Businesses exist to serve their customers. Self-perpetuation, environmental sustenance, social issues, and even shareholder value maximization are of little importance if the customer is not served. How can companies, and other organizations, give their customers their best?
By Mark D. Harris
The rug dealer at the Grand Bazaar in Istanbul carefully poured the Turkish apple chi into a small cup. “Here, my friend,” he said as he handed the cup to me. He sat down close by and asked, “How is your family?” Thus began ten minutes of chit chat before we even mentioned the silk rug that I had admired when I came in. The small talk would have gone on longer, but my American impatience cut it short. By the time we were done, the rug dealer had $500 of my hard-earned dollars, and I walked out with a beautiful rug that probably cost less than half that to make. The dealer may have congratulated himself for fleecing another rich American. I congratulated myself on buying a rug that my wife would like, having a fascinating experience, and helping support a Turkish businessman and the economy of a third world nation. A fair deal, I figure.
Buying and selling across the world
Americans walk into a store, find what they want, check to see if the price is reasonable to them, and if it is, they buy the item. Rarely is there any dickering between buyer and seller over price. My experience in northern and western Europe has been the same.
My involvement in buying and selling from Marrakesh to Dar es Salaam to Baghdad, has been a world apart. Like my escapades in Istanbul, buyer and seller learn each other’s names, talk about family, share tall tales, and drink coffee or tea. Commercial transactions take far longer than those in the west, but are much more entertaining. I do not suppose that any kind of real relationship develops between buyer and seller, but rather a passing familiarity. The process itself has a certain charm, mixing larceny and capitalist theater.
Customer Value from Customer Engagement
Conventional wisdom may suggest that the relationship between firm and customer is purely based on one or more transactions. As the example above illustrates, that has never been completely true, and it is growing less true all the time. Relationships are making a comeback in business. Sadly, these are not personal relationships, like I had with the rug dealer for a few minutes on one fall morning in 2003, but relationships between individuals and companies.
Modern companies strive to build long-term relationships with their customers, emphasizing customer engagement (CE). CE is defined as a “customer’s behavioral manifestations that have a brand or firm focus, beyond purchase, resulting from motivational drivers with a special focus on non-transactional customer behaviors” (Cambra-Fierro et al., 2015). Translated, CE involves customers doing things that demonstrate a satisfaction with and a loyalty to certain products and brands, before, during, and after purchase. Customer engagement (CE) has been repeatedly shown to be a key driver of a firm’s financial success. CE includes psychological, motivational, and behavioral components, with customers deciding what they want, being motivated to get it, and getting it. Engaged customers are less price sensitive, resistant to switching, helpful in product development, and willing to advocate for the firm (Roy et al., 2018).
A young woman walks into a mall-based clothing store. She purchases a dress and two tops and pays with a credit card. Afterwards, she has a salad for lunch at the Olive Garden, and then drives to her home outside Cincinnati to begin her shift teleworking for Microsoft. In one day, anyone who cares to compile her information knows her demographics, education, approximate income, economic behavior, political affinities, and a host of other data. Artificial intelligence (AI) programs analyze the data and build it into a personal profile. AI then combines the information garnered from all sources (including other transactions, government data, and social media), over the 26 years of her life to modify her profile. Every action in the modern world adds a little more data which improves her profile. Businesses and governments use the information to win her heart and predict her behavior.
The story above is about “Big data,” which refers to information that governments, businesses, and others harvest about customers. This information can then be used to influence these customers. Characteristics of “big data” include high volume, high velocity, high variety, and questionable veracity. Most articles on big data emphasize what such data does for the firm, but not how it can be used to benefit the customer. In a truly collaborative “big data” model, firms and customers would work together to gather only what data the company actually needed, not sell the data to anyone else, and use the data to benefit the consumer. Web forums, firm-created online communities, and webinars are examples of collaborative use of big data (Kunz et al., 2017).
Value-in-use (VIU) refers to the value of an asset as it is being used at the present time. A financier might say that VIU represents the net present value (NPV) of the sum of the cash flows generated by an asset over its life as that asset is currently being used. VIU is co-created by firms and customers and measures the extent to which customers feel better or worse through their experiences.
For example, Apple makes iPhones capable of performing hundreds of useful tasks, but few if any customers use all the iPhones’ features. The VIU is not what Apple made its phones to do, but what each customer does with it. VIU is therefore unique to each customer. To optimize value-in-use, managers should treat customers fairly, build cognitive and affective trust, and understand how each customer creates value-in-use (Roy et al., 2018). Leaders must then educate customers on how to use their product, redesign the product to improve usability, and even eliminate unused capabilities to lower the price. A lower price makes the product available to more people and saves all customers money.
Individualist and collectivist societies differ slightly in how they create value-in-use. The latter, especially in collectivist societies such as China and India, involves a strong focus on integrity and reliability. Families work together to determine VIU for members of that family. Such intercultural sensitivities assist with consumer engagement. Real person to person relationships also improve VIU by facilitating education and trust. Another pertinent factor is that companies and customers go through life stages in their relationships.
Customers perceive that family firms are more authentic than non-family firms, and more authentic firms enjoy higher levels of customer engagement (Zanon et al., 2019). Furthermore, customers want to extend their social identity, and do so by interacting with high authenticity firms on social media. Service-failures must be minimized, and excellent service-recovery systems implemented. Customers with a complaint want to believe that companies are exerting great effort to resolve their complaint. They also want justice: just compensation (distributive justice), a just procedure (procedural justice), and a good interaction with caring staff (interactive justice) (Cambra-Fierro et al.,2015). If a firm provides dissatisfied customers all these things, customer engagement rebounds higher than even before.
