5 Benefits Of Being A Socially Responsible Company

Ali Robins

Just as we choose to associate with good people in our lives, customers like to associate with good companies.

Being known as a socially responsible company is a great way to attract positive attention and make your employees proud to be part of your organization.

But before you can do this, it’s important to clearly define your company’s core values.

The definition of socially responsible companies

socially responsible companies quote

Investopedia defines corporate social responsibility as follows:

A corporation’s initiatives to assess and take responsibility for the company’s effects on environmental and social well-being. CSR may also be referred to as “corporate citizenship” and can involve incurring short-term costs that do not provide an immediate financial benefit to the company, but instead promote positive social and environmental change.

5 benefits of corporate social responsibility

The benefits of corporate social responsibility function on both an internal and external level.

  1. Build your brand

    Being socially responsible is a great way to build your brand and create a positive name. Factors like good will, trust, and an overall positive image are enhanced and developed through social responsibility. If you’re smart about it and you support the right type of business, it could also lead to co-branding and marketing opportunities.

  2. Attract and retain top talent

    A 2003 Stanford University study found that MBA graduates would sacrifice an average of $13,700 of their annual salary to work for a socially responsible company.

    Benefits of having a socially responsible company
    People want to feel like they’re making a difference in the world, and developing a reputation for social responsibility is a great way to attract and retain top talent.

    When employees are proud of where they work, they feel a sense of loyalty to the company and become company ambassadors.

    One way to measure your employees’ loyalty is with the Employee Net Promoter Score. Being socially responsible is an excellent way to get your employees on the high end of the scale.

    Millennials are especially connected to the idea of working for a socially responsible company. The Cone Millennial Cause Study found that 80 percent of 13- to 25-year-olds surveyed want to work for companies that care about their effect on and contributions to society.

  3. Customers love socially responsible companies

    A survey conducted by Nielsen group found that 50% of consumers surveyed worldwide would be willing to pay more for goods and services from socially responsible companies.

    The one caveat (and this is important for companies to remember) is that in countries where there is already some skepticism, the willingness to spend more is lower. This means that companies and the programs you’re implementing must be authentic.

    In their 2016 book, Good Is The New Cool, Afdhel Aziz and Bobby Jones highlight the importance of authenticity, inclusiveness, and kindness in everything from company culture to marketing campaigns.

    Quote about being socially responsible

    They want to contribute to something that makes a difference and that has a positive impact on the world.

  4. It helps engage your employees

    When you include your employees in larger processes and vision planning, such as designing and implementing a social responsibility program for your company, they’ll feel part of something bigger and more important than just their day-to-day tasks, and therefore they will be more engaged.

    Generally, employees are most engaged when they feel part of a holistic entity rather than bound only to their respective role and tasks.

  5. It keeps your company competitive

    Choosing a unique position as a company and doing things differently from competitors helps your business stand out. This applies to all facts of business, including social responsibility. Your relationship with society is as important as your relationship with customers. Having a strong vision and connection to a cause that makes a positive impact and gives you a competitive advantage.

Socially responsible companies

There are plenty of socially responsible companies today, and one of my favorite examples is an organization called 1% For The Planet.

This organization connects businesses with non-profits, and it has compiled a huge directory of companies that donate 1% of their profits to charity.

Here are some examples of well-known companies that practice social responsibility:

Coca Cola

Their #5by20 program empowers young women entrepreneurs. The plan is to bring 5 million women from the developing world into the company as bottlers or distributors. There is research that shows that this can have a multiplier effect, and create value for more than just those 5 million women.

Visa

Visa has partnered with several governments in the developing world to help offer financial solutions to those in need. Financial literacy is so important to advancing the lives of those in the developing world, and Visa is doing an amazing job to help.

Google

Google is well known for their giving program, and has been recognized as the most socially responsible company in the “workplace” category from the Reputation Institute. Not many people know about the kind of socially responsible investments that they make as a company.

Microsoft

Microsoft has corporate responsibility really deeply rooted in its culture, and organizes hundreds of social events every year, and has surpassed over $1 Billion in employee donations over 30 years.

Toms

For every pair of shoes Toms sells, they give a pair to a child in need.They’re currently given over 60 million pairs of shoes to children in need.

Patagonia

Patagonia’s mission statement is: “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis. They have awarded over $70 million in cash and donations to domestic and international grassroots environmental groups. However, their social awareness extends beyond the environment. You can read more about their very impressive impact here.

