It's one thing to focus on transparency as it relates to customer "acquisition", but what's its impact on customer "retention"?
From the recent research I've been digging into...EVERYTHING!
To start, which trait of a company is more likely to cause customers to stay, buy more, and advocate?
A) Creating a legendary customer experience
B) Consistently meeting customer expectations
Thursday night, I had a major "lightbulb" moment related to the answer to this question:
I read an article on LinkedIn (which wasn't the first) that proclaimed:
This article was screaming that the answer to the above question was "A".
With the article fresh in my head, unrelated, I headed over to my local Chicago suburban Costco to pick up a few things.
Costco, the 4th largest retailer in the United States, and #14 on the Fortune 500, doesn't create legendary customer experiences. I mean, they aren't even very good experiences.
I then started thinking about the last time I went to an IKEA, the world's largest furniture retailer for 12 straight years, and whose founder is currently the 8th richest human being on the planet. The experience is absolutely dreadful!
So, with the "legendary experience" article stuck in my head, coupled with the realization of Costco and memory of IKEA, I dug into the research.
"Perceived service quality and customer satisfaction are two different things. They have respective generation mechanisms and are effected by expectations" - International Journal of Services Technology and Management, 23(3), 219-236.
In other words:
If you want customers to stay, buy more & advocate...
...setting accurate expectations > (is greater than) creating a great customer experience.
For a company to maximize it's revenue...
...could it be that the most important job of sales and marketing is to help prospects and customers create accurate customer expectations? Yes!
🔳 Instead of painting a picture of product perfection, sellers must now embrace transparency. Transparency - painting a picture of potential reality. What could go wrong? What might not fit perfectly?
🔳 Instead of leaving it up to the buyer to set their own expectations, sales and marketing organizations must now lead with what you (as a product/service/tech) are giving up to be great at your core. We are not all things to all people. What sacrifices have we made in order to achieve a specific goal for our customers?
🔳 Instead of only providing A+ references, and in some cases (and some organizations) manipulating the perception of your offerings through fake reviews, fluffed case studies or incentivized references, focusing on reality, honest references, embracing both positive and negative feedback and sharing it.
TO MAXIMIZE REVENUE, SALES AND MARKETING TEAMS MUST FOCUS ON GETTING GREAT AT SETTING CUSTOMER EXPECTATIONS - AND MEETING THEM!
It's a concept one study refers to as the "evaluation gap". It surmises that a customer's proclivity to stay, buy more and advocate is "most strongly correlated with the size of the gap between their evaluation and their reality". - Yamada, Toyo University study, 18-20 July 18.
We are wired, as human beings, to attempt to predict what our experience is going to be using a product or service. It's why we read reviews before buying something of medium-to-high consideration that we haven't bought before.
However, it's also why we go to the negative reviews first, and why, when a product's average review score is between a 4.2-4.5, we are more likely to buy versus any other review score, including a perfect 5.0 - but this research has determined...
...we derive our level of customer satisfaction from predicting correctly!
But now we know - it’s not just sales! Transparency impacts each of the following metrics in a dramatically positive way:
I'll leave you with a totally counter-intuitive concept:
Setting consistently "accurate" expectations is better than setting expectations and consistently "exceeding" them.
As the research quote mentions above, customer satisfaction is derived from the GAP between expectations and reality. That's not just about missing expectations.
When expectations are set low and largely exceeded, it creates a short-term spike in satisfaction, but long term it creates something I'd like to call "expectation inflation".
With "expectation inflation", if you decide to set a low expectation, when the customer's experience exceeds that set expectation, the customer now has a new perception of what expectations should be, and they've equated your assessment as being low. Next time, the customer's expectation will be higher than the bar you've set.
In other words, avoid getting stuck in the trap of "expectation inflation" by trying to consistently exceed customer expectations. Instead, it's better for long-term customer value to get in the habit of setting ACCURATE customer expectations.
For your entertainment and reinforcement, here's a little video explaining this further, with clips from Seinfeld, 30 Rock, Ted and Office Space.
Enjoy...and please share this article if it resonates, comment and/or sign up below for more.
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