Three Steps to Avoid a Tricky Tweet

Lessons learned from poor customer service

By Kirsten Snyder - Director, Integrated Insight

We all have stories about terrible customer service.  Some industries, such as the airline industry, have a notoriously bad customer service reputation.  My experience was with a company in another dreaded industry...home warranties.  Generally, when something goes wrong with either my flight or my refrigerator, I have the same feeling of dread, expecting a terribly painful ordeal.  I recently had an awful experience with our home warranty company, but it didn’t have to be that way.  If the company had focused on only three things, it could have made the experience better.

Treat me like a valued customer.  Our home warranty company simply passed me off to a contractor who was supposed to solve my problem.  This is the typical process but unfortunately, they don’t follow up to make sure everything is going smoothly.  I am the home warranty company’s customer, but they don’t treat me that way.  They act like a broker rather than an advocate, which doesn’t make me feel like they value my business, and leads to my next point.

Proactively communicate with me.  After the initial meeting with the contractor, I went to the home warranty company to help expedite the process.  However, their solution was to continue to deal directly with the contractor, who kept telling me the part would be arriving in the “next shipment.”  After four weeks of no results from the contractor, my husband sent out a frustrated tweet.  The negative press caught the attention of the home warranty company, who promptly called.  This was the first communication I received from the home warranty company since my initial claim.  Had the home warranty company actually been involved in my claim, communicating with me and the contractor, we wouldn’t have resorted to taking our frustrations to Twitter.  The communication doesn’t have to immediately solve the problem, but even an email or phone call that says they are monitoring the claim, would have been a huge improvement, making me feel like a valued customer.

Give employees the tools to solve problems and encourage them to do so.  When the tweet prompted a phone call from the home warranty company after a month of radio silence, I was optimistic that they were finally going to advocate for my situation.  Unfortunately, the phone call began with, “Hi.  You recently posted something very negative on Twitter and I am calling to explain the situation.”  The representative proceeded to tell me what I already knew – the contractor had still not received the part.   She offered no solution to my problem, wasn’t prepared to offer a solution, and did it seem like she had any authority to do so.  Her job was to call and defend the home warranty company and prevent another “negative” tweet to my husband’s 130,000 followers.

If you have the staff to monitor and engage in social media, then use the opportunity to make the situation better.  Yes, people want to understand what’s happening, but most of the time what they really want is a solution.  In my case, I was well aware of the situation.  We took our problem to Twitter because neither the contractor nor our home warranty company was solving our problem.  We figured my husband’s large Twitter following would encourage the home warranty company to do something.   I wanted to hear, “We understand you have had a difficult and frustrating experience.  We have found a new contractor who has the part in stock and will be out tomorrow to install it.  I am so sorry for any inconvenience.” 

Communicating can go a long way in making customers feel valued in addition to turning a bad situation into a positive experience.

You Had Me at Hello

The Power of Live Chat

By Candy Parks - Director, Integrated Insight

I’m just a Mom.  And this summer, I was a Mom getting ready to send her baby off to live and go to school in New York City.  When you are a Florida girl born and bred, and have lived your entire life in Florida, there is nothing quite as overwhelming as New York real estate.  Not much intimidates me, but the challenge of finding an apartment in Manhattan did. 

After searching and haunting a multitude of web sites, I figured out that it was ludicrous to try to do this without a broker.  I reached out to friends and family and learned that there are two key brokers for the New York rental market.   Feeling desperate and stressed, I reached out to both.

One rainy Sunday afternoon, I hit both web sites.  The first was pretty standard.  I had to register and fill out a profile outlining the details of what I was looking for.  (And it took 72 hours to get a response.)  And the other site was an answer to my desperate Mother’s prayer.  Within seconds of hitting the home page of www.bondnewyork.com, I was greeted by a live chat pop up.  Normally, I avoid these because I’m totally put off by the scripted and sanitized messages that any robot can deliver.  True to my state of desperation, I responded.  And to my surprise, I got a response back that told me I was interacting with a ‘real’ person with a personality.  I even made a comment to that effect, and low and behold, I discovered the person on the other end had a sense of humor to boot.

I was totally engaged.  And I became a fan.  My chat partner not only sent me links to valuable resources, he also expressed empathy saying, “I know as a parent you are really concerned about the safety of your son.”  I fell in love.  Every other person I had interacted with basically said, “What you are looking for doesn’t exist.”  Suddenly, I had someone who not only understood me, but was willing to help me – and felt confident he could do so!  He said he would have someone call me.  My heart sank.  I’d been through this before.  If you aren’t buying a house in the Hamptons, most New York brokers don’t want to deal with you – especially if you are looking for a ‘cheap’ apartment.