GSOFT

GSOFT’s core mission is to “make a positive impact on people’s lives at work.” Part of the way they do this is by creating a culture that is supportive of employees’ personal mission and causes. Last December, GSOFT offered to match all donations that employees’ had raised for their personal cause, 24hr Tremblant, a ski event that raised money for children in need.

Another example of GSOFT’s socially responsible mindset is their affiliation with Le Club Des Petits Déjeuners, in which employees spend a morning serving food to underprivileged children to ensure they are nourished and ready to learn. GSOFT also participates in the Dream Day at La Ronde, where employees take children from the St. Justine hospital for a fun day on the rides. It has been a poignant experience and one that’s in line with the company mission and culture.

How to build a socially responsible company

1. Choose a meaningful cause

If the nature of your company impacts or causes harm to a specific area, consider choosing a cause that helps improve that area. For example, if you print a magazine, perhaps a part of your proceeds can go to planting trees. Also, choose something that is meaningful to your team. Supporting something that you don’t connect with takes the fun, passion, and success out of the initiative.

2. Create an authentic socially responsible mission

Avoid one-time events or annual donations. Genuine social responsibility is an ongoing process that starts from within and extends outward—if you are going to do it, do it right!

3. Ingrain the mission into your company’s DNA

Every decision that’s made should address your mission so that it becomes part of the company culture, not just an outside initiative. It should be part of your company’s journey, not a standalone project. Whenever possible, think about how decisions might affect this cause or how new initiatives can include the mission into the planning.

4. Get employees involved and enthused

It is not only up to management to drive the initiatives that make your company socially responsible. Get the whole team involved and participating in the cause. You might set up an internal fundraising committee, for example, that allows employees to work hands-on with organizations to help give them a sense of ownership.

5. Offer employees time off to volunteer

The beauty of being a socially responsible organization is that you don’t necessarily need to spend money in order to be socially responsible. There are a lot of other cool ways that you can give back, such as with “volunteer time off” (VTO).

The idea here is to give employees a paid day off at least once a year to provide volunteer services, ideally for an organization of their choice.

Is your company socially responsible? Tell us about your great initiatives!

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Why Corporate Social Responsibility Could Be Your Next Strategic Priority

Derek Klobucher

When organizations do the right thing, value can extend far beyond the good deed itself. Corporate social responsibility (CSR) can help drive better business outcomes, attract like-minded partners, increase employee engagement and more.

“Just like human resources years ago … CSR is going to grow into a strategic partner in the company,” John Matthews, SAP’s global vice president of HCM LoB Business Partner, Global Customer Strategy & Business Operations, said on Changing The Game with HR last week. “Doing good is also good for business.”

CSR refers to how organizations go above and beyond to evaluate and own their environmental and social impacts. But growing into strategic partnership with other, more quantifiable lines of business would require objective CSR metrics.

Quantifying good deeds

“We’re going to see the emergence of an index that captures the corporate social responsibility agenda … the responsibility with which companies act,” Chris Johnson, senior partner at New York-based human resources consulting firm Mercer, said on Changing the Game with HR. “And the index will be a key part of how the company will be accountable to its shareholders.”

If this seems farfetched, consider that shareholders are also beginning to demand sustainability. And organizations already get rated as best places to work, on work-life balance, and many other ratings; and Mercer even sponsors the Britain’s Healthiest Company index.

Johnson predicts a CSR index within the decade.

“It could be a very public account—a transparency and public accountability thing,” Johnson said. Advocacy groups “will be able to go to those companies that are low down [on] the index, and offer them a way of clamoring up the index and demonstrating their broader responsibility to society.”

“People love to work for a corporation that is paying it forward,” Bonnie J. Addario, founder of the Bonnie J. Addario Lung Cancer Foundation, said.

But CSR-minded organizations will still want a return on investment.

Paying it forward

“Corporate social responsibility also helps the bottom line, meaning that it helps you build trust with customers, employees, as well as with your suppliers,” SAP’s Matthews said. “If you give them that guidance, that direction, and you’re clear on what matters, others will come running to you—and come running with you to help solve problems.”

One of Matthews’ “problems” is a 3,400-mile bicycle ride across the U.S. to raise awareness—and funds—for lung cancer research; he’s doing so in memory of his late mother who died of the disease. Whether the issue is healthcare, education or implementing design elements that cut costs by increasing energy efficiency, corporate social responsibility can be an effective way to increase employee engagement.

