Embrace This Amazing Way Customers Evaluate You to Gain Success

Welcome to?Why Customers Buy, my weekly LinkedIn Newsletter series that explores how customers make decisions. It reveals ways to unlock what customers really want with new concepts and practical tips that drive value. Subscribe today?right here. Listen to our latest podcast episode?here. Subscribe to our YouTube channel?here.

People tend to be less sensitive to improvement the more things improve.

Diminishing sensitivity is why what exceeded customers’ expectations and delighted them in your experience on its introduction becomes what customers expect and appreciate—but don’t celebrate—upon return. So, let's look at what diminishing sensitivity today means to your experiences, the implications of it in your customer evaluations, and what you can do about it.?

Diminishing Sensitivity is part of Nobel-Prize Winning Economist Professor Daniel Kahneman's Prospect Theory. However, hundreds of years ago, Swiss mathematician Daniel Bernoulli wrote a famous paper about it.?Bernoulli's Hypothesis?was people accept risk not only based on what they could win or lose but also on the usefulness of engaging in the risky task or action. Professor Kahneman brought Bernoulli's Hypothesis back into modern psychology to explain how people evaluate things.

Diminishing sensitivity to improvements is a little like the difference between giving a wealthy person $100 vs. giving it to someone poor. The wealthy person will appreciate it, of course, but the poor person will feel the effects of an extra $100 more than the wealthy one. In other words, diminishing sensitivity explains why the more of something you have, the less you feel strongly about getting more of it.

Video games demonstrate this concept well, too. The difference is impressive if you have Football for the Atari 2600 game console and then get to play Madden's NFL 10 version. People are blown away by the improvement. However, once you start comparing Madden's NFL 10 with Madden's NFL 12 or 14 versions, you don't have that exact "Wow!" moment. Things improve, of course, like the players have steam coming out of their mouths when they play in winter and other details in later versions, but nothing like the enormous gains from Atari's Football.?

The Curse of Improvement

The iPhone has a bit of Madden's NFL problem, too. The original iPhone turned the world on its ear when it first launched. Now, 14 versions in, I am hard-pressed to remember which number I own when asked.?But not because it's terrible now; quite the opposite. It's because it's so good.??

iPhone can do all kinds of things in every new iteration. It improves on some of those attributes, i.e., the camera and the screen get a little better than the last. It also adds new features that will enhance the experience. However, these tweaks aren't the same as the first iPhone introduction.?

The iPhone has the Curse of Improvement.

The Curse of Improvement shows that as you enhance your offering, whether a physical product or an intangible thing like your customer experience, people might not notice or make a big deal about further improvements after a few of them roll by.?

For example, the first time you stay at an excellent hotel chain, you think, "Oh, this is pretty good. I like it here." However, after visiting a few more times, you expect that excellence. It no longer impresses you. Your reference point for hotels has changed—and the hotel you are staying at is what changed it.?

So, if you are the hotel manager and want to improve your customer experience scores, you need to remember that. If the scores are already high, getting a higher score might take much work for a little gain. It's not that your improvements aren't working. It's that it takes more to be noticed at this level.?

On the other hand, a struggling hotel chain with low scores could do a few easy things and get massive improvements. That manager gets to harvest low-hanging fruit. The other manager, who has already fixed all those things, has to work much harder to get to the fruit.?

I like finding accessible fruit in my consultancy work. I get excited when talking to potential clients from organizations that haven't gone far into their Customer Experience journey because I know there is much room for improvement. I can go in and make a significant impact right away.??

So, What Can You Do About It?

Our propensity for diminishing sensitivity is hard-wired psychology. It is how people evaluate things. We are less sensitive to improvement the better off things get, which is why there's this Curse of Improvement. The more you improve your customer experience, the harder it will be to improve it further. The more you improve your product, the harder it will be to enhance it further.?

One of the few ways around this is a massive disruption. For example, back in the day, the iPod got better and better until it was challenging for Apple to improve that experience further. So, Apple put it into a phone, and now the iPod is part of the iPhone. That reset some of these expectations on which Apple could build. Without that disruption, Apple likely would have encountered those limits of psychology.

However, when we are talking about something like 4.5 stars and trying to get to 5 stars, it might require more work, and it might not.

It depends on a couple of things.?

First, the way people use these rating scales is tricky. A huge positivity bias exists; something like 80 or 90% of all the ratings on Amazon are four stars and above. So it could be that 4.5, even though it's near the top of the range, is a neutral or an average experience for people. Moving customers to delighted, so they want to return to us might require moving them up to five.?

Therefore, the effort required to get five stars depends on what the 4.5 experience indicates. If 4.5 is neutral because of the positivity bias, then moving to five might mean there are easy things to do that will get you there. However, if 4.5 is for an experience or product that people view as positive, moving up to five might require herculean efforts. Likewise, if the whole industry is around a 4.5 rating, getting to five stars within that industry might also require much differentiation and continual incremental gains from lots of work on improvements.?

Then, of course, if the 4.5 is positive, you also have to be careful of complacency. If you sit at a 4.5 or higher, the more straightforward direction is down.?

Diminishing sensitivity describes a person's subjective reaction to an experience. So, if your organization has an excellent customer experience and all your metrics are high, you can still push those metrics up. However, it's going to be hard to get a dramatic reaction out of your customers.?

So, remember the Curse of Improvement and build it into your long-term planning and expected results. Constantly improve your offer, but remember, psychologically, the magnitude of the response will diminish over time.?

Recognize also that significant and periodic disruptions will shake things up. The benefit is that you get a reset, so people notice improvements again. Moreover, these disruptive moves might be necessary. Without them, moving the needle will only get more challenging as things keep improving.?

Also, it is essential to set people's expectations internally. For example, if everybody thinks you will get a 10% improvement every month through your customer experience improvement efforts, then you will disappoint people.?

(Having said that, in my experience, no one ever gets a ten percent improvement in a month by improving the experience. It takes longer to get those results, including time to train and implement the program and then for customers to realize you changed.)

Diminishing sensitivity is an essential consideration for a long-term plan for customer experience improvement. However, now that you know what it is, you can set proper expectations on both sides of the customer experience. Like the iPhone, you can keep improving things even if it is difficult to get a big splash in customer ratings. Gaining even a slight improvement is still up, and up is good. Especially when you are sitting at the top of performance—and the other direction is much easier.?

If you have a business problem that you would like some help with, contact me on LinkedIn or?submit your pickle here.?We would be glad to hear from you and help you with your challenges.

There you have it. No promotions, no gimmicks, just good information.

We hope you enjoyed this issue of Why Customers Buy. If you have, please forward it to a friend or colleague.

Think reading is for chumps? Try my podcast,?The Intuitive Customer?instead. We explore the many reasons why customers do what they do—and what you should do about it. Subscribe today?right here.