To my surprise, I got a call within an hour.  Suffice it to say that Brian is now a member of my family.  He held my hand, reassured me, and suffered my endless e-mails as we searched for the right apartment for my son.  We found it, and we found a friend in Brian.  And Brian found a loyal client for life.  My son may be a poor college student today, but he’s a New Yorker for life.  And Brian will forever be ‘his guy’ when it comes to finding apartments, and someday, that house in the Hamptons.

And it all started with a pop up.  “Hello, how can I help you today?”  And that pop up was followed by sincere, genuine, humorous, and empathetic interactions.  There is true power in live chat.  But the key is ‘live’ - not robotic.

The Psychology of Pricing Part II

A Balancing Act

By Laura Iles - Senior Consultant, Integrated Insight

In the process of evaluating pricing strategies, we all begin the same way: searching for the Holy Grail of strategies in our space, the one to maximize profits. Beyond the basic math, then, what is it that differentiates the leaders in an industry?

To answer that, we must consider the broader impact of consumer perception and behavior within the context of pricing decisions. Occasionally, strategies which seem less attractive become more valuable when the psychological impacts of pricing are considered, and vice versa.

Pricing strategies require a delicate balance of the company’s requirements and the consumer’s needs. Too often, companies employ a strategy that blatantly ignores one of those factors.

Dynamic Pricing

Dynamic pricing in particular conjures images of the airline industry. Customers feel obligated to monitor multiple ticketing options over a series of days in their effort to find one that fits their needs at the right price.

Of course, we all know of someone who has gone through this effort, only to arrive at the gate to discover that their seat is gone, the flight oversold in an effort to maximize profits.

To the consumer, this process is stressful, frustrating and dis-empowering – not the concepts you want associated with your firm.

Price Matching

Price matching strategies reverse this imbalance of priorities. As big box stores price match online retailers in an effort to cater to their customers, it leads to a decline in profits that ultimately hurts the company and the consumers.

Consumer –Targeted Pricing

Other stores, such as retailers Staples and Home Depot, have eschewed the low online price strategy and instead taken a multi-pronged approach. They combine dynamic pricing, shifting in response to competitor’s pricing, with variable customer pricing based on demographic factors. [1]

In one such example, customers on the Staples and Home Depot websites are targeted by location (using their IP address). Proximity to a competitor’s store lowers the price point they are shown, while proximity to a local Staples or Home Depot store raises the price point. Sometimes the difference is negligible, other times it is significant. In neither case is the consumer aware the pricing has been tailored specifically to them.

Consumer Reactions

The targeted approach is perfectly logical from a business perspective. The more competition, the more it begins to make sense to compete on price. In low-competition areas, higher online prices ensure you do not undermine your brick and mortar business.

Unfortunately, as in the airline and sports industries, consumers do not appreciate the idea of paying more than their neighbor for the same product. The secrecy surrounding the mere existence of the practice further aggravates their sense of distrust.

To date, these stores’ refusal to divulge precisely how the pricing is determined leaves shoppers with the uneasy feeling that that they are being penalized for the city in which they live.

Ultimately, the lack of transparency is damaging brand images and leaving shoppers wary of being monitored and targeted.

Learning to Love Dynamic Pricing

Compared to wholesale price matching or a flagrant disregard for the consumer’s experience, the targeted strategy in and of itself is a valuable one. There is nothing to be gained, for either consumers or retailers, by continuing to engage in price wars, slashing prices to match other retailers and cheap online sources. Dynamic pricing, in its various incarnations, works.

The challenge facing many companies today is to increase consumer acceptance of new strategies by introducing them in such a fashion as to highlight the benefits to the end user. High barriers to entry have, to a certain extent, protected the airline industry from repercussions relating to the frustrations around pricing strategies. For other industries, success will not come so easily.

The sports industry in particular has handled the transition into dynamic pricing well, and can serve as something of a model for other industries. Teams were slow to adopt dynamic pricing for fear of alienating fans, a stance which helped to reassure loyal customers.[2]

Since adopting dynamic pricing, several of the teams, along with one of the main software providers, Qcue, have been remarkably forthcoming in discussing how and why new pricing strategies were implemented.[3] As a result, the variable pricing has slowly gained approval among fans, while team images remain untarnished.[4]   

Transparency goes a long way towards dispelling customer discomfort with new pricing strategies. The most efficient and profitable system in the world won’t do you a bit of good if you damage your brand because your customers think you are taking advantage of them.