“People love to work for a corporation that is paying it forward,” Bonnie J. Addario, founder of the Bonnie J. Addario Lung Cancer Foundation, said on Changing the Game with HR. “It’s not always about money … it’s about involvement—it’s about having an emotional connection.”

“We’re going to see the emergence of an index that captures the corporate social responsibility agenda … the responsibility with which companies act,” Chris Johnson, senior partner at New York-based human resources consulting firm Mercer, said.

More than a cause

“CSR is becoming much more of a heritage asset, meaning people prefer their service efforts to leave lasting effects,” Kevin Xu, CEO of global intellectual property management company MEBO International, stated on Forbes CommunityVoice last month. “Rather than championing campaigns that make big splashes, businesses want to build and work toward causes that resonate with and get carried on by younger generations.”

These efforts can lead to new partnerships with like-minded organizations—what a wireless solutions provider’s CEO called a “return on doing good,” as opposed to a simple return on investment. And it’s a great way to build pride within the organization.

“I’ve already had 30 people from SAP from all across the world … who just heard what we were doing, and said, ‘How can I help?’” SAP’s Matthews said. “And it grows every day … so I’m very happy, fortunate, and proud to work for SAP.”

This story originally appeared on SAP’s Business TrendsClick here for a replay of this episode. And click here to learn more about Matthews’ ride. Follow Derek on Twitter@DKlobucher

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About Derek Klobucher

Derek Klobucher is a Brand Journalist, Content Marketer and Master Digital Storyteller at SAP. His responsibilities include conceiving, developing and conducting global, company-wide employee brand journalism training; managing content, promotion and strategy for social networks and online media; and mentoring SAP employees, contractors and interns to optimize blogging and social media efforts.

Diversity Is Hard Work And Requires Rethinking

Anka Wittenberg

In the third episode of the SAP Future Factor series, I sat down with Iris Bohnet, professor of public policy and behavioral economist at the Harvard Kennedy School of Government, to talk about the positive impact of diversity in the workplace for employee engagement and the business bottom line. We also talked about what it takes for companies to create an inclusive work environment.

Hint: It does not happen overnight.

Anka: As we discussed during our SAP Future Factor episode, an increasing number of companies are paying attention to diversity in the workplace.

Iris: Yes, workplaces today are much more heterogenous. Companies recognize that this heterogeneity is an asset. There is a lot of evidence that diverse teams tend to outperform homogenous teams in terms of creativity, innovation, and group processes.

Anka: There is also a strong business case for diversity and inclusion, which are linked to employee engagement. At SAP, we tracked an increase of 48 million euros on operational profit per year by increasing employee engagement by one percent alone. And, to your point, we see a huge benefit for innovation. Research has consistently shown that the more diverse your teams are, the more innovative you are. To tap into that innovative potential, we use a “design thinking” approach to the way we work at SAP, which means that we work with diverse teams to evaluate an issue from different angles and come up with out-of-the-box ideas.

Furthermore, diversity is important for a company to be able to relate to their customers – the diversity of customers needs to be reflected in the diversity of employees. However, diversity is also increasing complexity – which brings up its own set of challenges.

Iris: Certainly. Diversity is hard work. It is hard work for the exact reason that makes it an asset – bringing together a diversity of perspectives. This helps us consider issues from different angles, but can also be a trigger for debate, argument, disagreement. However, we can’t afford to forget that if we all have the same perspective, we will only move in one direction.

Many companies are implementing diversity training. Diversity training itself may not solve the problem, but it can open doors, and we can integrate technology to help us begin “redesigning” the way we work and even how we learn. From your perspective, what are some of the technologies that will have a positive impact in terms of making companies more diverse and inclusive?

Anka: Technology can be helpful in discovering and eliminating unconscious bias across the HR lifecycle. For example, software can identify biased language in job postings and suggest alternatives, so that companies can source talent more broadly. Machine learning is used to put together diverse teams. I truly believe that technology is a catalyst for change that helps us become aware of unconscious biases and create a more inclusive environment.

However, it’s important to recognize that each company faces its own unique set of challenges. The same company may even experience different challenges in different geographic regions. For example, recruitment might be an issue in one region, but in another, it may be the retention of talent. Given that, it’s critical to identify where the blind spots are, and then put clear action items behind it.

