In a way, customer service service agents must become amateur psychologists. Only someone with an interest in people will excel in customer service. Understanding human behaviour and motivation is key to successful service delivery.
As an agent, it’s your job to get inside the minds of customers. This is because customer service is primarily about building relationships – along with other customer-focused roles such as customer success, marketing and sales. Customer service reps are the human face of the company, responsible for creating positive interactions and lasting feelings.
We may like to think of ourselves as rational beings, but some of the greatest thinkers such as Antonio Damasio and Daniel Kahneman have shown that we make decisions based primarily on our emotions.
So logically, if you help a customer solve their problem, they should be happy, right? The reality is not quite so simple.
Damasio in particular linked neurobiology (in his case, the study of emotions) with philosophy. We are considering exactly what it means to be human, which will help us in improving customer service. Being purely business-driven will not help you earn the loyalty of customers.
A psychology that is concerned with cognition without feeling is not psychology at all.
The definition of psychology in customer service
The field of psychology is defined by Simply Psychology as:
“Psychology is the scientific study of the mind and behavior, according to the American Psychological Association. Psychology is a multifaceted discipline and includes many sub-fields of study such areas as human development, sports, health, clinical, social behavior and cognitive processes.”
Simply Psychology
It means understanding how people work. In business psychology, you use this understanding of human nature to optimise how your business operates. Namely, improve how your business works, make more money, and ultimately create happier customers.
But the psychology of customer service is about so much more than making more money or being more efficient. You can use these principles to connect with customers as fellow human beings and create lasting relationships. A business that does this will be much more sustainable, by positively impacting customer retention (as they say).
In short, customers who value their relationship with your business will stay loyal. The primary way to convince customers to stay is through human-to-human contact. This means you need to improve your customer service through supporting moments that are psychologically and emotionally rewarding.
Through positive reinforcement, customers will come to view your business through a positive lens.
Companies put so much effort into attracting new customers, but comparatively little into retaining existing ones. While the use of psychology is well-known in sales and marketing, you can equally apply it in customer service to maximise retention, loyalty and happiness.
9 psychological principles of customer service
Although customer psychological principles are well-known in marketing techniques, less attention is formally paid to them in customer service. Nevertheless, any good customer service rep will have an intuitive understanding of many of these principles.
Customer psychology is the same as human psychology, but simply applied in the context of a relationship with a business. However, businesses are still made up of people, and relationships can only exist person-to-person.
1. Reciprocity
Ever wondered why companies often give stuff away for free? This first principle is one of the reasons why.
The first psychological principle we’re going to look at is reciprocity. Reciprocity is one of psychologist Cialdini’s six principles of persuasion. VeryWell Mind defines this principle as:
“Reciprocity is a process of exchanging things with other people to gain a mutual benefit.”
VeryWell Mind
This means customers must feel they are going to receive something in exchange for what they have given. Make them feel they are participating in a two-way relationship, rather than are in a one-way drain of their resources and thus that your company is taking advantage of them.
You could say that giving to customers creates a perceived debt, which they are then motivated to repay.
When customers give you their money, they want to feel like they are receiving more than they expected back. By providing outstanding service, you are tapping into reciprocity through making your customer feel like a superstar. Taking the time with those little conversations, going above and beyond, and anticipating needs, all count as giving back.
Reciprocity is a key factor in generating loyalty. Not only does giving back to customers generate positive feelings, it also stimulates the urge to give to your company again through further purchases, loyalty and glowing reviews. This is because customers feel obligated to return the favour – hence this principle’s popularity in marketing.
But customer service is the best marketing.
2. Social proof
Social proof is the next customer service principle we’re going to look at. A popular tool of marketing, it was also introduced by Robert Cialdini’s 1984 book Influence, whereby you could use it to induce customers to buy more products. It was another one of Cialdini’s Six Principles of Persuasion.
But social proof can also come into play when customer service reps show infectious enthusiasm for the company.
When companies use influencers or celebrities to promote their products, or rely on word-of-mouth or reviews to increase acquisition, they are using the power of social proof. Customers trust other people like them, or who they admire, who support your company.
