Issue: 113
Sent: 27-05-2008 11:13:02
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Emotional Influence - Lester Wills
I have spoken long and often about emotive influence on investment decisions as I think it is important to understand what is going on. In fact my Doctoral research was based on this premise, i.e. understanding the decision-making process when it comes to preparing financially for retirement.
It seems that others have similar views. Knowledge@Wharton recently carried an article all about the hidden influence of emotions on consumer choice. This led me to dig deeper and I discovered a plethora of research going on into how emotions can determine consumer choice, and how retailers are trying to alter their potential customers emotions and thereby encourage purchases.
Does such an approach have merit in the financial services industry? I am biased so I will let readers make up their own minds.
Liam Fahey from the Emotion Mining Company commented recently that when deconstructing the customer experience, emotions are not usually considered. As he says, this is despite the fact that every customer experience stimulates emotions.
He goes on to point out that emotions reside at the heart of the customer's needs and wants and 'rational' choices are always influenced and often driven by emotional considerations. I would argue that this is particularly so when it comes to decisions concerning money and even more so when such decisions are about money invested in a highly volatile market.
Fahey illustrates his point:
'For example, a customer is leaning toward buying a product because it has superior functionality while being priced approximately the same as a rival product. A rational choice would be to buy the product, better functionality, same price'. For our purposes, lets assume a savings product, one being promoted by DGY Brothers and the other by a subsidiary of a well known manager.
This is important as Fahey asks the question, what if the customer feels uncomfortable with the brand? What if the product's colour evokes the negative emotions associated with the customer's least favourite football team? (In my case a certain north London football team who recently played at Wembley in all white).
As Fahey points out, what might seem like a simple rational choice has now become a more complex choice process in which the customer's emotions play a pivotal role and may well lead to a purchase decision that the so-called "rational" choice criteria might not have predicted.
It is for these reasons that Fahey teamed up with a neuroscientist and established the 'Emotion Mining Company' to develop what has become a very significant database of customer emotions. They have developed a set of web-based data gathering and analysis methods that highlight the role emotions play in defining and motivating customer experiences.
As a result, this team has the ability to distinguish between expressed conscious emotions and unexpressed subconscious emotions, i.e. the emotions that are not readily or reliably expressed. In other words emotions that customers may not even be aware of themselves.
Fahey argues that the emotion mining methods can also deconstruct the customer's emotional experience as a direct means to detect customers' aspirations. To be exact, the needs that otherwise would remain under the radar screen for those seeking to influence customer behaviour.
"To understand the emotional life of customers is quite important as it impacts their preferences, choices and commitment to brands and leads to behaviours and ultimately financial performance," he says.
He explains how they consider positive and negative emotions when analysing customer reactions. He gives the percentage of positive and negative emotions associated with any customer experience arguing that although this represents the simplest emotion finding. In many instances it signals an alert to the existence of the need to change the experience, and in some cases, significantly. As he explains, an emotion need unfulfilled indicates the presence of a opportunity.
Now this is where it starts to get really interesting. To illustrate his methodology, Fahey provided details of a financial services firm selling insurance. In the analysis they found the percentage of negative emotions involved in the average sales transaction was a staggering 70%.
He found that neither the customers nor the sales professionals were enjoying the buying-selling process, suggesting that something was fundamentally wrong with the approach being used by the financial services company. He went on to argue that this simple finding alone indicated that if the situation was corrected and the customer experience improved, sales would improve.
Given the inferiority complex of many customers when they first visit a financial planner, I would not be surprised if many of them also score highly in terms of negative emotions. Understanding that aspect alone could be significant in terms of developing the relationship.
I will continue this next time, meanwhilre, I mentioned last week how I am finding things very different here in the US and that I have started a Blog to reflect that. For those who are interested the address is
http://brock-expatblues.blogspot.com/
Have a read and you, like me, might be surprised at what you take for granted.
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