Iris: Precisely. Unfortunately, many companies and governments continue to throw money at the problem without diagnosing what is broken. It’s important to understand what the challenge is and then intervene strategically. For example, I worked with a tech company that found out that it was much less biased based on gender and race than it thought, but on the flipside, had a much bigger disciplinary bias. Blind evaluation, as we discuss in the Future Factor episode, can be helpful in terms of eliminating implicit bias in hiring.

Anka: Adopting an inclusive mindset and embracing diversity go beyond recruitment. As you mentioned earlier, we have a much more heterogeneous workforce today. For example, at SAP, we have a workforce that spans five generations. We have programs in place, such as “Autism at Work,” to recruit differently abled individuals who excel at certain tasks but may have a different way of working. This means that we need to change the norms around work to integrate individuals with different backgrounds, expectations, and working styles.

Iris: I couldn’t agree more. Previously when we talked about flexibility, it was pretty much associated with women. But now, we have a whole new generation of people with different needs, including requiring more flexible work arrangements for various reasons such as child care or elder care or simply because they want to pursue interests outside of work. It is a surprise for many companies that employees are no longer defining themselves with work.

Anka: Thank you, Iris, for being part of the SAP Future Factor series and for your support and guidance in helping SAP achieve its goal of 25% women in leadership. As you know, it was a journey over many years, but we built a strategy around the goal and now have an environment that is inclusive of the thoughts and opinions of men and women in management. This allows us to better serve an increasingly diverse customer base, attract and retain talent, and compete in the global economy.

Before we conclude, I want to congratulate you on the publication of the German edition of your book, What Works: Gender Equality by Design. It is an excellent resource for understanding organizational dynamics and design in relation to diversity and inclusion.

To watch the entire discussion between SAP chief diversity officer Anka Wittenberg and Prof. Iris Bohnet, click here

For more on digitization, work, and HR, visit Episode 1 and Episode 2 of the SAP Future Factor Web Salon, in which HR executives and thought leaders from science/academia discuss the digitization of work.

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Anka Wittenberg

About Anka Wittenberg

Anka Wittenberg is the Chief Diversity & Inclusion Officer at SAP. She is responsible for the development and implementation of SAP’s Diversity and Inclusion strategy globally, ensuring sustainable business success.

Primed: Prompting Customers to Buy

Volker Hildebrand, Sam Yen, and Fawn Fitter

When it comes to buying things—even big-ticket items—the way we make decisions makes no sense. One person makes an impulsive offer on a house because of the way the light comes in through the kitchen windows. Another gleefully drives a high-end sports car off the lot even though it will probably never approach the limits it was designed to push.

We can (and usually do) rationalize these decisions after the fact by talking about needing more closet space or wanting to out-accelerate an 18-wheeler as we merge onto the highway, but years of study have arrived at a clear conclusion:

When it comes to the customer experience, human beings are fundamentally irrational.

In the brick-and-mortar past, companies could leverage that irrationality in time-tested ways. They relied heavily on physical context, such as an inviting retail space, to make products and services as psychologically appealing as possible. They used well-trained salespeople and employees to maximize positive interactions and rescue negative ones. They carefully sequenced customer experiences, such as having a captain’s dinner on the final night of a cruise, to play on our hard-wired craving to end experiences on a high note.

Today, though, customer interactions are increasingly moving online. Fortune reports that on 2016’s Black Friday, the day after Thanksgiving that is so crucial to holiday retail results, 108.5 million Americans shopped online, while only 99.1 million visited brick-and-mortar stores. The 9.4% gap between the two was a dramatic change from just one year prior, when on- and offline Black Friday shopping were more or less equal.

When people browse in a store for a few minutes, an astute salesperson can read the telltale signs that they’re losing interest and heading for the exit. The salesperson can then intervene, answering questions and closing the sale.

Replicating that in a digital environment isn’t as easy, however. Despite all the investments companies have made to counteract e-shopping cart abandonment, they lack the data that would let them anticipate when a shopper is on the verge of opting out of a transaction, and the actions they take to lure someone back afterwards can easily come across as less helpful than intrusive.

In a digital environment, companies need to figure out how to use Big Data analysis and digital design to compensate for the absence of persuasive human communication and physical sights, sounds, and sensations. What’s more, a 2014 Gartner survey found that 89% of marketers expected customer experience to be their primary differentiator by 2016, and we’re already well into 2017.

As transactions continue to shift toward the digital and omnichannel, companies need to figure out new ways to gently push customers along the customer journey—and to do so without frustrating, offending, or otherwise alienating them.