The same holds true in customer service. When your customer service reps shine with happiness, enjoy their jobs, and sing the praises of your company, customers are more convinced about what they’ve bought. If your reps like your company, it must be a great place to work.
There’s no shortcut to creating social proof in this way. You have to create a happy work environment for the people who support your customers, along with everyone else. Employees are your most important customers.
Customer service staff can also be an important source of sales through cross sells and upsells. If a relevant product or higher tier plan could help customers, service reps should be in a position to recommend such things.
Social proof is powerful because people also like to be part of a tribe. Help customers feel like they belong.
3. Scarcity
The field of economics is based on the principle of scarcity, according to Investopedia. This basically means not having enough to go around. This essentially creates a perceived sense of increased value, because supply is short.
Scarcity can also be applied in social psychology and indeed it is in fields such as sales. Any limited-time sale such as Black Friday creates a sense of scarcity in shoppers, as we also saw in cases of panic-buying during the COVID-19 pandemic when some essential items were scarce.
Essentially, people are hugely motivated by their perception of scarcity and value goods, products or services that are harder to obtain. This sense of value is also influenced by their perceived social proof, in which low stock supplies indicate that many other people must be buying the product.
This principle drives the entire model of luxury goods. The more scarce something is perceived to be, the more customers will want it and the more impulsive their buying behaviour. Counteract this tendency by avoiding the trap of making your customer service scarce. Ensure that help is always available.
Customer service scarcity is not a good look for your business.
4. Loss aversion
Loss aversion is the observed cognitive bias that human beings would rather avoid losing something than gaining something of equal value. In short, the pleasure of gain is outweighed by the pain of loss in equal measure. It’s better not to lose £20 than gain £20!
The need to avoid pain leads to loss aversion.
The term “loss aversion” was again coined by Daniel Kahneman and Amos Tversky, leading them to develop Prospect Theory. It’s relevant to customer service because you need to be mindful of a customer’s aversion to loss. Rather than emphasising the positives that customers could gain through your service, explain how they can avoid a loss (such as through minimising downtime, repairs, or replacements).
You can tap into loss aversion to retain customers. Explain to customers what they would lose if they switched to a competitor. Although it may be traditional to list benefits, it’s better to show customers how they could avoid pain by using your service. Without the assistance of your customer service agents, they would be stuck without a life raft.
Continually show customers value through customer service to remind them of what they would lose if they left.
5. Law of Least Effort
One of the giants of modern psychology and an influence on business, Daniel Kahnemen has clarified some important cognitive processes. The law of least effort refers to the principle that people will choose whichever way is easiest when given a range of choices.
According to the late Daniel Kahneman, we can look at it like this:
“A general “law of least effort” applies to cognitive as well as physical exertion. The law asserts that if there are several ways of achieving the same goal, people will eventually gravitate to the least demanding course of action. In the economy of action, effort is a cost, and the acquisition of skill is driven by the balance of benefits and costs. Laziness is built deep into our nature.”
Daniel Kahneman — Thinking, Fast and Slow
Rather than laziness, you can also look at it as economy of effort, which is important for survival.
If the least amount of effort is leaving your company for a competitor or alternative product, customers are going to do that. This means they will not necessarily make the best choice – just the one that is easiest at the time.
According to Evan Williams, one of the co-founders of twitter, the internet exists to give people what they want. In other words, it offers them speed and convenience, and the most successful companies remove most of the steps and get people to their destination quickly. An interview with Williams was featured on behaviour change expert James Clear’s website.
So, the same holds true in customer service. Customers are already inconvenienced by having to contact your support department in the first place. Removing the pain points and time it takes for customers to solve their problems with your product or service is key.
Customers are more likely to stay with your company when it is the least effortful option.
6. 80/20 rule
In 1997, entrepreneur Richard Koch wrote a book called The 80/20 Principle. Aptly named, this title first explored the 80/20 principle, reinterpreting the original Pareto Rule by Vilfredo Pareto in 1906. According to Koch, 20% of our efforts result in 80% of our outcomes. This startling revelation means you could theoretically eliminate 80% of your effort and still achieve the same results.
