Social norms and market norms are separate and you must not mix them. Social norms prevail in social situations. For example, if two friends go out skiing and one friend gives the others some pointers just for fun, that’s a social situation and social norms prevail. The instructor would find it absurd to be given cash at the end of it, but might feel slighted if the student didn’t invite him to his Super Bowl party. If a person goes out and hires a professional ski instructor, the ski school requires the student to pay full freight, but the instructor has no expectation of being invited to the student’s party.

In most of our lives, it’s clear which realm were in. However, in Predictably Irrational, which I’ve mentioned before, Dan Ariely shows the danger of mixing these two realms, because if you do, market norms typically win, though by themselves social norms can have a bigger effect. For example, when they pay people to do tasks, the people who are paid tend to perform more work in a given amount of time as their pay increases. But those who do the work as volunteers actually do more work than any of the paid subjects (see pages 70-75). People love to help other people and in the social realm we work for the good feeling that we get from doing something for someone. This is so powerful, in fact, that research shows that giving to others makes us happier than does buying something for ourselves.

You mess this up if you tell Aunt Marge how much your gift bottle of wine cost. Even if she knows it’s cheap or expensive, even if she knows the exact dollar worth of the wine, it fits within the context of social norms until the price is explicitly mentioned. But then, no matter what the price, it fits within market norms.

Companies mess this up all the time by trying to ingratiate themselves, pretend you have a relationship, you and the company are friends. But the second they hit you with a late fee and refuse to budge, the second they tell you that they have policies and can’t treat you differently than everyone else, they have violated the social norm and entered the realm of market norm. If it has always been a market relationship, that presents no problem. But if you’ve been courted like a friend, like your relationship is personal, like you won’t be treated like everyone else, the abrupt reentry into the realm governed by market norms feels like a betrayal. You end up having stronger negative feelings toward the company than you do towards companies for whom they never had any warm fuzzy feelings. It’s like the difference between hailing a cab and, upon reaching the destination, being asked to pay the fare. No problem. But if you ask a friend for a ride to the airport and at the destination you’re asked to pay “just half” of the cab fare because “we’re friends”. It’s a stab in the back and when companies act this way, they should be prepared to have accounts closed and to see virulent blog posts and horrid word of mouth publicity.

Ariely puts it thus:

If you’re a company… you can’t have it both ways. You can’t treat your customers like family one moment and then treat them impersonally — or even as a nuisance or a competitor — a moment later when this becomes more convenient or profitable.

Personally, I never become “friends” with companies, only with people. So no matter how much I respect a business, I don’t buy t-shirts with their logo and I don’t put their stickers on my car. So I’m disloyal, but I’m safe. But what about all those people who not only buy ice cream, but buy a Ben and Jerry’s t-shirt, that is they pay for the right to wear advertising?

Of course, I can be bought cheap. If I don’t hate your company and there’s a free t-shirt in it…

We as humans tend to key on contrast and judge value by the relationship of one thing to another. If we can find a comparable, we always do. The way Starbucks got us to buy $4 cups of coffee (er, you, anyway, since I have never bought a coffee a Starbucks, but I have bought a double chocolate cream frappucino) was to make the experience difficult to compare to Dunkin Donuts. Euro-style tables, funny names, funky music, soft lighting, all contributed to an ambiance sufficiently different to make the comparison difficult. Tough economic times, have made people more willing to see coffee as coffee and refuse to pay for the experience (that and, of course, the fact that the Starbucks experience has become mundane itself, just like Dunkin’ Donuts).

We all know that from personal experience, but I have been seeing it a lot more clearly since reading Dan Ariely’s fun book Predictably Irrational: The Hidden Forces That Shape Our Decisions and the interesting, though a bit more stodgy Robert Cialdini book Influence: The Psychology of Persuasion. So here’s where it gets interesting. Savvy marketers know that we judge value by contrast and relationship. So the Economist offers subscriptions for the following rates (or did when Ariely did his study):

1. $59 for the online-only subscription.
2. $125 for the print-only subscription.
3. $125 for the print and online subscription combined.

What’s going on there? Why even bother to offer option 2? Simple. It isn’t clear which is the better deal between $59 for the online subscription or $125 for the print subscription, but there’s no question which is the better deal between the print-only and the print and online option. Because of that and because those two are obviously comparable — different offers at the same cost — we key in on those two options. When Ariely showed the offer to MBA students at MIT, only 16% went for the online-only subscription, none went for the print-only option and a whopping 84% signed on for the combo. The deal was too good to pass up. But, and this is where it gets really really interesting, what if you eliminate the print-only subscription? After all, not a single person wants it anyway, so it’s not really an important part of the offer, right? Well when he offered only two choices, the online version and the combo (options 1 and 3 in other words) to MBA students, with no “decoy” offer, 68% opted for the internet-only option. So in other words, by focusing the comparison on the $125 option, they shifted from a measly 32% willing to pony up $125 to a whopping 84%. That’s the power of contrast! We are just not wired as humans to think in absolutes, which is usually a good shortcut as historically, evolutionarily (and in most life-threatening situations) we have very few choices and choosing quickly has advantages. In the modern marketplace, though, it’s a different story.