The quest to understand online customers better in order to influence them more effectively is built on a decades-old foundation: behavioral psychology, the study of the connections between what people believe and what they actually do. All of marketing and advertising is based on changing people’s thoughts in order to influence their actions. However, it wasn’t until 2001 that a now-famous article in the Harvard Business Review formally introduced the idea of applying behavioral psychology to customer service in particular.

The article’s authors, Richard B. Chase and Sriram Dasu, respectively a professor and assistant professor at the University of Southern California’s Marshall School of Business, describe how companies could apply fundamental tenets of behavioral psychology research to “optimize those extraordinarily important moments when the company touches its customers—for better and for worse.” Their five main points were simple but have proven effective across multiple industries:

  1. Finish strong. People evaluate experiences after the fact based on their high points and their endings, so the way a transaction ends is more important than how it begins.
  2. Front-load the negatives. To ensure a strong positive finish, get bad experiences out of the way early.
  3. Spread out the positives. Break up the pleasurable experiences into segments so they seem to last longer.
  4. Provide choices. People don’t like to be shoved toward an outcome; they prefer to feel in control. Giving them options within the boundaries of your ability to deliver builds their commitment.
  5. Be consistent. People like routine and predictability.

For example, McKinsey cites a major health insurance company that experimented with this framework in 2009 as part of its health management program. A test group of patients received regular coaching phone calls from nurses to help them meet health goals.

The front-loaded negative was inherent: the patients knew they had health problems that needed ongoing intervention, such as weight control or consistent use of medication. Nurses called each patient on a frequent, regular schedule to check their progress (consistency and spread-out positives), suggested next steps to keep them on track (choices), and cheered on their improvements (a strong finish).

McKinsey reports the patients in the test group were more satisfied with the health management program by seven percentage points, more satisfied with the insurance company by eight percentage points, and more likely to say the program motivated them to change their behavior by five percentage points.

The nurses who worked with the test group also reported increased job satisfaction. And these improvements all appeared in the first two weeks of the pilot program, without significantly affecting the company’s costs or tweaking key metrics, like the number and length of the calls.

Indeed, an ongoing body of research shows that positive reinforcements and indirect suggestions influence our decisions better and more subtly than blatant demands. This concept hit popular culture in 2008 with the bestselling book Nudge.

Written by University of Chicago economics professor Richard H. Thaler and Harvard Law School professor Cass R. Sunstein, Nudge first explains this principle, then explores it as a way to help people make decisions in their best interests, such as encouraging people to eat healthier by displaying fruits and vegetables at eye level or combatting credit card debt by placing a prominent notice on every credit card statement informing cardholders how much more they’ll spend over a year if they make only the minimum payment.

Whether they’re altruistic or commercial, nudges work because our decision-making is irrational in a predictable way. The question is how to apply that awareness to the digital economy.

In its early days, digital marketing assumed that online shopping would be purely rational, a tool that customers would use to help them zero in on the best product at the best price. The assumption was logical, but customer behavior remained irrational.

Our society is overloaded with information and short on time, says Brad Berens, Senior Fellow at the Center for the Digital Future at the University of Southern California, Annenberg, so it’s no surprise that the speed of the digital economy exacerbates our desire to make a fast decision rather than a perfect one, as well as increasing our tendency to make choices based on impulse rather than logic.

Buyers want what they want, but they don’t necessarily understand or care why they want it. They just want to get it and move on, with minimal friction, to the next thing. “Most of our decisions aren’t very important, and we only have so much time to interrogate and analyze them,” Berens points out.

But limited time and mental capacity for decision-making is only half the issue. The other half is that while our brains are both logical and emotional, the emotional side—also known as the limbic system or, more casually, the primitive lizard brain—is far older and more developed. It’s strong enough to override logic and drive our decisions, leaving rational thought to, well, rationalize our choices after the fact.

This is as true in the B2B realm as it is for consumers. The business purchasing process, governed as it is by requests for proposals, structured procurement processes, and permission gating, is designed to ensure that the people with spending authority make the most sensible deals possible. However, research shows that even in this supposedly rational process, the relationship with the seller is still more influential than product quality in driving customer commitment and loyalty.

Baba Shiv, a professor of marketing at Stanford University’s Graduate School of Business, studies how the emotional brain shapes decisions and experiences. In a popular TED Talk, he says that people in the process of making decisions fall into one of two mindsets: Type 1, which is stressed and wants to feel comforted and safe, and Type 2, which is bored or eager and wants to explore and take action.

