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
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.
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.
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.
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.
They want to contribute to something that makes a difference and that has a positive impact on the world.
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.
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:
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 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 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 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.
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’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’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!
Article published by Ali Robins. It originally appeared on Officevibe and has been republished with permission.
I’m sure you’ve heard all about the millennial generation. Those 20- to 36-year-olds, pampered throughout their lives by their baby-boomer parents, have grown up to be self-absorbed, entitled narcissists, right?
Actually, this isn’t an accurate picture of millennials—and since they now represent the largest share of the American workforce, that’s good to know. Despite widely held perceptions about their supposedly “me-first” ways, these younger workers rank social responsibility as an important tenet of life and are looking to work for companies that share their sense of social responsibility.
In case you doubt the desire of millennials to align themselves with socially responsible companies, look no further than the Horizon Media’s Finger on the Pulse study, which found that 81 percent of this younger generation expect companies to make a public commitment to good corporate citizenship. Millennials also put their money where their mouth is: According to the 2015 Cone Communications Millennial CSR Study, 62 percent are willing to take a pay cut to work for a socially responsible company—a full six percentage points higher than the average response of all age groups surveyed.
The need for a CSR plan
Obviously, then, companies need to do more than just offer perks like free snacks to recruit and retain this valuable workforce segment. Having a formal corporate social responsibility (CSR) program is the key way for companies to demonstrate their commitment to the positive ideals their employees espouse. And here’s a PR bonus for you: By promoting corporate social responsibility, you’re also conveying to your customers that you care about the world outside your company’s walls.
At most companies, the HR department falls into the organizational sweet spot for managing the CSR program. As Angela Schettino of Think People Consulting observes, a company’s HR strategy links to the four components of any successful CSR initiative. First, of course, are employees, in keeping with HR’s focus on their rights and well-being, but the three other components—environment, community, and marketplace—also fall under HR’s domain.
Bottom of form
HR’s most appropriate role in managing a CSR plan would be to monitor its adoption and then document its successes throughout the company. In the area of energy conservation, for instance, the HR department could start by implementing a company-wide recycling program and promote earth-friendly practices like subsidizing public transit costs or encouraging employees to shut off the lights, computers, printers, and copiers during non-work hours.
Try these CSR initiatives
Here are some other ideas for HR departments and companies to consider as they implement and manage their CSR program.
Create a company culture compatible with CSR. As Strategic HR Inc. describes, this can start with your job advertisements and interview process. Use corporate social responsibility as a recruitment tactic, which will attract the socially responsible employees who will support and sustain your program. Perhaps even consider adding a position—chief sustainability officer—whose role would be consistent with your company’s focus on CSR.
Pick a cause. Look at what other successful companies are doing and see if your organization can model a similar CSR program. Starbucks, for instance, has several programs in place to promote environmental sustainability. Toms has a program called “Giving Shoes,” in which the company donates a pair of shoes to a child in need for every pair of shoes purchased. To date, the company has given away more than 70 million new pairs of shoes.
Allow time off for volunteering. As part of your employee engagement program, give employees a few days of volunteer time off (VTO) per fiscal year to do something meaningful in their communities.
Donate to a good cause.Take a cue from companies like Jersey Mike’s Subs, which has raised more than $20 million since 2010 by donating 100 percent of its sales nationwide on its annual Day of Giving. Or consider the corporate goodwill generated by Patagonia, a sustainable clothing brand that gave all $10 million from its Black Friday 2016 sales to hundreds of grassroots environmental organizations.
Match employee contributions. Convey to employees that “we’re all in this together” by matching their contributions to a charity of their choice. It’s a way for them to stretch their giving dollars—and for you to demonstrate firsthand that the causes they value are causes that you value as well.
Demonstrating your company’s commitment to the communities and environment in which you work isn’t just the right ethical decision, it’s good business. As Patti Dunham, MA, MBA, SPHR, SHRM-SCP, states, “…becoming socially aware and responsible helps the company’s bottom line. The impact on the organization’s public image and becoming an “employer of choice” because of these initiatives is immeasurable.”
If you haven’t already done so, consider empowering your HR department to implement and manage a corporate social responsibility program this year.
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About Meghan M. Biro
Meghan Biro is talent management and HR tech brand strategist, analyst, digital catalyst, author and speaker. I am the founder and CEO of TalentCulture and host of the #WorkTrends live podcast and Twitter Chat. Over my career, I have worked with early-stage ventures and global brands like Microsoft, IBM and Google, helping them recruit and empower stellar talent. I have been a guest on numerous radio shows and online forums, and has been a featured speaker at global conferences. I am the co-author of The Character-Based Leader: Instigating a Revolution of Leadership One Person at a Time, and a regular contributor at Forbes, Huffington Post, Entrepreneur and several other media outlets. I also serve on advisory boards for leading HR and technology brands.