Cialdini has all sorts of examples where the contrast principle is used to influence our decisions. Brunswick pool tables instructed salesmen to start by showing the most expensive pool tables “just to see what the high-end features are” and then bring people down the price ladder. Result: a big increase in the amount people were willing to spend because the mid-range tables now seemed cheap. Some clothing retailer figured out that if a man comes in to buy a suit, always sell the suit first and the accessories second. After making the big purchase, what’s another $20 for a tie? But if they choose the tie first, they’ll go for the $10 tie instead.

This is also why discounts, coupons, MSRPs on cars that nobody pays, and “$97 value, yours for only $27″ work even if nobody in the history of humanity would consider paying $97 for the piece of junk that really isn’t even worth $27. Even though in our rational mind we know with certitude that the list prices are absurd and nobody pays them, they anchor us on high prices and we compare the sales price to the high price put in our mind because we are wired to compare. This is so subtle and so powerful that if you simply ask people what the last two digits of their social security number are, this will actually influence how much they are willing to pay for something later. Those with higher numbers are actually willing to pay more because the higher number is still stuck in their mind and that provides the mental anchor at that moment. In the absence of a meaningful comparison, they are simply comparing the last two numbers they have heard and that makes a price seem reasonable or unreasonable depending on what has become set as their anchor.

So as a consumer, you need to really think about what comparisons you make implicitly, without thinking about it. And as a merchant, of course, you need to think about what comparisons your customer is making.

What happens when I send a note of praise to your company? Does it get handled efficiently and effectively? Does it build my loyalty or destroy it?

I usually refrain from nasty notes. In most cases, I figure I’m better off encouraging continued good service with a letter of praise than sending a nasty letter in a vain attempt to change a place that gives bad service. When I do send a note of thanks by email, where responding is simple, I expect a response. Some companies do a great job. A friend wrote a note to say that Formula 409 had been really effective at cleaning a problem mess and he received a thank you and coupons for all kinds of free product.

So I recently wrote to a company praising their tech support (see below for a copy of the letter). I had some trouble installing a new DSL modem and getting connected. I wanted the tech rep’s supervisor to know that I got some of the best support I’d ever gotten, but there was no email contact for tech support, general contact, or a simple “comments and complaints” address. So I sent it to the only department that had an email address on the website: sales. Now, you would think if anyone knew the importance of customer service it would be the sales department.

To my surprise, I didn’t get any response. How hard would it have been for someone in sales to say “Thanks for contacting us. I’m glad we could help you out. I’ll see that your comments get forwarded to the tech support people”.

So I have two questions:

1. Why didn’t sales respond?
2. Why isn’t there a testimonials@zyxel.com email address?

The sales department’s failure to respond wiped out much of the goodwill created by the amazing technical support rep. If I had sent a complaint, I bet I would have gotten a response, but someone who sends a complaint may have already decided to hate you forever. Recovering the good will of that customer will be hard. If you do it right, that person will be loyal forever, but doing it right takes a lot of work. When someone writes you a letter of praise, though, it’s more like dating. That person is saying “I think I would like a long-term relationship with you.” You don’t have that loyalty yet, though. Think of it as a test, like a first date. Is there someone there? Is there a good response? If not, you’ve squandered that opening the customer offered. That’s what the Zoom modem people did to me.

If you want people to say good things about you, you should make it possible. So why don’t you have an email address for testimonials? You have “support”, and “sales” which should handle problems and complaints. Who do you have assigned to handle praise?

I am not writing for a sales question, but because there was no general contact email address on the contact page.

I just wanted to ask you to forward this to management and especially management in support to say that I was really pleased with the support that I got today on my Zoom 5615A modem. I’ve been tearing my hair out for two days going to a WiFi hotspot and searching the internet, calling my ISP, and made an inquiry to Zoom which got me connected, but then I ran into troubles when I rebooted and couldn’t get back where I was.

This afternoon, I could tell that though the tech was running through a step-by-step protocol, he seemed to know a lot more about modems than just what was written in his protocol. So I asked him a few questions, got him to explain some things so I could better explain my goals and my situation. Deviating far from the script and giving me the more fundamental knowledge I needed to frame my question correctly, he really sorted me out. Everything works now — modem, router, the whole deal. I would also commend him for his patience as I went through this screen and that screen and changed over to another computer.
[other identifying details snipped]

Quick test: you are about to ask someone for a favor or to give you something. What’s the magic word?