People can move between these two mindsets, he says, but in both cases, the emotional brain is in control. Influencing it means first delivering a message that soothes or motivates, depending on the mindset the person happens to be in at the moment and only then presenting the logical argument to help rationalize the action.

In the digital economy, working with those tendencies means designing digital experiences with the full awareness that people will not evaluate them objectively, says Ravi Dhar, director of the Center for Customer Insights at the Yale School of Management. Since any experience’s greatest subjective impact in retrospect depends on what happens at the beginning, the end, and the peaks in between, companies need to design digital experiences to optimize those moments—to rationally design experiences for limited rationality.

This often involves making multiple small changes in the way options are presented well before the final nudge into making a purchase. A paper that Dhar co-authored for McKinsey offers the example of a media company that puts most of its content behind a paywall but offers free access to a limited number of articles a month as an incentive to drive subscriptions.

Many nonsubscribers reached their limit of free articles in the morning, but they were least likely to respond to a subscription offer generated by the paywall at that hour, because they were reading just before rushing out the door for the day. When the company delayed offers until later in the day, when readers were less distracted, successful subscription conversions increased.

Pre-selecting default options for necessary choices is another way companies can design digital experiences to follow customers’ preference for the path of least resistance. “We know from a decade of research that…defaults are a de facto nudge,” Dhar says.

For example, many online retailers set a default shipping option because customers have to choose a way to receive their packages and are more likely to passively allow the default option than actively choose another one. Similarly, he says, customers are more likely to enroll in a program when the default choice is set to accept it rather than to opt out.

Another intriguing possibility lies in the way customers react differently to on-screen information based on how that information is presented. Even minor tweaks can have a disproportionate impact on the choices people make, as explained in depth by University of California, Los Angeles, behavioral economist Shlomo Benartzi in his 2015 book, The Smarter Screen.

A few of the conclusions Benartzi reached: items at the center of a laptop screen draw more attention than those at the edges. Those on the upper left of a screen split into quadrants attract more attention than those on the lower left. And intriguingly, demographics are important variables.

Benartzi cites research showing that people over 40 prefer more visually complicated, text-heavy screens than younger people, who are drawn to saturated colors and large images. Women like screens that use a lot of different colors, including pastels, while men prefer primary colors on a grey or white background. People in Malaysia like lots of color; people in Germany don’t.

This suggests companies need to design their online experiences very differently for middle-aged women than they do for teenage boys. And, as Benartzi writes, “it’s easy to imagine a future in which each Internet user has his or her own ‘aesthetic algorithm,’ customizing the appearance of every site they see.”

Applying behavioral psychology to the digital experience in more sophisticated ways will require additional formal research into recommendation algorithms, predictions, and other applications of customer data science, says Jim Guszcza, PhD, chief U.S. data scientist for Deloitte Consulting.

In fact, given customers’ tendency to make the fastest decisions, Guszcza believes that in some cases, companies may want to consider making choice environments more difficult to navigate— a process he calls “disfluencing”—in high-stakes situations, like making an important medical decision or an irreversible big-ticket purchase. Choosing a harder-to-read font and a layout that requires more time to navigate forces customers to work harder to process the information, sending a subtle signal that it deserves their close attention.

That said, a company can’t apply behavioral psychology to deliver a digital experience if customers don’t engage with its site or mobile app in the first place. Addressing this often means making the process as convenient as possible, itself a behavioral nudge.

A digital solution that’s easy to use and search, offers a variety of choices pre-screened for relevance, and provides a friction-free transaction process is the equivalent of putting a product at eye level—and that applies far beyond retail. Consider the Global Entry program, which streamlines border crossings into the U.S. for pre-approved international travelers. Members can skip long passport control lines in favor of scanning their passports and answering a few questions at a touchscreen kiosk. To date, 1.8 million people have decided this convenience far outweighs the slow pace of approvals.

The basics of influencing irrational customers are essentially the same whether they’re taking place in a store or on a screen. A business still needs to know who its customers are, understand their needs and motivations, and give them a reason to buy.

And despite the accelerating shift to digital commerce, we still live in a physical world. “There’s no divide between old-style analog retail and new-style digital retail,” Berens says. “Increasingly, the two are overlapping. One of the things we’ve seen for years is that people go into a store with their phones, shop for a better price, and buy online. Or vice versa: they shop online and then go to a store to negotiate for a better deal.”

