Customer Psychology

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When Customers Help Set Prices

To many managers, the idea of involving customers in pricing decisions seems counterproductive. For most companies, pricing is a sensitive, private affair. But it may be time to reexamine those ideas. Letting customers have input on prices provides opportunities for customization and can promote greater customer engagement. Opening up customer participation also offers a way for companies to create a new sense of excitement.

Image courtesy of Flickr user Peyri Herrera.
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The Big Upside of Customer Participation

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Encouraging customers to provide feedback and recommendations directly to a company engages them in valuable ways. Researchers looked at customers of a global bank who engaged in either positive word of mouth, or provided suggestions, or both. They found that customers who ranked high in participation tended to purchase more products and services. In other words, participation was more closely associated with customer spending than word of mouth was.

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Stories That Deliver Business Insights

Companies are gaining value from ethnography, the in-person study of how people actually use a product or service. Through its attention to the details of people’s lives, ethnography can be a powerful tool to help executives gain insights into their markets. Ethnographic stories can also be indispensable in helping executives rethink their assumptions about what customers care about and about overall strategic direction.

Image courtesy of Flickr user PhotKing ♛.
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One Size Does Not Fit All in Social Media

How can corporations get more value from their use of social media? They can start by paying attention to research into developmental psychology, argues Boston College’s Gerald C. (Jerry) Kane. Understanding why people use social media differently at different ages can provide considerable insight for corporations that want to interact with customers.

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Communicating Corporate Social Responsibility to a Cynical Public

Companies are increasingly engaging in CSR activities. But unless companies communicate their CSR achievements wisely to stakeholders, they fear being accused of greenwashing. A study of CSR communication practices in 251 European corporations yields seven guidelines for effective CSR communication. The authors conclude that many beliefs about the risks associated with CSR communication are exaggerated, and that companies that communicate honestly about their activities have little to fear.

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How to Identify New Business Models

Companies traditionally pursue growth by investing heavily in product development so they can produce new and better offerings; by developing consumer insights so they can satisfy customers’ needs; or by making acquisitions and expanding into new markets. This article identifies a fourth method: “business model experimentation,” or using thought experiments to quickly and inexpensively examine new business model possibilities.

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Can Marketing Lift Stock Prices?

Traditional marketing practices are increasingly viewed with skepticism. In many organizations, marketers struggle to document the return on investment for expenditures; as a result, marketing has less influence in the boardroom — and marketing is viewed as a questionable cost rather than a worthy investment. This article is based on a study that found that certain marketing techniques can influence a company’s stock market valuation — if the techniques increase customer lifetime value.

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When Should You Nickel-and-Dime Your Customers?

When should a company “nickel-and-dime” customers by charging separately for various extras, and when is it better to combine all of the charges into one total price? It depends on a variety of factors, such as whether customers comparison shop, whether they are more sensitive to the prices of some components (delivery) than to others, whether the price of one component is small or large relative to the others, and whether the company controls the costs and quality of a particular component.

Image courtesy of Flickr user Kliefi.

Designing the Soft Side of Customer Service

This article examines how three factors—emotions, trust and control—shape customer assessments of service experiences and their overall view of service providers. Drawing on research conducted at companies including Dell, the Seattle Supersonics and McKinsey & Company, the article posits that organizations seeking to excel in customer service need to attack the “soft side” of customer management with the same type of intensity they have previously used to reengineer workflow and supply chains.

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Why the Highest Price Isn’t the Best Price

There are several questions an organization should ask to improve its pricing strategy, including: What is the marketing strategy in this segment? What is the differential value that is transparent to target customers? What is the price of the next best alternative offering? What is the customer’s expectation of a “fair” price?

By asking these questions and others, an organization can choose a price point that provides the largest long-term value to the supplier.

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