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While advertisers and marketers know the importance of understanding - and appealing to - the emotions and whims of their audience, economists and many others in the business community tend to view all consumers as economic rationalists.
Implicit in many business strategies is that consumers come to their decisions with an objective and economic-based reasoning. In our modern world, this thinking is rapidly unravelling - more and more businesses are realising that to gain a competitive edge they must win a customer's heart as well as their mind.
A good example of this is the banking industry. From an economic rationalist standpoint, customers have undoubtedly benefited from cost optimisation that has taken place around the globe. Increased competition and cost reduction has led to price erosion, and banks have also worked hard to improve their product ranges, adding new product features and widening their accessibility through ever-more convenient distribution arrangements. However, far from being pleased with their banks, most customers around the world are increasingly disaffected. Switching and banking promiscuity are at all-time highs, and UK clients are among the most dissatisfied in Europe. Banks have tended to optimise away the emotional "glue" that bound their customers to them. (Indeed, the same banks that once set aggressive branch closure targets are now re-opening in similar locations in an attempt to regain contact with their customers.)
The banks' lessons can be extrapolated to other industries: improved product features do not compensate for people's lack of emotional satisfaction or attachment.
Since emotion is a product of human interaction, it has implications for how organisations interact with not only their customers, but also their staff. Staff are also emotional beings, and many of the latest trends in sales force and performance management also rely on human factors such as emotion. Nucor (US steelmaker) is a good example. The company has understood what drives its employees - a good pay packet (linked to performance) is coupled with a devolution of power, flat hierarchy and team attitude. This engenders a passionate and emotional attachment to the company that many argue is the key to their success.
Most organizations are intuitively aware of the power of emotion, and are investing significant amounts on closely-related subjects; customer loyalty, branding, advertising. The problem for many is that explicitly factoring emotions into their business strategy is not easy - emotion is notoriously difficult to measure and therefore manage, thus most organisations are a long way from adding emotion as a parameter of the "value equation".
CVA believes that incorporating emotional understanding into value-based management is the next major shift in management practices. This will require organisations to describe and quantify the components of emotion, understand its implementation challenges and principles, and trade off the costs and the benefits alongside other methods of adding value. Much as in the early 90s where marketing and product design moved from being the domain of unstructured "creatives" to being a management science, 'emotion-based management' needs to make a transition: from the domain of advertisers and intuitive managers to a management science that is systematically applied, a recognized component of the value creation toolkit.
As a strategy consulting firm, CVA has a long track record in supporting clients in strategic marketing nad customer-centric business design problems. Our tradition is value-based management, and our style is rigorous, quantified and creatively pragmatic.
In recent years, we have been integrating the emotional dimension into more familiar toolkits (segmentation, CRM, customer profitability analysis, new offer development and so on) . The topic remains in its infancy, but recent advances in the academic field and in customer research are increasingly providing tools to help face this challenge. As specific examples, we have recently helped clients integrate traditional strategy approaches with emotions-based analysis to tackle:
Improving customer satisfaction - within 6 months of implementation, the Business Unit posted the single biggest rise in customer satisfaction ever seen in the organisation, with negligible incremental cost
Measuring branch performance fairly in a de-centralised environment - the Bank now uses our toolkit to assess branch performance
Boosting sales conversion rates in call centres - project proved emotions alone can more than double sales conversion rates in call centers
Operational service improvement
Tailoring branding and advertising strategy to target specific emotional segments
The process of factoring emotions into our analysis can be complex, but we are observing the emergence of some core principles in this arena which are widely applicable across industry and cultural barriers. At CVA we have been pioneering this integration of emotion into value-based management as a natural extension of our customer-centric approach (CCVE®). We believe that this will offer our clients a competitive edge in understanding and generating value from their customers.
If you are interested in learning more about our approach to incorporating emotions into business strategy, please contact Sandra de Castro (London) or Kipling Zubevich (Melbourne).
Implicit in many business strategies is that consumers come to their decisions with an objective and economic-based reasoning. In our modern world, this thinking is rapidly unravelling - more and more businesses are realising that to gain a competitive edge they must win a customer's heart as well as their mind.
Since emotion is a product of human interaction, it has implications for how organisations interact with not only their customers, but also their staff. Staff are also emotional beings, and many of the latest trends in sales force and performance management also rely on human factors such as emotion. Nucor (US steelmaker) is a good example. The company has understood what drives its employees - a good pay packet (linked to performance) is coupled with a devolution of power, flat hierarchy and team attitude. This engenders a passionate and emotional attachment to the company that many argue is the key to their success.
CVA believes that incorporating emotional understanding into value-based management is the next major shift in management practices. This will require organisations to describe and quantify the components of emotion, understand its implementation challenges and principles, and trade off the costs and the benefits alongside other methods of adding value. Much as in the early 90s where marketing and product design moved from being the domain of unstructured "creatives" to being a management science, 'emotion-based management' needs to make a transition: from the domain of advertisers and intuitive managers to a management science that is systematically applied, a recognized component of the value creation toolkit.
