Posted on March 01 2019
I’ve been learning quite a bit lately about what I’m calling psychological innovation. Basically changing the way we look at a product or service in order to improve it without having to spend a ton of money. Sounds a bit crazy, right? Well if you’re bootstrapping your company it might make sense to change the frame in which customers view your product rather than to spend big bucks trying to physically improve your widget.
Late last year I discovered Rory Sutherland, Vice Chairman of Ogilvy. He’s got hundreds of hours of video on YouTube going back at least a decade. Most of you have probably already heard of him; I guess I’m a bit of a late bloomer. I’d argue I learned more just watching his videos than people coming out of school with an MBA and $150k in debt. Sorry, a bit of a side rant. Rory tells a host of parables highlighting the impact of behavioral finance/economics. I’ll share one that resonated well with me:
Customer Expectations. Rory tells of an insurance company which had a barrage of customer complaints about how long it took to receive their claim checks. The insurance company decided to spend a few hundred thousand euros on implementing new systems to speed up the claims process. At one of the meetings, one wily character said, “Hang on a minute, how long does it take to get the claim check now?” The answer was ‘about eight days’. The guy, being a shrewd amateur behaviorist said, “There’s no such thing as fast and slow in the human brain. Only faster than you expected and slower than you expected.” He went on, “Keep sending the claim checks out using the current process, only tell customers to expect their check in 14 days.” Complaints to the call center all but dried up. The few calls that trickled in were often from customers thanking the company for sending the check out so quickly.