Still, digital increases the number of touchpoints from which the business can gather, cluster, and filter more types of data to make great suggestions that delight and surprise customers. That’s why the hottest word in marketing today is omnichannel. Bringing behavioral psychology to bear on the right person in the right place in the right way at the right time requires companies to design customer experiences that bridge multiple channels, on- and offline.

Amazon, for example, is known for its friction-free online purchasing. The company’s pilot store in Seattle has no lines or checkout counters, extending the brand experience into the physical world in a way that aligns with what customers already expect of it, Dhar says.

Omnichannel helps counter some people’s tendency to believe their purchasing decision isn’t truly well informed unless they can see, touch, hear, and in some cases taste and smell a product. Until we have ubiquitous access to virtual reality systems with full haptic feedback, the best way to address these concerns is by providing personalized, timely, relevant information and feedback in the moment through whatever channel is appropriate. That could be an automated call center that answers frequently asked questions, a video that shows a product from every angle, or a demonstration wizard built into the product. Any of these channels could also suggest the customer visit the nearest store to receive help from a human.

The omnichannel approach gives businesses plenty of opportunities to apply subtle nudges across physical and digital channels. For example, a supermarket chain could use store-club card data to push personalized offers to customers’ smartphones while they shop. “If the data tells them that your goal is to feed a family while balancing nutrition and cost, they could send you an e-coupon offering a discount on a brand of breakfast cereal that tastes like what you usually buy but contains half the sugar,” Guszcza says.

Similarly, a car insurance company could provide periodic feedback to policyholders through an app or even the digital screens in their cars, he suggests. “Getting a warning that you’re more aggressive than 90% of comparable drivers and three tips to avoid risk and lower your rates would not only incentivize the driver to be more careful for financial reasons but reduce claims and make the road safer for everyone.”

Digital channels can also show shoppers what similar people or organizations are buying, let them solicit feedback from colleagues or friends, and read reviews from other people who have made the same purchases. This leverages one of the most familiar forms of behavioral psychology—reinforcement from peers—and reassures buyers with Shiv’s Type 1 mindset that they’re making a choice that meets their needs or encourages those with the Type 2 mindset to move forward with the purchase. The rational mind only has to ask at the end of the process “Am I getting the best deal?” And as Guszcza points out, “If you can create solutions that use behavioral design and digital technology to turn my personal data into insight to reach my goals, you’ve increased the value of your engagement with me so much that I might even be willing to pay you more.”

Many transactions take place through corporate procurement systems that allow a company to leverage not just its own purchasing patterns but all the data in a marketplace specifically designed to facilitate enterprise purchasing. Machine learning can leverage this vast database of information to provide the necessary nudge to optimize purchasing patterns, when to buy, how best to negotiate, and more. To some extent, this is an attempt to eliminate psychology and make choices more rational.

B2B spending is tied into financial systems and processes, logistics systems, transportation systems, and other operational requirements in a way no consumer spending can be. A B2B decision is less about making a purchase that satisfies a desire than it is about making a purchase that keeps the company functioning.

That said, the decision still isn’t entirely rational, Berens says. When organizations have to choose among vendors offering relatively similar products and services, they generally opt for the vendor whose salespeople they like the best.

This means B2B companies have to make sure they meet or exceed parity with competitors on product quality, pricing, and time to delivery to satisfy all the rational requirements of the decision process. Only then can they bring behavioral psychology to bear by delivering consistently superior customer service, starting as soon as the customer hits their app or website and spreading out positive interactions all the way through post-purchase support. Finishing strong with a satisfied customer reinforces the relationship with a business customer just as much as it does with a consumer.

The best nudges make the customer relationship easy and enjoyable by providing experiences that are effortless and fun to choose, on- or offline, Dhar says. What sets the digital nudge apart in accommodating irrational customers is its ability to turn data about them and their journey into more effective, personalized persuasion even in the absence of the human touch.

Yet the subtle art of influencing customers isn’t just about making a sale, and it certainly shouldn’t be about persuading people to act against their own best interests, as Nudge co-author Thaler reminds audiences by exhorting them to “nudge for good.”

Guszcza, who talks about influencing people to make the choices they would make if only they had unlimited rationality, says companies that leverage behavioral psychology in their digital experiences should do so with an eye to creating positive impact for the customer, the company, and, where appropriate, the society.