Without hesitation any child can tell you that it’s please. But in fact there is another magic word. Consider this study reported in Robert Cialdini’s book Influence: The Psychology of Persuasion (p. 4). People standing in line were asked in three different ways whether or not the person asking the question could cut in line. Here is the question, followed by the response rate in each case.

Frankly, I find it sort of surprising that 94% of the people said yes to because I’m in a rush which is barely a reason ("I’m in a rush because my plane leaves in one hour and I need to get this copied before I get to the airport" is a reason). But the amazing thing is that there’s such a huge difference between no because at all and one that adds no information whatsoever (obviously the person wanted to make copies).

It occurred to me that I should subtitle pages "Please read this because I wrote it" as in "The Magic Word (please read this because I wrote it)."

Preparing to leave on a flight from Burlington, VT to Columbus, OH to see my wife I get online and find out my flight is delayed. So I show up at the airport an hour before my flight (a small airport and I have no bags to check, so this should be enough). I find that I can’t check in using the self-serve kiosk because it’s within 30 minutes of the scheduled departure time. The departure board, the automated phone system and website all know that the flight is still at least an hour a away, but the kiosk won’t take me because it’s within 30 minutes. Great. Why isn’t this database connected to all the other databases so that I can check in 30 minutes from the currently announced time of departure, rather than some schedule that slipped days ago?

So I go stand in line and about 40 minutes after my arrival at the airport, I get a ticket agent who says she won’t check me in because they can’t check anyone in within 20 minutes of departure. It is exactly 20 minutes from the announced departure time which, by the way, was moved up by 10 minutes since I checked the website 45 minutes earlier. Finally, after getting a bit hot, she called to “reopen” the gate and get me on the flight. As I gather my things, she yells “Run sir!” I am still gathering some stuff (this is a total of about 26 seconds by the way) and she yells “Sir! You have to run now!” So I run. I offend a woman by cutting in line a bit during the security check. I get there and the gate is closed. Why? Because the aircraft is not even in the airport yet!

We finally load and the gate closes at 5:55. It was 5:00 when she told me she would not allow me on the plane because it was within twenty minutes of departure. As it turns out, the flight wouldn’t even land at the airport until 5:30. Why isn’t the customer service terminal connected to a database that updates in real time or near real time? In an era when Wal-Mart can forecast, not just record, how much it will sell of any given item hour-by-hour through any given day, how can US Airways tell a customer that he doesn’t have time to get to the gate when the plane is still thirty minutes from landing (and again, this is a small airport and you can get to any gate in five minutes).

Then when I get there, I find that the 4:55 flight to La Guardia is now scheduled for 5:20. Of course it is 5:20 and the plane is nowhere to be seen. Whatever. That’s not the bad part. The bad part is that the 12:24 flight to La Guardia is scheduled to leave at 5:49 (I think they may also need a lesson in significant digits). I can’t describe how mad I would be to see the 4:55 flight leave before me if I were on the 12:24. But it gets better. When I get on the plane, approximately 1/3 of the seats are empty. Why didn’t they just fill it with people from the 12:24? I can only guess that it’s because once again their database is not up to the task and they didn’t have a count of seats available.

So then I get to La Guardia and things go reasonably smoothly to get on my next plane, despite delays. My boarding pass says that I’m in row 9D. The guy in front of me is in 5F. The only thing is, the plane only has three rows, labelled A, B and C. After everyone decides that the obvious solution is to take any seat, since this is obviously completely messed up, the flight attendant gets on the intercom to explain the seating situation. Row A is A, Row D is Row B and Row F is Row C. Makes perfect sense. Somewhere there was a software problem. Since that rule meant that everything mapped perfectly and there was no conflict between someone assigned to seat 9F and someone assigned to seat 9C, presumably the computer knew all along that there were only three rows, A, D and F of course.

Of course, all that data exists. It’s all available in some systems, but not in others. As a result, customers are mad and confused. Customer service reps are harried and yelled at. But that’s okay, because the airlines have so many customers and are making so much money, they can afford to piss off customers. Or maybe not.

You’ve no doubt heard of single-issue voters. People who vote for a candidate purely based on issues like abortion, capital punishment, gun control and so on. But what about single-issue customers? That is, customers who won’t patronize your business because it’s so unfriendly to smokers, vegetarians, or whatever. How many of those groups can you afford to alienate? Maybe not as many as you think.

How businesses should really count vegetarians (and other single-issue customers) » »