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Moving On From ROI To ROE - A Return On Empathy

Business has always focused on return on investment (ROI) as the primary metric to calculate success. However, innovations in the neurosciences and developments in social media have revealed that profitability should no longer be relegated to sales figures and profit margins alone. Increasingly, to create sustainable customer relationships, businesses must attend to innovations in psychology, and invest in the emotional needs of their customers. Those making this shift will gain a significant ROE -- return on empathy.

Investing in empathy

A business that invests in empathy devotes itself to understanding the emotional needs and motivations of its customers, and aligns itself to meet them. Companies have increasingly embraced the role of emotion in selling products and services, but often merely pay lip service to its importance without understanding how to harness it.

We know human motivation is extremely complex -- typically people don't say what they think, or even think what they report. As a result, significant business resources are wasted by an over-reliance on market research that poses only rational questions but neglects to probe customers' emotional reactions that lie hidden within their answers.

When businesses look beyond the rational data and into the meaning behind their customers' feelings, and behaviors, they will recognize the human needs that drive decision making. Control fuels our motivations in every aspect of our lives. Our inability to influence the outcome of an event is deeply unsettling. This is why air travel is routinely among the most stress-inducing activities, as it inherently presents frustrations regarding arrival times, security, and the quality of the experience itself. 

When we conducted customer research for a major airline, we learned that customers expect a certain lack of control when flying -- and that telling a customer he/she can “control” the experience is a turnoff, since it isn't true. However, offering some degree of control by providing “choices” is more desirable. The airline used this insight to devise new services that offered passengers greater control -- and as a result, passengers were willing to pay extra for certain services like priority boarding, guaranteed seat selection and extra leg room, which generated additional revenues and helped the company defray some of the expense of rising fuel prices.

The need for caring relationships

The need for care is another core emotional need. But brands must go beyond marketing semantics -- companies can't just say they care, they must prove it throughout their customer interactions. Apple's investment in customer service “geniuses” reinforces their commitment to caring. A few years ago, I accidentally deleted some music I had purchased from the iTunes store, and emailed the customer service team for help. A few hours later, I received a friendly, non-formulaic reply from “Mandy” in Customer Support that addressed my problem. Assuming it was a simple form letter, I deleted it without response. A few days later, I received a follow-up letter from Mandy. What struck me was that the second letter contained several typos, which assured me that Mandy was a real person. Compare that to the familiar “We value your call” response. 

Consumers treat brands like relationships -- they reward friends with their loyalty and lash out when wronged. When companies maintain trust and cultivate positive relationships with customers, they are rewarded with loyalty. Early in the 2000s, we consulted with a leading auto insurance company and found that “accident forgiveness" was a winner with customers. Such policies often come with a price -- forgiveness plans may cost up to 20 percent more than a standard policy. But it's a price many people are willing to pay because the concept of “forgiveness” is psychologically enticing. For policyholders, the extra price of “accident forgiveness is paid back via emotional satisfaction. 

People gain peace of mind of knowing they will be forgiven for something that might not have been their fault, and they feel cared for. Forgiveness is one of humanity's strongest virtues, and among the hardest to practice. When we are forgiven, we are more likely to reciprocate positively toward those who absolved us. Businesses that practice genuine care earn the hearts and loyalties of customers.

When businesses work to build lasting customer partnerships, they see a tangible return on empathy. Their efforts are rewarded through sustained relationships that often endure and grow beyond shifting trends to deliver greatly enhanced lifetime customer value.

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