; to receive and to provide sexual satisfaction; to maintain sexual alternatives without exercising them; to avoid condemnation for sexual appetites.
  • Stimulation. The need to establish one’s sexual identity and attractiveness; to enjoy sexual contact; to receive and to provide sexual satisfaction; to maintain sexual alternatives without exercising them; to avoid condemnation for sexual appetites.
  • Understanding. The need to learn and comprehend; to recognize connections; to assign causality; to make ideas fit the circumstances; to teach, instruct, or impress others with one’s expertise; to follow intellectual pursuits.

What is a Customer Experience Anyway?

There’s a lot of talk about “customer” experience today.  In previous posts, I’ve mentioned our working definition of the customers’ experience:  how the customer reacts both rationally and emotionally… across their end-to-end process… of achieving one or more goals that are important to them.   If you think about it from this customer-centric perspective, what actually makes it a “customer” experience?  It’s really just an experience a person has that, while in the course of trying to accomplish something, that person ends up in the role of “customer.”

The fact is, you can’t really understand “customer” experience without understanding the fundamental nature of “human” experience.  How do people experience things?  How does it work?  You have an experience just about every minute you’re awake (and arguably when you’re sleeping too).   You have experiences driving to work, talking with your colleagues, having lunch, going shopping, parenting, getting a cold, taking out the garbage, etc…  You get the picture; the list is endless.

How you experience anything is intimately connected with the way your mind works…. how your mental machinery perceives, interprets, and evaluates the situations you’re in… and how this process influences what you do.  You might say that every human being has about 4 pounds of experience (approximate weight of their central nervous system).

For years, we’ve been helping clients design customer experiences from the “mental model of the customer” rather than the “mental model of the company.”  In order to do this effectively, it’s critical to understand the capabilities, limitations, and idiosyncrasies of human perceptual, affective, and cognitive systems.   Without getting into too much technical detail, I’ll describe a couple of the key points that have had a profound impact on the effective design of outstanding “customer” experiences.

First, your brain is optimized to filter out more than 99% of the sensory information you are continuously exposed to.  This allows you to pay attention to a small number of the most important things.   Your hierarchical neural network is continuously and automatically comparing the flood of sensory information to what it predicts it will experience.  If that sensory information roughly matches what was expected, the information is dealt with subconsciously.  Often this subconscious process involves running automatic behavioral scripts.  For example, if you walk up to the front door of your house… key in hand… and the lock and door appear to behave as expected, you unlock the door and walk in without having to consciously “figure it out.”

If, on the other hand, the sensory information isn’t what was expected, it gets passed up the hierarchy for additional processing at the next level.  Eventually a small number of features of the current situation bubble up to the level of conscious processing.  If an element of the current situation catches you by surprise, it creates an “orienting response”… your attention is turned to it.  Research has shown that conscious processing is severely constrained based the limited capacity of short term memory.  Generally, a person can only consciously attend to seven (plus or minus two) pieces of information held in short term memory.

The most effective experiences are designed around: 1) the brain’s short-term memory limitation and 2) people’s ability to subconsciously run automatic behavioral scripts.   Whether you like it or not, customers filter out… or at least deal with subconsciously…  virtually all the details of every experience they have and only pay attention to a small number what appear to be the most salient things.

The trick is to deliberately design an experience that naturally maps to customers’ automatic behavioral scripts while reserving a very small number of salient differences; things we call the “Signature Elements” of the experience.  These signature elements are the small set of things that get the customers’ attention and are consistent with the brand story the experience is designed to tell.  For example, the Signature Elements of the Whole Foods experience include:  quality natural/organic products; artful food presentation; novelty-seeking assortment; educational product signage; mission for each department; extra mile in-store helpfulness.  These deliberately designed elements form the story that people tell themselves and others about their experience with Whole Foods.

Unfortunately, most companies do exactly the opposite.  They interrupt their customers’ automatic behavioral scripts.  For example: frequent changes to a travel company’s online storefront interrupts the automatic behavioral scripts of their frequent travelers;  or a bank that “greets” customers as they come in to the branch to make a deposit creating a valueless distraction from their customers’ “doing it on automatic pilot” activity and interrupting their train of thought on the six other things that were more of a priority.   In addition, if you’re going to do something different (get the customers’ attention; interrupt their train of thought; create an “orienting response”), you’d better make it good!  Most companies have a hard time being creative and focused on the small set of things that will actually make a difference to customers… and be consistent with a differentiated brand story.  So, as a result, the actual experience customers have with many companies can be summarized as varying degrees of being difficult to do business with.

Well, this post is going on too long and has just scratched the surface of something that is very important.  The key point is design the experience from the “mental model of the customer” not the “mental model of the company.”  This is the essence of Cognitive Ergonomics.  The next logical question is:  “What is a Mental Model?”  And, what does one look like.  I’ll discuss that in one of the next posts.

Cheers,  Frank