Surprise and Delight Tips
Beware the Sceptic
Organisations struggling to be more customer centric sometimes decide to delight their customers unexpectedly, but the effectiveness of this ‘Surprise and Delight’ depends on what type of loyalty mechanism is in play between you and your customers. It's important this is considered when planning your Surprise and Delight strategy to avoid damaging your standing with the very customers you are trying to impress.
A study by Marketing Science Institute1 points out that customers are loyal because of 3 intrinsic behavioural mechanisms:
- Habit: memory based loyalty, formed from consistent and automatic spending patterns, notably in customers whose usage does not change over time.
- Dependence: rational loyalty driven by a cost-benefit analysis of switching costs, particularly in customers with a wide product holding.
- Relationship: social and emotional loyalty, built on the trust that arises through multiple interactions typically in long-tenured customers.
To look at the impact of ‘special benefits and experiences that go beyond the core offering' the Marketing Science Institute team tagged customers to each of these 3 mechanisms in a telco’s database, and identified 4 customer segments that each responded differently to a surprise offering of 2 months’ free service – giving us a guide to who should be the recipient of Surprise & Delight investment:
- Loyalists: have high levels of all 3 loyalty mechanisms. These customers are the best targets for S&D as the gift signals that you still care and are not taking their loyalty for granted. Churn dropped 5.1% following the offer, although there was no expansion of their business.
- Dependents: have a broad product holding with you but low ‘habit’ and ‘relationship’ levels. You need to be careful with these customers, defection rates did drop 5.3% but the likelihood of them expanding their business also dropped by 8.6%, perhaps because they were nervous to add to their dependence – so best to combine S&D with socially-oriented activities to build trust.
- Sleeping Dogs: these customers are mainly bound by ‘habit’. Be careful about waking these customers up with a gift as they may play (they expanded their business by 1.9%) or bite (defection increased 3.3% as well). Better to wait until ‘dependence’ and ‘relationship’ grow.
- Sceptics: these customers have low levels across all of the 3 loyalty mechanisms, so don’t engage! They viewed the offer with suspicion – perhaps assuming it was to compensate for an inferior product, and increased their churn by 5.8%
This tells us that the effectiveness of Surprise & Delight works best when your customers are already loyal but have some 'head room' to do more business with you. We should be careful which customers we choose to surprise, if we want to be delighted with the result!
Ellipsis specialise in Loyalty and Customer Insights. We help our clients become customer centric, because we believe getting this right is crucial to creating value.