With interest rates at record lows, inflation at twice the Government’s target, unemployment still ‘unacceptably high’ and with economic growth barely managing to register anything more than the promise of a recovery, we all know just how tough a tough economy can be. And it’s not going to change anytime soon.
What’s fascinating in all of this is just how impotent the state has become. As a leading commentator in the US said recently about the American landscape, “the economy really is on its own now”.
Well to me this feels as though we are in a cathartic realignment of things. People are having to accept that fundamentally, they are also on their own. The level of debt and size of the deficit means that benefits are being cut along with every other area of government spending and so an almost Darwinian state of affairs has arisen.
Survival of the fittest and natural selection sounds like a terrible way to describe the way that civilised society should operate, but in the world of business, that’s what’s always happened, and now people in society are feeling the same pressures. No longer will the state be able to fund income support, pensions or maybe even provide a free NHS, for an indefinite period. Priorities have changed.
The Obama administration’s stimulus packages of 2009 and 2010 – paid for by huge levels of borrowing – have run out and many publicly funded programs now lie unfinished and the workers they briefly employed, have returned to the unemployment lines. The truism that government can’t create real jobs is now clear.
With nowhere for governments in the UK and US having anywhere to turn, economics has been stripped bare and now we see it for what it always was. A balance between incentives and disincentives.
In his great work, Freakonomics, Steven D. Levitt analysed human behaviour in a number of situations – from drug dealers, sumo wrestlers and day care centers – and observed that it is incentives, or the lack of, that truly effect power from one body over another.
For example, it wasn’t the levying of a small fine on parents that dissuaded them from being late every day to collect their children at the day care that changed their behaviour (that was just viewed as cheap babysitting!) – it was publishing their names and addresses on the front door. Naming and shaming.
Now businesses can only grow in three ways:
1. Increase the number of customers
2. Increase the average transaction value
3. Increase the number of transactions per year
For each of these, incentives are the key. But crucially I’m not talking merely about simply discounting, or BOGOF offers.
I’m also not talking about naming and shaming!
The Fajita Effect
The incentives businesses need to consider revolve around what Chris Brogan has called the ‘fajita effect’. You know how it is in a restaurant when someone at the table next to you has a sizzling hot plate brought to them and everyone turns to watch the theatre unfold? Immediately everyone thinks, “I’ve got to have that!”
So how can you create this effect amongst your customers? How can you incentivise customers to spend more and recruit new customers?
Well in the same way the sound of the sizzle and the aroma of the dish appeal to very basic human emotions in the restaurant, by demonstrating your brands awareness of your customers, by not just seeing a number, but by being human yourself, by recognising customers needs, concerns and genuine preferences, you can create a powerful incentive for them to interact and engage with you.
The greatest incentive you can offer your customers and prospective customers is one that’s based on a very real human need. That of being recognised and seen. By demonstrating that you respond to people on a one to one basis, that you don’t switch off your customer service channels, or your social media channels at 5pm and say, “call us in the morning – goodnight”, you can powerfully demonstrate that by listening and engaging directly with individuals, others will hear about your levels of care – in the same way they currently hear about your lack of care – and you’ll be seen as a generous brand forever, not a mean one who offers 15% of for a limited time only.
Strip down to essentials and be human.