Elevate the Positives or Eliminate the Negatives?

The majority of transactions I have with businesses and corporations are mostly forgettable experiences. I'm thinking electricity & water suppliers, internet providers, Amazon deliveries. That's a good thing right?

If I'm having to spend mental energy thinking about my internet speed then it's probably because I've experienced a pothole in the service and there's an issue that needs sorting.

And so "mostly forgettable" experiences within the office and within real estate would be a success wouldn't it? It means nothing went wrong. You got what you expected. You didn't need to spend mental energy thinking about the air-conditioning or the cleaning or the service charge costs.

Think of it as the foundation stage of a successful customer experience. First you focus on the potholes and ensure a consistently good experience which then frees you up to progress to the next stage - creating the moments that will make the experience "occasionally remarkable".

What strikes me after 25 years in the real estate industry is that most investors never pivot to that second stage.

It's as though creating a "complaint-free" service is more important to landlords and operators than creating an extraordinary one.

Various studies have shown that reliability, dependability and competence meet customer expectations. In order to exceed customer expectations you need to optimise the interpersonal and behavioral parts of the service. You need your team to interact like human beings!

I recently polled my LinkedIn contacts about what they would do with the results of a satisfaction survey of customers who had been asked to rate their emotions on a scale of 1-7, with 1 reflecting a very bad experience and 7 being a very good one.

In order to simplify the process I narrowed down the decision making to one of three options; 1. Option 1 - magically eliminate all of the unhappy customers (1's, 2's and 3's)

2. Option 2 - instantly vault all your neutral-to-positive customers to a 7 (4,5&6 to 7)

3. Option 3 - spread the budget across all customers to move them all up one point on the scale

15% of the respondents chose to focus on moving unhappy customers to neutral and an overwhelming 54% chose to spread the limited budget on trying to improve all responses by one point on the scale.

At first glance you could make an argument for both approaches but if you're at all interested in the ROI of your precious capital then there's only one option which bares scrutiny. Here's why.

Starbucks discovered that a merely ‘satisfied customer’ visits Starbucks 4.3 times per month, spends ￡4.06 and is a customer for 4.4 years. That’s pretty good, but more impressively, a ‘highly satisfied customer’ visits 7.2 times per month, spends $4.42 per visit and is a customer for 8.3 years.? Extrapolating these figures over a year, it’s clear the ‘highly satisfied customer’ spends 82 percent more each year—and is worth $3,169.67 over the span of their ‘customer life’.

The customer experience researchers at Forrester's have built similar models of the financial value of customers and their data supports this idea that a customer who is "very satisfied" will spend considerably more than a customer who is merely "satisfied".

In other words, the most satisfied and positive in any industry tend to spend more, so moving a 4 (5 or 6) to a 7 generates more additional spending than moving a 1 to a 4. Additionally, you would expect many more customers to be in the 4-6 zone than in the negative 1-3 zone and so with Option 2 you're creating more financial value per customer and reaching more customers at the same time.

The Forrester data provides an astonishing insight - if you Elevate the Positives (Option 2), you'll earn about 9 times more revenue than if you constantly focus on the potholes and Eliminate the Negatives.

And so why do real estate investors and operators repeatedly prioritise the customer problems and the negative feedback?

"Bad news travels fast" and I think for many of us, we can empathise with the tendency to magnify the negative and attach less weight to the positive. Think of a post on LinkedIn with overwhelming positive comments but one slightly negative reaction or a 360 degree feedback with mountains of positive data but a couple of areas to work on.

It's probably no surprise then that investors and operators are attracted to the negative comments and the worst experiences but by doing so, miss an enormous financial opportunity to create memorable and remarkable experiences.

There's nine times more to gain by elevating positive customers than by eliminating negative ones and that process of elevation doesn't happen by accident. It happens by service design. It requires a thoughtful, intentional approach to experience, amenity and hospitality.