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Sunday, March 6, 2011

Changing customer behavior? Choose carrot or stick carefully.

I got an email from my insurance agent, informing me that I hadn’t signed up for electronic delivery of my bill. It turned out that I was still receiving paper bills and, sensibly, they wanted me to shift to paperless transactions.

But they didn’t just rely on an appeal to my sense of morality to get me to make the transition.

To motivate me to change my behavior, they told me that if I weren’t to change my billing to the paperless option, I would lose my 10% ebilling discount (that frankly, I was unaware I had.)

There are a lot of ways to get customers to change their behavior. In many cases, change is as easy as letting customers know what behavior you expect of them. In others, the only way to effect the change in customer behavior is align the customers benefit with it. Some companies gently make it worth the customer’s effort to change. Southwest Airlines is a master at this, for example, getting customers to the gate early through their unique boarding process and keeping them close by with comfortable chairs and electrical outlets.

Another way to align customer interests with the desired behavior is to punish the alternative.

In this case, my insurance company suggested that a benefit I already receive would be lost if I failed to act the way they wanted.

Whether the discount was real or not is almost immaterial. I was going to have to pay an additional 10% if I didn’t make the small change in behavior they were asking for - enough for me to go online and make the shift.

Both methods of changing customer behavior can be effective. Of course, Southwest’s behavior changes are subtle enough that most don’t even perceive them until they’re ingrained, and their efforts often win them fans along the way. My insurance company on the other hand? Well, the threat was definitely perceived. And while it didn’t upset me any (it might others) it certainly won’t endear them to me either.

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