Business Psychology - Latest Findings

Article No. 185
Customer Psyschology Findings, by James Larsen, Ph.D.

Effective Customer Service

New research identifies crucial factors in establishing effective customer relationships.

Daydream with me for a moment. Let's go into the business of a competitor and examine the customers. Now hold these customers in your mind but change the surroundings to your own business. Magic, they're your customers and you're doing business like gangbusters.

Fantasy, you say. Nonsense. But James Barnes from Memorial University of Newfoundland may disagree. He questioned people in 40 focus groups of random customers who talked about their relationships with service providers, and his analysis identified crucial factors in establishing effective customer relationships from the customer's perspective. They are . . . (in order of importance)

    1. feeling welcome, relaxed, and comfortable,
    2. feeling pleased,
    3. feeling pleasantly surprised,
    4. feeling the staff care about them, and
    5. feeling they can rely upon the business.

Barnes also closely examined long-duration customer relationships and found that half of these customers report satisfaction with their level of closeness, 40% express a desire for a closer relationship, 10% express a desire for a less close relationship, and 10% report dissatisfaction with the business and feel trapped in the relationship. Curiously, these last customers, who are dissatisfied, form closer relationships with specific employees than any other type of customer, and this little detail offers a strategy for business owners to garner more customers for themselves.

Here's an example:

The Cooper Department Store employs a marketing vice president who is experimenting with relationship marketing. Her name is Bernice, and she worked in the ladies wear department before her promotion. She maintained call books which helped her be the top salesperson in the store for many years. Now she's trying two new ideas that expand this call book idea to the store. Both ideas involve large data bases that she has been carefully organizing.

The first data base includes a community listing of property values and demographic data about the people who live there. Bernice searches this data base for likely customers based on age, gender, and property values, and then eliminates existing customers. This leaves her with a list of likely customers who haven't made a purchase at the store. She has also identified the top salespeople in her store, and every week she gives each of them a few names and phone numbers. The store pays these salespeople to call these potential customers in the evening. The customers are offered a twenty dollar coupon if they will come in and get it personally from the caller.

The second data base profiles people who have made purchases in the store in the last 25 years: where they live, how much they have spent, and the departments they have frequented. Bernice searches this data base and identifies customers by the year of their first purchase, the frequency of their purchases, and the departments they visit most often. Then she selects customers at 5 year intervals and prints and sends a personal letter that is signed by the department manager of their favorite department. The letter thanks them for their patronage and includes a five dollar coupon. Regular customers get one of these letters every five years.

With the second strategy, Bernice has taken a step to improve the experience of her store's long-duration, dissatisfied customers who feel trapped in the relationship, even though she can't be sure which customers they are. She recognizes that competitors covet these customers and they will likely to be lost if they are approached as she is doing in the first example.

Reference: Barnes, James G. (1997) Closeness, Strength, and Satisfaction: Examining the Nature of Relationships between Providers of Financial Services and Their Retail Customers. Psychology and Marketing, 14 (8), 765-790.

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