/

21-04-2020

Behavioral Sciences & Nudge: new frontiers for customer experience?

The whole “mar-tech” space (marketing, technology, data & analytics) is going through an unprecedented period of change. The driving forces are technological breakthrough, business model hacking (start-ups), and competitive pressure, moving at an incredible speed. But behind all these changes is a common quest: the ideal customer experience. Customer experience is the new horizon after excellence in service, greater satisfaction, or stronger recommendations for more predictable business results.

The concept of “customer experiences” was made popular in the 1990s with Pine & Gilmore’s book The Experience Economy. Their main proposition was to demonstrate that, to create value beyond product and services, companies should strive to create experiences that are memorable and personal. What do Nespresso, Apple, Disney, Amazon or Grab have in common? A distinctive customer experience. Such experience helps brands differentiate and/or create stronger engagement. In 2007 Gentile proposed an updated definition integrating all the developments that Pine & Gilmore inspired:

“The customer experience originates from a set of interactions between a customer and a product, a company, or part of its organization, which provokes a reaction. This experience is strictly personal, and implies the customer involvement at different levels (rational, emotional, physical and spiritual). Its evaluation depends on the comparison between a customer’s expectations and the stimuli coming from the interaction with the company and its offering in correspondence of the different moments of contacts or touch-points.”

Today, digitization of customer journeys, multiplication of data sources and the emergence of new players in every realm of CX measurement (cloud-based Customer Relationship Management, CRM platforms, feedback management editors, start-ups in AI and analytics…) have turned the CX concept into a buzzword. And everyone in the industry is now claiming to provide “customer insights” or contribute to a superior “customer experience” – using rather stretched definitions.

The predominant acceptance of CX is very much about key performance indicators (KPIs) and technologies under the influence of software business marketing efforts, but it also relates to user experience (UX) players improving interfaces for seamless online journeys. Measuring CX certainly helps identify conversion issues, detect business opportunities, and/or optimize marketing strategies (providing that you have a strategy… not just a tool!). However, a “customer” cannot just be defined through cookies or as a CRM data set. To better serve your customers, surprise them, and show how much you care – not just sell them more stuff – you need to “know” them on a more emotional level. And this is where behavioral science and empathy come into play.

The behavioral economics revolution: toward a new CX definition

By redefining the experience from the “user” point of view, Pine & Gilmore have helped marketers rediscover the power of emotions and context beyond marketing promises. Reframing the theory from “sensorial or experiential marketing” (the company perspective) to “customer experience” (the consumer perspective) was a brilliant move to help brands redefine their proposition through the eyes of the customer, not the advertiser.

In parallel, behavioral economics (BE) provides a new understanding of how real people make real decisions in real life: we are not rational “econs” making optimal decisions, but “humans” prone to external influences and making errors (a couple of them being systematic). And it’s only when you know your customer’s irrationalities that you can manage them in a CX journey.

In addition, because “People can perfectly explain what they couldn’t predict the day before” (Amos Tversky), cognitive biases have also helped us to filter what can be trusted from the “voice of the customer”, and what implicit drivers should be researched instead to create new solutions like “nudges”: gentle interventions that drive people toward desired behavior. (download the ESOMAR excellence award paper “Nudge me tender”). Any time there is a bottleneck where human behavior is part of the problem and of the solution, like in a sales process, or in a change management project, behavioral sciences and nudge are great resources to crack these, and get measurable results.

But behavioral economics also sheds a new light on the concept of experience. Memorized experience is, in fact, mostly influenced by emotional peaks and final moments (Kahneman), and this has changed our approach to creating value and enhancing customer’s perceptions instead of just trying to fix problems (see Brand renovation: drive value in (and risk out) – new value kpi’s for brand experience redesign). In a real-life context, people assess value through relative comparison with alternatives or by time and effort to gratification, not by giving a mark of one to ten – this offers a great number of marketing levers to modify the value perception beyond a resulting customer satisfaction score (CSAT) or Net Promotor Score.

Fig 1 | Source: BVA Group

Today we are suggesting a revision of the CX definition through a Behavioral Economics lens. This has already changed the background paradigm of our research, because behavior is what people do, not what people say they will do. And business basically results from real-life behaviors: trial, purchase, habit purchase, re-consultation, churn, recommendation…. Brand remains a central element of our definition as it is the emotional brain index that encapsulates and helps retrieve all cognitive associations with experience. Hence we propose the following new formulation:

“Customer experience is a trace left in the memory of a human (a customer or a prospect), associated with a branded product or service and one that will influence – consciously or not – his or her future behavior when engaging with the brand. Experience results from association with emotional imprint of past interactions with organization-branded touch points, but also from implicit comparison with alternative reference points, activated in any given situation”.

