2: Profitability of Emotions
For commercial organizations, everything gets back to money at some point, and the goal is to be as profitable as possible. As such, interest in emotions depends on explaining their value in terms of dollars and cents.
Cost-basis analysis based on function is straightforward: a regression analysis can extrapolate how much more a customers in aggregate are willing to pay for a vehicle that is fuel efficient, distill it to the amount of revenue per MPG, and then determine if a functional improvement that increases the efficiency by 5 MPG is worth the cost of making the necessary changes, within a fairly precise level of (mathematical) accuracy.
Cost-based analysis does not yield to the same mathematical analysis. You cannot prove that people will be 5% more excited and feel 3% more sophisticated as a result of a change, nor how much more money they will pay for those incremental improvements in emotion. It is still very much gut-feel to assess how customers will feel and how they will respond in terms of their buying decisions. And to upper management, anything that cannot be expressed in dollars and cents is just black magic, and certainly not important enough to be considered.
The author draws a parallel between sentiment and economics, the latter of which is still taken very seriously by executive types in spite of the fact that supply and demand are largely arbitrary and highly theoretical. While economists can speak in terms of money, the additional revenue generated from a price change, the numbers are speculative and superficial.
The same can be said of customer satisfaction: more satisfaction in the emotional experience of using a product means more interest and more revenue, less satisfaction means less, but there is not a reliable way to move from this general notion to a specific algorithm that will calculate differences to the penny.
Given these parallels, the author looks to the field of economics as a possible way to illustrate or explain the relationship between emotion and revenue.
Emotion-based Revenue
To begin, revenue is the result of price and units sold and the latter parameter may be the result of more customers buying or customers buying more units. It's obvious the customers are firmly in control of the last two - less obvious that they are also in control of the first (the company can name a price, but the customer decides whether they are willing to pay it).
Case Study: McDonald's
McDonald's is arguably the most high-volume business in the world, serving 50 million meals per day in locations all over the world. It's a paragon of operational efficiency and logistics management. But consider some of the emotional aspects:
First, people must feel safe about consuming a food product: if someone gets sick, it's not just a lawsuit, but it damages trust. Especially because it is a family restaurant, with people feeding their product to their children, there must be a feeling of confidence. And it likely takes a great deal of effort to ensure food safety in so many locations.
Second, the choice to be a family-friendly restaurant is also significant - especially in catering to children. Between their iconic characters, colorful environment, toys, playgrounds, and the like, the is a sense of fun that is in some instances more important than food. The author suggests, ". Even if children never touch their fries, they want to come back."
Along the same lines, adults may value simplicity and efficiency over the quality of a meal. It's not the best-tasting and healthiest meal - its' good enough, and it's quick. (EN: no direct connection to emotion, as the effort put into obtaining a product is part of the price, but I suppose it can be argued that it avoids the negative emotions that arise when faced with the prospect of traditional restaurant service when you're in a rush).
All of these a strong emotional differentiators that has made McDonald's successful to a far greater degree than its competitors. Moreover, none of these emotions can be provided except by genuine effort. You cannot earn a reputation for being safe and efficient except by actually being safe and efficient, and doing the many things that are necessary to be so.
Case Study: Black & Decker
The author mentions Black & Decker, a tool and appliance manufacturer that was popular for the residential market, but had a dismal reputation among professional tradesmen. The author suggests that "The performance level of Black & Decker's professional-grade tools was not the reason for its low market share among tradesmen" but instead, the brand of tools were "a badge of professionalism" among professionals, and one tradesman was quoted as stating he would be laughed at by his colleagues if he showed up at a job site with the B&D brand.
(EN: The author's portrayal is not quite complete. B&D initially tried to sell residential-grade tools that were not up to performance standards, and earned a poor reputation, which stuck to them even when they made actual improvements to the functional quality of their professional line, until they rebranded it, which the author notes next.)
Around 1992, B&D launched a separate brand of professional tools, as DeWalt. They changed the color of the tools, made the brand name prominent, and marketed them as a prestige brand at a premium price. Within two years, its share of the tradesman segment swelled from 9% to 40%. The author underscores that this is a "double win" for revenue - increased number of customers and increased price.
The author suggests is that this was possible because the new brand offered a "professional emotional value" that could not be achieved by the B&D brand, largely because it was also used for popcorn poppers and low-power vacuum cleaners, not to mention tools that were adequate only for occasional household use.
How Much Do Emotions Cost?
Cost is an inevitable consideration, and it's maintained that creating a product that customers will love requires taking on significant expense in order to add extras that make the product better than the competition's offering.
This is likely true, but everything businesses do comes at a cost. The real question is whether the cost is less than the additional revenue the firm gets by investing in their customers' emotional well being. Considering the market share and pricing premium that is won by brands that customers love, it can be quite significant.
Product emotions can be a substitute for advertising, and are often far more effective in that they generate publicity and word-of-mouth. Consider the phenomenal success of Starbucks, a firm that is clearly more about the emotional experience than the product, and how little they spend on advertising, versus the vast amounts of ad spend by competitors in a vain attempt to get people to regard their brand as being equivalent. It very often is a trade-off, as companies that do not deliver emotional satisfaction often have to shake the trees to get people to buy.
(EN: A better example might be Krispy Kreme, which has fanatical customers. I recall an interview of their CMO in which he mentioned that the brand was built almost entirely by word-of-mouth, and specifically stated that the company chose to invest in employee training rather than television commercials because it felt a positive in-store experience was more effective in generating buzz in the community.)
The cost of emotion can also be considered as a component of other product benefits: to ensure that the design of a product doesn't merely make it serviceable or functional, but thoughtfully designed for ease of use and visual cues that evoke emotional reactions. Even something as superficial as the color of the product, which has nothing at all to do with its performance, has a great deal to do with the emotional reaction.
The physical aspects of most products often deliver the emotional benefits - the materials in a car's cabin, the quality of napkins and tablecloths in a restaurant, and even the flooring and decorations in a bank lobby all give customers certain "feelings" about the brand that have nothing to do with the functional benefits. Thoughtful and ergonomic design generally does not add much to the production cost - though it may require training engineers to think about such things, or bringing into the design process individuals with the skills and mind-set to consider emotion.
It would be misleading to suggest that designing for emotion is always easy and cheap - some firms put a great deal of cost and time into research and testing to ensure the product they release is "just so." But considering that most products perform the basic function reasonably well, the investment in designing for emotion is repaid in market share and price premium that are won by the products customers love, not those that are bare-bones.