Research into human Behavioural Psychology has been embraced by leading marketers. Given that we’re more sensitive to the possibility of a bad outcome than a good one, it’s not hard to see why.
Not meaning to kick Uber when it’s down but, as it happens, the week before the company lost its London licence, it repeatedly failed to get me where I needed to go, with unhappy consequences. My three-year-old son and I were on our way to a children’s play that he had been excited about for days. I hardly ever use Uber, but it made sense to get a ride that day. We still had 45 minutes before the play, and the app said the journey would take 15 minutes tops.
I had to request a car four times without success, so we missed the play. Cue an upset said child, £24 for the tickets down the drain and a spoiled afternoon. To cut a long story short, the second time we couldn’t get to the pick-up point in time as it was on the other side of a busy thoroughfare and so I was charged £4 for missing the car. Then, as I was looking out for the third car, the driver cancelled. And then the fourth driver did the same. By that point, it was too late to request another ride, so I gave up and we took a trusty bus home.
When I spoke to an Uber customer agent a few days later, she responded with a stock “Uber drivers are independent contractors” answer. After some discussion, she offered me £5 credit “as a gesture of good will” and that was only after I asked why Uber drivers are compensated when passengers miss their ride but passengers get nothing when drivers cancel on them. The agent also agreed to refund the £4 cancellation fee.
The incident made me wonder why customer service from firms in general does not meet customers’ expectations in many instances.
Perhaps many companies don’t worry much about losing existing customers, knowing that new ones will replace them. But return buyers are actually more important for the bottom line. Research by a top management consultancy Bain & Company has shown that in industry after industry, the high costs of acquiring customers mean many of them are unprofitable in the first few years and that repeat buyers spend more in months 24-30 of their relationship with a firm than they do in the first six.
In addition, referrals by happy customers cut down on marketing expenses, as one of the Bain researchers, Fred Reichheld, has pointed out. “Your happiest customers will often pay a premium to keep doing business with you, even if they could save by switching to a competitor,” he wrote in a 2018 LinkedIn post.
Further insights can be drawn from the findings of behavioural psychology and behavioural economics over the past half a century. Monetary incentives, a traditional focus for economists, are far from the only driver of our spending decisions. Emotions and context play a big role too, and a little empathy can go a long way…
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