Conscious capitalism encourages every business to have a higher purpose than simply making money. Firms should be managed to provide simultaneous benefits to all stakeholders, and should be led by people who embody the firm’s values (Grewal et al., 2017). These contribute to a shared sense of purpose and values between company and customer. Some customers come to closely identify with the firm, reaching the highest form of customer engagement. However, conscious capitalism cannot make up for weakness in the basics of business, such as having a good product for a fair price with excellent customer service.
In his provocative work, The Abolition of Man, C.S. Lewis’ detailed dangers with the technology which man uses to gain mastery over nature. Such technology delays death and makes life easier, but also supplants historical moral values. In The Abolition of Man, modern technology ultimately destroys man himself. Neuromarketing is another step in that direction.
In neuroimaging, researchers watch parts of the subjects’ brains light up on MRI/PET when these subjects are exposed to certain stimuli. EEG patterns are also examined. Such anatomic and functional neuronal patterns have provided interesting insights into the diagnosis and treatment of patients with depression, post-traumatic stress disorder and traumatic brain injury. Neuromarketing uses similar techniques for the purpose of telling companies how to part consumers from their money.
The concepts behind neuromarketing are not new. The first time that someone with something to sell, whether a king or merchant, used a pretty girl to entice someone else to buy, he was using neuromarketing. When enjoying the dance of Herodias, Herod’s pupils undoubtedly dilated, his skin flushed, his heart rate jumped, he sweated, and he enjoyed other physical signs of arousal. Just like a customer eager to buy a product, Herod gave the dancer what she wanted. In AD 21, people watched others’ faces and bodies to get them to do something. In AD 2021, people watch neuroimages. Whether the conclusions are any more effective in prying a dollar from someone’s clutch remains to be seen.
The most obvious use of neuromarketing is packaging. Will a female customer be more likely to buy a box of cereal if it is in pink or blue? What about a male customer shopping for tires? Do we keep people out of our stores if they have a neuroimaging pattern that indicates that they are window shopping? What if their pattern shows a propensity for shoplifting? The possibilities for profit, and the possibilities for tyranny, are endless.
Eijlers et al. (2020) compare EEG findings in subjects exposed to various advertisements. Researchers discovered that the majority of subjects were aroused by ads, but some had a negative reaction, making them less likely to purchase a product. Neuromarketing may discover how to make a brain light up on MRI, PET, or EEK, but not how to generate a response that will produce sales.
Companies and academics must discover a lot more about customer engagement
- What are the most effective means to promote engagement
- How do customers benefit from big data?
- What is the best balance of customer driven and firm driven engagement?
- What other cultural factors influence value-in-use perceptions among customers, and how can firms optimize them?
- How can a company practicing conscious capitalism balance the conflicting needs of its stakeholders and still achieve identity with large numbers of its customers?
- How can family firms use their unique stories and sense of authenticity to maximize their advantages in authenticity and customer engagement?
- How does a customer’s reaction to service-recovery differ depending upon their life-cycle stage or their relationship with the company?
Customer engagement has been important to business transactions since the wheelwright made custom wheels for the wagonmaker who was building conveyance for the king. If they didn’t collaborate and make an excellent product, they could both lose their heads.
Technology has provided products, levels of quality, avenues of distribution, and a speed of production unheard of by the wheelmaker, the wagonmaker, and the king. However, companies must use technology for their customers. Big data, value in use, conscious capitalism, and even neuroimaging can and must be used to primarily benefit customers, not businesses.
Cambra-Fierro, J., Melero-Polo, I., & Javier Sese, F. (2015). Can complaint-handling efforts promote customer engagement? Service Business, 10(4), 847–866. https://doi.org/10.1007/s11628-015-0295-9
Eijlers, E., Boksem, M. A. S., & Smidts, A. (2020). Measuring Neural Arousal for Advertisements and Its Relationship With Advertising Success. Frontiers in Neuroscience, 14(1736). https://doi.org/10.3389/fnins.2020.00736
Grewal, D., Roggeveen, A. L., Sisodia, R., & Nordfält, J. (2017). Enhancing Customer Engagement Through Consciousness. Journal of Retailing, 93(1), 55–64. https://doi.org/10.1016/j.jretai.2016.12.001
Kunz, W., Aksoy, L., Bart, Y., Heinonen, K., Kabadayi, S., Ordenes, F. V., Sigala, M., Diaz, D., & Theodoulidis, B. (2017). Customer engagement in a Big Data world. Journal of Services Marketing, 31(2), 161–171. https://doi.org/10.1108/jsm-10-2016-0352
Roy, S. K., Balaji, M. S., Soutar, G., Lassar, W. M., & Roy, R. (2018). Customer engagement behavior in individualistic and collectivistic markets. Journal of Business Research, 86(86), 281–290. https://doi.org/10.1016/j.jbusres.2017.06.001
Zanon, J., Scholl-Grissemann, U., Kallmuenzer, A., Kleinhansl, N., & Peters, M. (2019). How promoting a family firm image affects customer perception in the age of social media. Journal of Family Business Strategy, 10(1), 28–37. https://doi.org/10.1016/j.jfbs.2019.01.007