Understanding Consumer Behavior: Signaling

The way people make purchasing decisions isn’t always logical. Consumer behavior is determined by a great number of factors. One of the challenges of good marketing figuring out the best methods that appeal to how most people think when they’re shopping.

A recent article in the New York Times takes a look at some of the eccentricities in how people choose their favorite brands. The basic argument of the piece suggests that for most consumers, decisions are made via a mix of reasonable research and emotional impulse.

The writer, Davidson, offers the example of his decision to purchase a more expensive baby formula, largely because the company’s been around longer than many of its competitors. This signals to him that they care about their reputation enough to consistently offer a quality product. This is an assumption based on little evidence, yet one many other consumers are likely to understand.

For certain purchases, especially for items that influence the health of your family and more costly purchases, people want to feel confident that they’re choosing an item of the best quality. Whether or not they know that the product’s the best matters less than how they feel.

For many small businesses, it isn’t too complicated to ensure that your company is well represented in the research phase of consumer shopping. Any business that cares about its reputation knows already to only offer quality products and consistently excellent customer service. It’s the more emotional side of consumer behavior that can present a challenge.

Many of the examples the article cites of successful signaling by brands consist of larger companies demonstrating their success by spending lots of money on advertising. If they’re already successful, the thinking goes, clearly they’re already doing something right and consumers should have confidence in their product.

So how can a small business use this knowledge of consumer behavior on a smaller scale?

  • Include customer testimonials on your website, to give people confidence that you’ve provided quality products and services in the past. If one of your customers is known and respected in the community, all the better.
  • Are you a member in a trade organization? Have you earned any awards or received favorable reviews? Show that on your website. It lets visitors know that your business cares about its reputation and as such will strive to offer quality goods and services.
  • Make sure your website looks professional. If it looks sloppy or poorly designed, people are less likely to trust that it’s a legitimate business. It’s worth it to spend a little money on a good graphic designer.
  • Don’t go too low in your pricing. Some people will always take what looks like the better deal (and little by little learn that this often means having to replace the original purchase soon thereafter), but others will choose to look for the higher quality product rather than the cheapest one.
  • Offer a money-back guarantee or warranty. It’s much easier to feel confident in making a purchase if it doesn’t feel like an obligation.

When in doubt, think of your own shopping tendencies and talk to friends and family about their consumer habits. What turns them off to a potential purchase? What helps them decide to go ahead with it? Consumer behavior is varied, but there are enough trends and tendencies to help businesses make effective marketing decisions.

Great Customer Service as Marketing

Marketing is about reputation. Creating one amongst those not yet aware of your business, and maintaining a positive one for those already familiar with you. Hands down, the number one thing a company can do to ensure a consistently good reputation is to provide exceptional customer service.

People remember their best and worst customer service experiences and are quick to talk about them to friends, colleagues, and sometimes a much larger internet audience. Companies can now be made and ruined according to their reputation in online forums.

Social media and online review sites have made what was always true much more so: customer service is crucial to good branding and marketing. While providing acceptable customer service will help you to avoid the PR disasters of bad online reviews and social media rants, if you want to really stand out from the competition and turn customer service into a form of marketing, you’ll have to resolve to go above and beyond.

One particular example of a company that’s gained a lot of positive attention based purely on their reputation for customer service is Zappo’s.

When it comes to buying shoes or clothes online, some may still be skeptical, concerned about finding the proper fit or paying for shipping. Zappo’s alleviates those concerns with free shipping on many orders and a free 365-day return policy for all items. In addition, many customers have publicly shared stories of Zappo’s going above and beyond to help them out, fueling one of the best word of mouth branding successes in recent business memory.

How did they achieve this success? For one thing, company CEO Tony Hsieh has acknowledged that the company made a decision early on to treat customer service as a top priority. They’re picky in hiring service positions, making sure not only that the candidate is qualified, but also a good fit for company culture. Perhaps most importantly, in contrast to many large companies, Zappo’s is willing to spend more on customer service to get better results, rather than seeing it as an area to cut costs. As a result, customers can get ahold of a competent, friendly representative anytime they need help, and the company inspires articles like this and this, without having to put money into marketing.

If your customer service is good enough, your customers will do the marketing for you.

Maintaining Customer Satisfaction

We all have businesses that we’ve had exceptional customer service experiences with, and others that we immediately think of when the subject of bad customer service comes up. Ensuring customer satisfaction is hands down one of the best ways for a small business to keep current customers happy and encourage new ones.

Customer service is actually a fairly crucial aspect of marketing, as it has a strong relationship to maintaining a positive brand and encouraging the kind of word of mouth recommendations that are invaluable to small businesses.  With consumers’ growing reliance on review websites like yelp.com and the ease with which someone can broadcast a bad experience with a company via social media, there is extra pressure on businesses to make sure current customers are happy with the goods and services they provide.

So how does a business encourage positive word of mouth and avoid the kind of experiences that send customers ranting and raving to their friends and online social networks?

  • Keep it personal – Have you ever gotten stuck in phone message loop, seemingly endlessly pressing buttons without ever getting to an actual person?  How often have you tried to send a question or complaint via an generic online form or e-mail address and never gotten a reply?  I’ve never known anyone who was more satisfied with an automated customer service experience than with getting a response from an actual human being.  In the effort to increase efficiency, many businesses have opted for methods that isolate and anger customers.
  • Make providing feedback easy – This is valuable on multiple levels, as it keeps you informed of ways to make your business and products better and lets your customers know you’re interested in listening to their suggestions.  Most of us have at some point had an idea for how to make a product we like better, but it’s rare that people seek out the information to communicate that to the company.  On the other hand, if providing that feedback is easy and takes little time or effort on the user’s part, then there’s no downside to providing it.
  • Don’t oversell – Don’t say or imply that your product does something more or better than it does.  Don’t say a new product or update will be ready by a specific date unless you can make sure it will be.  Sometimes user expectations will exceed your promises in spite of your best efforts and there’s little to be done about that, but you can make sure you’re not actively creating higher expectations than what you can provide.
  • Listen – Don’t just make it easy to provide feedback, pay attention to it and make changes based on it.  Not every customer’s going to feel the same way and sometimes what different people want will be in contradiction, but pay attention to the most common suggestions and ideas and act on them.
  • Try to establish and encourage a community – Whether this be via a forum, a blog with enabled comments, social media or meetings with customers at conferences, if your customers can talk to each other and you and know they’re part of a larger conversation and community, it keeps your company and products top of mind and gives them a greater investment in their relationship with your business.
  • Don’t deny or dodge responsibility for mistakes  – This seems to be largely the purview of particularly large companies that train their customer service representatives to never admit an error or apologize.  When I’ve encountered it from a company, I never go back.  I know to many business owners and marketers, the idea of offering an apology or admitting an error is blasphemy, but for many consumers, it’s meaningful to know a company can acknowledge a problem with sincerity and it lets the customer know you’re going to work to avoid repeating the mistake and improve things moving forward.

It is imperative that small businesses make customer satisfaction a top priority, or all the amazing marketing techniques you may find the means to employ will come to naught once word gets out. Don’t let a bad customer experience ruin your brand.