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[1] http://online.wsj.com/article/SB10001424127887323777204578189391813881534.html

[2] http://www.bizjournals.com/seattle/print-edition/2012/03/09/mariners-try-out-demand-based-ticket.html?page=all

[3] http://espn.go.com/blog/playbook/dollars/post/_/id/597/dynamic-pricing-is-new-trend-in-ticket-sales

[4] http://www.forbes.com/sites/prishe/2012/01/06/dynamic-pricing-the-future-of-ticket-pricing-in-sports/

The Psychology of Pricing

By Laura Iles- Senior Consultant, Integrated Insight

The sheer volume of recent articles on the subject of dynamic pricing, spanning publications from Forbes to Time to local news reports, underscores its success in a variety of industries. As dynamic pricing makes its way from the travel and hospitality industries into sporting events, consumers are faced with fluctuating prices in more and more areas of their lives.

Unfortunately, challenges linger and some customers remain wary of the strategy. Specifically, consumers are often frustrated with what they perceive as a lack of fairness, a system that is too complex, and the lack of transparency surrounding pricing.

Whether it’s a seat on a plane or in a stadium, discovering that the person next to you paid half of what you were charged will sour an otherwise enjoyable experience.

The company that surmounts these obstacles and provides a dynamic pricing experience which meets the needs of the customer, while still maximizing revenue, will pull ahead of the competition and garner additional loyalty from fans.

Cross-Disciplinary Solutions

In an effort to find such a solution, two professors from Northwestern University, Jeff Ely and Sandeep Baliga, have applied both economic theory and psychology in a controlled experiment. They are testing a new approach to optimize pricing and drive customer satisfaction, using a variant of dynamic pricing to sell tickets to the university’s basketball games.  

Ely and Baliga employed a reverse auction, beginning with the highest price and reducing it over time, to ensure they captured maximum value. A refund guarantee assured buyers they could purchase with confidence.  

In a recent podcast with Sarah Green of the Harvard Business Review, Ely and Baliga discuss their findings; the full podcast is linked at the end of this post.  Future blog posts will contain discussion of additional topics in the podcast, including the benefit of secondary markets, such as StubHub; the pitfalls of price matching; and the challenges of pricing to address both company goals and customer needs, but below, I highlight some of the interesting and unanticipated results brought to light through their experimentation.

An Innovative Test

How do you test consumer behavior at a variety of price points without damaging revenue streams OR upsetting the customer?

Their solution: A reverse auction, starting at the highest price and moving downward, and a guarantee to refund the difference between the price paid by the consumer and the lowest price sold.  Counterintuitive? Yes.  It’s also an extraordinary use of psychology to encourage exactly the behavior the firm wants to see.

Customers are given an incentive to purchase tickets at the precise moment the price reaches their acceptable threshold – they receive better seats and still have a guarantee of being treated fairly should the price drop.  This also has the added benefit of reducing incentives to use secondary markets, as the primary market is now more attractive.  The firm is able to observe customer behavior at a variety of price points, zeroing in on the price that will best support the firm’s goal. This strategy allows for flexibility, and the company is able to focus on maximizing revenue or attendance as needed.  Monitoring shifts in purchase behavior as the price is reduced - little by little - generates an understanding of the likely outcome of further shifts. This in turn prevents the company from reducing the price too much.

Results

In the control studies, the final price set by the reverse auction & refund guarantee strategy matched the pricing suggested by the data based on the secondary market (StubHub).  While the reverse auction approach may work in industries with event driven, one time purchases, time will tell if the method has legs with less emotional based products and services, and a more frequent purchase environment.

Take Away

No strategy is a one size fits all solution, but embracing new approaches may just gain you a competitive edge.  The pricing strategy tested by Ely and Baliga has the benefit of maximizing profits while providing value to the customer through ease of use, transparency, and fairness.

Chasing revenue at the expense of your customers’ experience is a long-term strategy for failure. If you don’t discover that optimal balance of great customer service and profit-maximization, eventually one of your competitors will.

Are you out-behaving your competition?

Sources:

The original podcast and associated transcript can be found here.

http://blogs.hbr.org/ideacast/2013/06/pricing-strategies-people-love.html

For additional articles on the pricing experiments of Ely and Baliga, please see the links below.

http://blogs.hbr.org/cs/2013/05/any_business_trying_to_sell.html

http://business.time.com/2013/02/19/pay-less-for-sporting-event-tickets-after-youve-already-bought-them/