In keeping with that ethos, any customer experience designed along behavioral lines has to include the option of letting the customer make a different choice, such as presenting a confirmation screen at the end of the purchase process with the cold, hard numbers and letting them opt out of the transaction altogether.

“A nudge is directing people in a certain direction,” Dhar says. “But for an ethical vendor, the only right direction to nudge is the right direction as judged by the customers themselves.” D!

Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.


About the Authors:

Volker Hildebrand is Global Vice President for SAP Hybris solutions.

Sam Yen is Chief Design Officer and Managing Director at SAP.

Fawn Fitter is a freelance writer specializing in business and technology.

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How Artificial Intelligence Will Transform Tomorrow’s Digital Supply Chain

Alina Gross

Artificial intelligence (AI) may sound futuristic, but it’s a real-life breakthrough that exists in the present. Anyone who interacts with an online search engine, shops on Amazon, owns a self-parking car, or talks to voice-powered personal assistants like Siri or Alexa is using AI.

AI is a field of computer science in which a machine is equipped with the ability to mimic the cognitive functions of a human. An AI machine can make decisions or predictions based on its past experiences, or it can respond to entirely new scenarios. When given a goal, not only does it attempt to achieve its objective, it continuously tries to improve upon its past performance.

Revolutionizing the digital supply chain

Within five years, 50% of manufacturing supply chains will be robotically and digitally controlled and able to provide direct-to-consumer and home shipments, according to IDC Manufacturing Insights. Additionally, 47% of supply chain leaders believe AI is disruptive and important with respect to supply chain strategies, per a 2016 SCM World survey. With that in mind, 85% of organizations have already adopted or will adopt AI technology into their supply chains within one year, according to a 2016 Accenture report.

Supply chains need AI to aggregate their mass amounts of data. In the supply chain, AI can analyze large data sets and recommend customer service and operations improvements while supporting better working capital management. As corporate systems become more interconnected, providing access to a wider breadth of supply chain data, the opportunity to leverage AI increases.

Let’s look at the potential benefits of using AI to link transportation data with order data:

A logistics enterprise ensures the delivery of a product within two days. With AI, the carrier can view past performances from shipping a similar product on a specific day, using a particular route, which reveals there’s a 25% chance the order will arrive in four days, not two. This information supplies customer service and supply chain professionals with proactive alerts of potential fulfillment challenges.

To take this a step further, AI could also compare historical shipping data to the customer’s requested delivery date to provide recommendations on whether this particular carrier’s performance meets requirements, or if you need to consider a different logistics enterprise that is 15% more expensive, but 25% more likely to deliver the product on time.

Step by step to a more efficient supply chain with AI

There are many opportunities to use AI throughout the supply chain, from buying raw materials/components and converting them into finished products to selling and delivering items to customers. Supply chains can also use AI to end repetitive manual tasks and begin automating processes. This can enable companies to reallocate time and resources to their core business, and other high-value, judgment-based jobs, by using AI for low-value, high-frequency activities.

In an AI-driven selling platform, chatbots can manage many of the sales, customer service, and operations tasks traditionally handled by humans, including interacting with buyers, taking orders, and passing those orders through the supply chain. In warehouse operations, AI-capable robotics and sensors can enable organizations to enhance stacking and retrieval, order picking, stock-level management, and re-ordering processes.

Amazon is currently combining automation with human labor to increase productivity by using robots that can glide quickly across the floor to rearrange items on shelves into neatly organized rows, or alert human workers when they need to stack the shelves with new products or retrieve goods for packaging. And Logistics company DHL is using AI and automation to create self-sufficient forklifts that understand what products need to be moved, where they need to be moved, and when they need to be moved.

Supply chain companies see a path forward with AI

Leveraging AI is an important next step for supply chain companies looking to lower costs and improve productivity. It can enable your organization to spend less time on repetitive processes, such as planning, monitoring, and coordinating, and focus more on innovation and growth.

AI still needs careful monitoring, however, as well as experienced and knowledgeable logistics and operations professionals to ensure it’s being used to its maximum potential.

For more on how AI and advanced tech can help boost your business, see Next-Gen Technology Separates Digital Leaders From The Rest.

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Alina Gross

About Alina Gross

Alina Gross is currently pursuing her BA in international business at Heilbronn University. She plans on deepening her knowledge by adding an MA in international marketing. During her six-month, full-time internship at SAP, she has focused on marketing and project management topics within the field of supply chain, especially around event management and social media.