Lean Business: Do Unto Others*

The golden rule of word-of-mouth marketing: Be nice to thine customers and, lo, they shall be nice to you in return. The mechanical nuts and bolts behind this idea, in social psychology terminology, is represented by the concept of reciprocity. In short it referes to how people respond to a positive action with another positive action. We live this every day in ways simple and complex. For instance when the clerk at the 7-Eleven hands you the change back when you buy your Big Gulp and says a simple “Thank you” the almost-automatic response will be a “You’re welcome.” And when your neighbor is so kind as to lend you their chainsaw to clear some brush out back, it would seem neighborly to give her a nice cold six-pack when you return the device.

But there is more to it than just the simple tit-for-tat return of a verbal offering. It turns out that when people do nice things for us, it has the effect of making us more generous by default. In 1971, a Cornell University researcher named Dennis Regan conducted a study on the effects of granting favors. He had a group of students work in pairs made up of a test subject and an assistant masquerading as a colleague (or in the language of the study a “confederate”). Some of the test subjects were manipulated to better like their partner when they were given a nice cold soft drink by the confederate. The confederate went on to offer the subject the opportunity to buy some raffle tickets. How much more the subject liked the confederate after the favor was given (or withheld) was measured as well as the subject’s compliance with the request to buy raffle tickets. Interestingly, while the subjects who received the soft drink did have a small increase in manipulated liking, they had a much larger increase in compliance with the request to buy raffle tickets. In other words, be nice to someone and deliver them a Big Gulp to slake their thirst and they will be much more likely to buy whatever it is you’re selling.

This is the power and the glory of Word-of-Mouth marketing and it starts and ends with great customer service. Companies that leverage the power of reciprocity tend to have many more rabid and engaged fans of their business and use those fans to amplify their marketing message. It is for this reason that, I argue, delivering great customer service should be tightly integrated with the marketing function for many companies. Customer service is marketing and by providing the highest quality support to your customers, by solving their problems, by paying attention to them, by just being nice to them you may not get them to “like” you, but chances are good that you will get them to buy more of whatever products or services you are offering.

Several fantastic companies provide good illustration of the positive business effects of reciprocity. For example Zappos, the online purveyor of shoes, clothing, and fashion accessories, has long been known for its focus on and ability to deliver world-class customer service. Zappos has one of the highest customer retention rates in retail (among competitors both on and offline) and has created aan army of rabid fans. But Zappos goeds further, not just delivering great customer service, but alo giving their customers the metaphorical gift of a soda, but in other ways like by surprising new customers with upgrades to free overnight shipping and a generous returns policy. These kindnesses pay off – for instance, the online customer ratings and comparison site Bizrates gives Zappos a 96% positive customer rating in overall satisfaction, 94% rating on whether customers “would shop here again,” and a 96% rating on a customer’s likelihood of recommending them.

The idea of reciprocity extends beyond retail and is a crucial aspect of the freemium pricing model often used by companies selling apps for mobile devices; a free version is typically available (often supported by advertising) but users who want to use the version with richer features or functionality are charged for the premium version of the app. For instance Rovio Entertainment, the creator of the Angry Birds franchise offers free download versions of many of their games, but all are available in paid versions which offer more features (and presumably more fun).

A pioneer of the freemium strategy was 37signals, the Chicago-based software company and purveyor of products such as Basecamp, Campfire, and Highrise. 37signals offers free trials of it’s software as well as stripped-down versions that they make available at steep discounts. Those  “gifts” build loyalty and retain 37signals customers over many years of mutually beneficial relationships. Value delivered to customers and recurring revenue to 37signals.

Other companies practice a more direct and tangible form of reciprocity by giving away actual gifts, often in the form of “swag.” If you have recently attended a trade show or conference you probably left loaded up with tee-shirts, pens, memo pads, shopping bags, or other promotional merchandise. Their hope is that when you get home you’ll put on the branded shirt, or write with that branded pen and think warm thoughts about the company that gifted it to you. And if all goes well, you’ll call them up soon to see if they have any raffle tickets for sale.

Photo: Nick Hobgood/Wikipedia – Ocellaris clownfish (Amphiprion ocellaris) in a sea anemone (Heteractis magnifica)


*And they may buy more from you.