Millions of people around the world still lack consistent access to the basics of modern life. They also lack resources to build conventional infrastructure in order to obtain essentials such as water and a consistent supply of electricity. Enter frugal innovation—a process for simplifying complex technologies so they are less expensive to produce and operate. Two startups have devised affordable systems that give people access to essential utilities.
Waterpoint Data Transmitter
About 780 million people, mainly in rural locations, don’t have indoor plumbing. Instead, they rely on hand pumps to access groundwater. Sooner or later, these hand pumps break and often aren’t fixed due to lack of parts and know-how. By some estimates, one-third of pumps aren’t functioning at any given time.
OxWater, a startup launched from Oxford University, has a solution that incorporates basic cell phone technology. The Waterpoint Data Transmitter is a monitoring device that communities deploy to track pump usage. If a pump stops working, a local, trained repair team receives a notification to fix it. The device also provides predictions of which pumps are likely to break and reports low water levels. A pilot project in Kenya showed a dramatic reduction in repair times, from an average of 37 days down to just two.
Solar power has become an important technology for people living in off-the-grid rural environments. But once the sun goes down, or during spells of cloudy days, the solar panels may not generate enough electricity. That often means a return to inefficient and unsafe solutions, such as kerosene lamps for lighting.
Azuri Technologies has developed a simple, independent system that enables solar users to adapt the amount of power they use according to the amount of energy they generate. The Quad is a small wall-mounted unit that’s wired to a solar panel that comes with a USB port for mobile phone charging. The system uses the company’s HomeSmart technology to monitor local weather patterns and learn consumers’ energy usage. Then, based on available energy, it automatically regulates the amount of power used for lighting (by, for example, adjusting brightness) and battery charging.
A 5-watt system costs about US$156, which users can pay off weekly using a mobile money account. Once they own the unit, they can generate power at no cost. Since its launch in Kenya in 2011, 90,000 Quads have been purchased in 12 African countries.
Preventing disasters and delivering aid when they do hit are difficult in isolated locations, where there aren’t enough services that enable quick reaction. Complexity and cost can also keep aid from reaching its targets. These startups are using frugal technology in imaginative ways to issue alerts of impending problems and deliver help to people in need.
Disaster relief is an uphill race against the clock. Whether responding to a natural disaster, war, or famine, aid workers must assemble and deliver supplies, navigate around natural obstacles, avoid thieves, and stay safe. Windhorse Aerospace has developed POUNCER, a disposable drone, to address these problems.
Designed for takeoff from a C-130 Hercules military transport plane and guided using a built-in GPS, POUNCER can be launched from up to 40 kilometers from its destination, with a landing accuracy of within 7 meters. The drone can carry enough food and water rations for 50 people. What’s more, every part is reusable and disposable. For example, the frame, which has a 3-meter wingspan, can be used for shelter or burned for fuel (Windhorse is meanwhile looking to develop an edible frame). Because the entire unit is designed for on-site use, there’s also no cost or peril involved in recovering it from the disaster area.
Many of the world’s poor live in shacks that are built very close together, and they lack electricity. As a result, they rely heavily on open flames for light, heat, and cooking, creating a high risk of fire. But conventional smoke detectors can’t be relied on in places that are already smoky. One devastating fire in Cape Town, South Africa, prompted a group of local university students to design a fire detection device specifically for these environments.
The Lumkani detector is a small wall-mounted unit that runs on batteries and, instead of being triggered by smoke, detects fires by monitoring temperature increases. The detectors use basic radio frequency technology to link all units within a 60-meter radius to a mesh network, which enables early warning alerts for the surrounding inhabitants. The $7 device also stores GPS coordinates, sends warning texts to residents, and can self-monitor the operating health of the whole linked system. Lumkani is working on a way to send real-time data to local emergency response units.
Data at the Digital Frontier
Do you own the land you’re farming? When will the next rainstorm hit? These are basic questions, but for some people living in emerging economies, they’re not so easy to answer. Startups are using clever designs and simple interfaces to provide the information that rural communities need to thrive.
For millions of small landowners around the world, verifying a legal claim to their land is a complex, expensive, and practically insurmountable process. And without documentation that proves that they own their land, protecting their property rights is nearly impossible, as is getting loans to expand their land holdings and businesses.
Landmapp, based in Amsterdam and operating in Ghana, has developed a mobile platform to make mapping and filing claims accessible to small landowners. The company educates farmers about property rights and then, for a small fee, uses its own platform to record and legally validate land ownership. Landmapp uses geospatial technology and cloud data on a tablet, meaning they don’t need fancy and expensive surveying equipment. FarmSeal, Landmapp’s first product, serves farmers; the company is also launching HomeSeal, for homeowners, and CropSeal, for sharecroppers and landowners. The startup’s platform incorporates local government, legal, and traditional community agreements, and is customizable for different locales.
