In this week’s entry in the Practically Friday series, we’re looking at work from Columbia researchers Cecile K. Cho and Gita Johar, who ran a couple of interesting performance expectation experiments detailed in their paper “Attaining Satisfaction.”
The following problem was put forth to a large group of students:
Imagine that you are living in a foreign country and need to invest your money. You have an investment budget of $5,400 and want to invest it in the stock market of this country. Given the market condition in this country, at the end of a month, you can expect your portfolio to yield between 6% and 20% in return. As with any investment in a financial market, investing in stocks involves risk.
Students were then asked to select a goal and choose between stocks and portfolios options of varying levels of risk to attempt to achieve that goal. After stocks were picked, Cho and Johar then set 'results' such that the exact initial goal was always achieved (plus a .04 percent bonus add-on to returns to disguise the manipulation).
Curiously, though the goals of everyone were all met, those who had set lower return goals were much more dissatisfied than those with high goals:
Cho and Johar found that these dissatisfied individuals were in many cases basing their satisfaction off the best possible outcome, not the goal they had set. However, dissatisfaction was mitigated when the low-goal students were reminded of their initial goal. Cho and Johar replicated this finding in a second experiment that looked at performance on a puzzle task (further explanation is available in the paper).
The authors offer this very practical application of their research regarding customer expectations and customization:
It may be tempting in this era of customization to allow different customers to select their own levels of product performance. However, even if the product lives up to an individual customer’s goal, the longing for the potential is likely to color the customer’s satisfaction. In cases where consumption does not have a clear or objective standard for evaluation, such as artwork, services, or really new products, the tendency to recruit higher potential or better imagined experience as a comparison standard may be exacerbated.
Entrepreneurs of all people are more likely to have brand new products and services where there is not a clear or objective standard for evaluation. So be very careful when setting customer expectations and allowing customization of your product or service (especially if you offer a range of basic-intermediate-premium options). Be ready to remind customers of their initial goals and expectation if they start down the path of dissatisfaction.