This definition emphasizes a perceptual and behavioral result within the mind of the subject (a sensori-motor result and not a description of the interaction from an outsider perspective). It also highlights the importance of situational factors framing the choice: this is to avoid mistaking the experience that brands want to deliver and what consumers truly “live” when confronted with alternatives. We have also expanded the concept of customer to one of prospects: to also measure the experience of those who can rapidly become a missed opportunity when metrics are focused on existing clients.  This definition of experience from the user point of view attempts to fight the curse of brand-centric vision just as another discipline does: design thinking.

Nudge has successfully entered the CX space just like design thinking

Knowing what drivers are preventing or promoting your customer’s or staff behavior’s in context is at the heart of our methods at BVA Nudge Unit. Inspired by behavioral economics-focused observations, Nudges are small interventions applied within existing customer journeys aiming at removing roadblocks, and facilitating change. Nudges have proven very efficient to drive customers toward the right channel, improve conversion and digital adoption, or facilitate selling ceremonies. They can also enhance the customer experience by managing peak moments, frustrations or time perception. Nudge is useful to improve existing processes wherever there is a gap between strategy and its execution. They facilitate the walk through the “last mile”, where our cognitive biases sit. Nudges help bridge the “intention-action” gap, playing on environmental factors with a disproportionate influence on our behaviors.

Alternatively, design thinking is dedicated to creating new products or services. And it was soon considered as a helpful method to re-invent customer journeys. Its starting point is empathetic immersion of teams into the reality of clients: a way to force organizations to adopt a user point of view. Field observation, combined with prototyping, is a pragmatic way to help the different functions to “live” and realize what clients experience (not just to ask what they expect, which is often misleading). UX designers apply a comparable philosophy to improve digital interfaces, facilitate a user’s navigation, and reduce effort… using real behavioral feedback from users (A/B testing), but after the design is created.

What do behavioral economics and design thinking have in common? They place human understanding (not specifically customer understanding) at the heart of their approach – unveiling emotional and irrational behavioral drivers in context. They help companies look at their CX from the inside out and not from the outside in (see fig 2). This is because it is very hard to switch from a brand delivery point of view (brand vision, the category strategy…) to an end-user point of view (how people live, the problems they face, and how brands may occasionally enter their world) when you are part of a marketing-driven organization.

Fig 2 | Source: BVA Group

Everyday internal constraints often overcome the ability of employees to empathize with outside clients. For CX directors, it’s even schizophrenic: how can you be judge and jury, define strategy, anticipate reaction and measure results without falling into the “self-confirmation” bias? To succeed, both BE and design thinking have used a similar strategy: embodying business concepts: “a company”, “a brand” and “a customer” are now real people with a life of their own (that you can empathize with, using videos, personas, live connections…). By incorporating the concept of “customers” as well as “frontline” into humans with biases and emotions, our method also helps creating an emotional clash of perspectives internally. And, as consultants in behavioral change, we know that acting on the perceptions of company employees is critical to drive internal transformation, starting from the top: companies need to reconnect with their customers. You won’t change people’s behavior unless they emotionally understand the impact of their actions toward customers. Because data and dashboards alone, even in real time, are far too rational to produce this transformational power, we observed that going through one of our processes, a NudgeLab, is also an incredible change catalyst internally. The reason?

“People are generally better persuaded by the reasons which they have themselves discovered than by those which have come into the mind of others.” said Blaise Pascal.

This article is adapted from: ESOMAR 70th anniversary Congress 2017  “Alice in Customer Land” whitepaper.

Interested in knowing more about how to improve customer experience by design? Get in touch.

Richard Bordenave

BVA Nudge Unit

Recent Headlines from the BVA Nudge Unit

23-07-21

The Reluctant Zero-Sum Consumer

Koen Smets

Senior Advisor, BVA Nudge Unit

What distinguishes humans from the rest of the animal kingdom? Among many possible answers to this question, there is one […]

20-06-21

The Hitchhiker's Guide to Applied Behavioural Science

A Journey to the Land of Nudge for Marketers and Behavioural Consultants Context is everything…but what is context? The definition […]

14-04-21

How to Run an Online Event using Behavioural Science - Part Three

Gonzalo Lopez

BVA Nudge Unit

Part three – Experiment and evolve Like so many people, last year I found myself in the position of moving […]