3D-Printed Weather Stations
Weather data drives numerous economic and public safety decisions. But in many countries, a scarcity of weather stations means no data about vast geographic areas. Unfortunately, conventional weather stations are expensive, costing upwards of $20,000 per unit. In emerging economies, governments and rural communities don’t have the resources or training to buy and maintain them.
At the nonprofit university consortium University Corporation for Academic Research, researchers are leveraging 3D printing to fill the weather gap. They’ve devised a weather station that local government agencies can install in rural communities. The units use off-the-shelf, basic sensors, store data on a small computer, and run on energy generated by a single solar panel. The local agencies have 3D printers to create other parts, including the frame and wind gauges, which can be easily customized or replaced.
The cost? About $300. And beyond letting communities know when, for example, rain is on the horizon, the unit can also be a first alert for natural disasters, like floods.
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:
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.
Front-load the negatives. To ensure a strong positive finish, get bad experiences out of the way early.
Spread out the positives. Break up the pleasurable experiences into segments so they seem to last longer.
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.
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!
Historically, most of the data businesses have analyzed for decision-making has been of the structured variety—easily entered, stored, and queried. In the digital age, that universe of potentially valuable data keeps expanding exponentially. Most of it is unstructured data, coming from a wide variety of sources, from websites to wearable devices. As a recent McKinsey Global Institute report noted: “Much of this newly available data is in the form of clicks, images, text, or signals of various sorts, which is very different than the structured data that can be cleanly placed in rows and columns.”
At the same time, we have entered an era when machine learning can theoretically find patterns in vast amounts of data to enable enterprises to uncover insights that may not have been visible before. Machine learning trains itself on data, and for a time, that data was scarce. Today it is abundant. By 2025, the world will create 180 zettabytes of data per year (up from 4.4 zettabytes in 2013), according to IDC.
Big Data and machine learning would seem to be a perfect match, coming together at just the right time. But it’s not that simple.
The connected world is ever-widening, enabling the capture and storage of more—and more diverse—data sets than ever before. Nearly 5,000 devices are being connected to the Internet every minute today; within ten years, there will be 80 billion devices collecting and transmitting data in the world. Voice, facial recognition, chemical, biological, and 3D-imaging sensors are rapidly advancing. And the computing muscle that will be required to churn through all this data is more readily available today. There’s been a one trillion-fold increase in computing power over the past 60 years.
The importance of data prep
But having vast amounts of data and computing power isn’t enough. For machine learning tools to work, they need to be fed high-quality data, and they must also be guided by highly skilled humans.
It’s the age-old computing axiom writ large: garbage in, garbage out. Data must be clean, scrubbed of anomalies, and free of bias. In addition, it must be structured appropriately for the particular machine-learning tool being used as the required format varies by platform. Preparing data is likely the least sexy but most important part of a data scientist’s job—one that accounts for as much as 50 percent of his or her time, according to some estimates. It’s the unglamorous heavy lifting of advanced analytics, and it takes experience and skill to do it—qualities that are, and will continue to be, in short supply even as demand for data scientists is predicted to grow at double-digit rates for the foreseeable future.
It took one bank 150 people and two years of painstaking work to address all the data quality questions necessary to build an enterprise-wide data lake from which advanced analytics tools might drink. That’s the kind of data wrangling that has to be done before companies can even begin to test the value of machine-learning capabilities.
More data, more problems
There’s also the misperception that having access to all this new data will necessarily lead to greater insight. There’s great enthusiasm around data-driven decision-making and the promise of Big Data and machine learning in boardrooms and executive suites around the world. But in reality, says UC Berkeley professor and machine learning expert Michael I. Jordan, more data increases the likelihood of making spurious connections. “It’s like having billions of monkeys typing. One of them will write Shakespeare,” said Jordan, who noted that Big Data analysis can deliver inferences at certain levels of quality. But, he said, “we have to be clear about what levels of quality. We have to have error bars around all our predictions. That is something that’s missing in much of the current machine learning literature.”
Again, this is where the expertise of the data scientist is of critical value: deciding what questions machine learning might be able to answer, with what data and at what level of quality.
These problems are not insurmountable. Tools are being developed to help businesses deal with some of the data management blocking and tackling that stands in the way of advanced analytics. One company, for example, has developed a machine-learning tool for real estate and finance companies that it says can extract unstructured data in 20 different languages from contracts and other legal documents and transform it into a structured, query-ready format.
What is clear is that the business of combining Big Data and big computing power for new insight is harder than it looks. The benefits almost certainly will be huge. But companies are still at the early stages of experimenting with new data types and emerging machine-learning tools and discovering the drawbacks and complications we will need to work through over time.
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About Dan Wellers
Dan Wellers is the Global Lead of Digital Futures at SAP, which explores how organizations can anticipate the future impact of exponential technologies. Dan has extensive experience in technology marketing and business strategy, plus management, consulting, and sales.