April 19, 2006
Sometimes "less is more" when it comes to placating disgruntled customers, say Tulane University researchers in the A.B. Freeman School of Business, and it all depends on whether the customer is an optimist or pessimist. Harish Sujan, professor of marketing at Tulane, is conducting research on how to resolve problems with unhappy customers, which will be useful to retailers and service providers.
Because it is more expensive to replace customers than retain them, these groups have become interested in research on the effectiveness of recovery strategies. The difficulty in finding one correct strategy, says Sujan, is that optimistic and pessimistic personality types respond differently to generosity. According to Sujan, retailers often assume that "more is better" when it comes to appeasing unhappy customers.
For example, it is thought that offering a replacement rather than a fix of a defective product is better business practice, as is adding a gift to compensation for a shirt ruined in dry cleaning However, sometimes more can be worse, says Sujan, especially if the customer is an optimist. In a study where a hotel failed to give the customer the type of room requested, being offered a free night's stay seemed an overly generous resolution to some customers, and triggered their suspicions of the marketer's intentions.
Sujan reports, "A fifty percent discount on one night's stay was considered a more fair offer, and elicited more loyalty." A key point of Sujan's research is that both optimistic and pessimistic customers' responses can be manipulated - and unless the retailer knows in advance the customer's personality, he will not know how to appease the customer.
It's a gamble for the retailer: a gift enables pessimistic customers to respond as positively as optimistic customers do naturally to a good offer; a gift enables optimistic customers to respond as negatively as pessimistic customers do naturally to a poor offer. Sujan's study suggests that retailers and service providers need to know the personality of their customers and offer more or less, accordingly, in order to have the best customer retention.
He and his co-authors are conducting additional research to establish a valid test for identifying a customer's optimistic personality. For more information, contact Sujan at email@example.com or 504-865-5074.
Tulane University, New Orleans, LA 70118 504-865-5000 firstname.lastname@example.org