Posted on July 21st, 2010
I am spending a few weeks in China. This time, I sense a really big change in the Chinese marketplace. Not only has income level risen dramatically since my last visit a few years ago, but the Internet has become an even more pervasive force in Chinese consumers’ daily life. I confess that I have not done extensive research about marketing and consumers in China. But there are a few notable observations that I would like to share with my readers.
Discretionary Spending on the Rise
When I graduated from college in 1996, I was paid slightly over 1000 Yuan (about $140) a month as an assistant editor at a publishing company in Beijing. Today, my college classmates are often paid more than ten times that working in their professional jobs. Without a doubt, the standard of living has increased dramatically in China. As the cost of basic living items (excluding housing) is still pretty low, Chinese consumers in metropolitan areas are enjoying more and more discretionary income. This has boosted spending on discretionary items such as travel and automobiles. A lot more consumers are traveling both within China and aboard. Having a car is also becoming more commonplace.
Housing Gap
With the high population density in China, housing (sold by square meters) is still expensive and is one of the largest expenses in many consumers’ budget. In popular metropolitan areas such as the capital city Beijing, condominiums cost from a few thousand yuan (= a few hundred dollars) per square meter to upwards of $10,000 per square meter, which puts the price tag of a 2000sqft condo at $1.8 million. Read More »
Posted on July 14th, 2010
When we talk about social networking or contagion effect, we are usually referring to getting good words out about us so that we can engender good will and gain additional customers. In other words, we often focus on positive behavior in the context of social networks. But just as positive behavior can be fostered through social networks, quitting behavior can be social too. When consumers decide to leave a company, even when no particularly negative word-of-mouth is present, that decision can still have a social rippling effect. Consider my recent quitting of Facebook, for instance. That decision was bolstered by seeing 36000+ consumers who also signed up to quit on QuitFacebookDay.com.
Image by Loui Loui from Flickr | CC 2.0
To help understand how this social quitting behavior works, I would like to discuss the findings from a rare academic study on this subject. Published in the Marketing Science Institute’s 2010 Working Paper Series, Irit Nitzan and Barak Libai from Tel Aviv University studied the effect of defection by friends on our own decisions to quit a company. If you are interested in the full report, you can purchase it directly from MSI.
Context
The study is based on the behavior of 853,643 customers of a major cellphone service provider in a Mediterranean country. The communication records and defection behavior of these consumers over the course of one year were examined. Social networks were constructed from the consumers’ call and text messaging records.
Main Findings
- Quitting definitely has a social effect. Having an additional defecting friend increases one’s probability of leaving the same company by as much as 80%.
- This social effect is the strongest right after the friend quits, and dissipates rather rapidly as time passes.
- The stronger the social relationship one has with the quitting friend and the more similar one is to the friend, the stronger the social impact of quitting.
- Heavy users and loyal customers who have been with the company for a long time and heavy users are more immune to the social effect of quitting from defecting friends.
What Does All This Mean to Practice?
- Be proactive when a customer quits. If you have access to the customer’s social network (e.g., through online social networks such as Facebook), engage in preventive measures with the customer’s friends, such as sending an appreciation message to the friends, offering a special promotion, or obtaining feedback to address potential issues.
- Try to respond fast, preferably within the first month, as the social effect of quitting is the strongest at the beginning.
- Fostering customer loyalty does pay off. Loyal customers are much more resistance to forces that may lure them away from your company. This has been found to be the case from not only this study but also other academic studies as well.
Reference:
Irit Nitzan and Barak Libai (2010). Social Effects on Customer Retention Marketing Science Institute Working Paper Series 2010 Report No. 10-107
Posted on July 7th, 2010
Last week, I used my unpleasant mortgage application experience with Quicken Loans to demonstrate the danger of force locking in consumers instead of fostering loyalty. Since then, I have received some interesting communication from Quicken Loans. As a consumer, I emerged from the entire experience feeling OK again about Quicken Loans as a lender. While Quicken Loans had lost us as a customer for this mortgage because we already chose another lender, it successfully averted future negative word-of-mouth and ill will against the company. I detail my experience in this post as a case study of how companies can use social media to discover and address service failures and customer dissatisfaction.
Chronology
June 29 My unpleasant phone conversation with a Quicken Loans customer service representative
June 30 My blog on the experience as well as negative review on Epinions.com (note: consumers act fast when they feel unhappy)
July 1 Kelly at QuickenLoans commented on my Epinions.com review, offering to look into the problem and requesting more information from me
July 2 I emailed Kelly with full details of the incident
July 6 (after Independence Day Holiday weekend) I received a call as well as an email from Scott King, Lead Client Advocate at Quicken Loans. He had listened to my original conversation with their customer representative and read my blog. In the phone call and email, he apologized for our unpleasant experience and offered to introduce us to one of their best mortgage banker for a second chance.
The Response
You can read Kelly’s original comment on Epinions.com. With Scott’s permission, I am publishing his email response below: Read More »