Applied to customer service, this means that only 20% of your customers lead to 80% of the value you get from helping them.
To capitalise on this principle, you could identify the roughly 80% of your customers who don’t actually need the help of your agents. Of course, it’s important not to abandon customers. Perhaps you could deflect their inquiries with an in-depth and detailed knowledge base containing tutorials, guides and reference docs.
It’s the modern equivalent of putting up a sign to answer the most basic questions.
You could also look at it like 20% of your inquiries drive 80% of the effort agents must go through to solve them. Perhaps 80% of customers are asking about your returns policy or for a password reset. This means you could eliminate so much work by automating or providing self-service for these queries.
The beauty of the 80/20 principle is that you don’t need to change everything. This principle can be used in all areas of business – but especially customer service. Once you’re aware of this principle, it can be a gamechanger for productivity.
7. Halo Effect
The halo effect is a bias we have towards viewing something positively if our overall impression is good. This could mean that if we like a company, we are more likely to view their service as good. Our opinion is not based on objectivity, but rather the halo effect.
Other factors can come into play such as whether we view the customer service rep as attractive. It’s well-known that physically attractive people are usually viewed more positively by others. The halo effect illustrates that appearances count for a lot.
While in an ideal world we wouldn’t judge by appearances, we can be mindful of the tendency for customers to make superficial judgments. We can do our best to present our customer service in the best light possible, by making it attractive, easy to use, and staffing channels with polite and friendly agents.
The halo effect is why branding is so important in attracting and retaining customers. Make sure that your customer service department is a coherent part of your brand, and not obviously outsourced or neglected.
Use the power of association through the halo effect to bolster your customer service.
8. Paradox of choice
The paradox of choice was coined by Barry Schwartz in his 2004 book of the same name. Schwartz was interested in the intersection between psychology and economics.
The paradox of choice is particularly important when giving customers options for how to solve their problems, or deciding which channels to offer for customers hoping to get in touch. Giving a customer too many choices essentially paralyses them, reduces satisfaction and decreases the likelihood of engagement.
When customers face the paradox of choice, switching to your competitor might just be easier.
Schwartz uses the example of jam, inspired by a study conducted by Sheena Iyengar and Mark Lepper in a grocery store in 2001. These researchers found that when shoppers were presented with 24 choices of jam versus six options, customers were more likely to make a purchase when faced with fewer options.
These findings run counter-intuitive to the idea of freedom of choice. When decisions are too difficult, customers may default to giving up. You can apply this idea in customer service by limiting the options for customers to encounter frustration. Guide them through a path that has been optimised for success.
Suggest a few options to solve their problem in the knowledge base, then direct them to call or email customer service. You don’t have to cover every channel, just because it’s possible. When solving a customer problem, go with the most likely answer.
Give customers an obvious pathway to follow when seeking help from your customer service department.
9. Mere exposure effect
Somewhat similar to the halo effect, the mere exposure effect refers to the fact that we develop a preference for things that we are familiar with. So if customers are used to interacting with a brand and hearing communications from you, they will come to like you through increased familiarity.
Of course, the exposure effect doesn’t always work if interactions lean towards the negative. Customers will only grow to like you if their experiences with your company reinforce the qualities that drew them towards you in the first place. Every customer service interaction is a chance to make a great impression on customers.
This also means that the more customers use your products, the more they will grow to like them. This fact makes customer success and customer service all the more important for developing customer loyalty.
“Familiarity is associated with a general sense of comfort with the known and discomfort with—even distaste for and fear of—the alien and distant.”
Economist Gur Huberman
We like what we know. Use this to your advantage in customer service.
The bottom line: treat your customers like humans
As with all psychological processes, there are many other factors at play in customer service. Individuals differ greatly, with differences observed across gender, socioeconomic group, cultural background, and many other categories. There is no cookie cutter customer who you can target your customer service too.
There are only general trends that you can use to inform your strategy, which must evolve to fit each individual case.
Understanding customers is no good if you fail to act on this knowledge. Customers can be influenced, but we cannot control their behaviour. All customer service teams can do is act in accordance with their innate tendencies and maximise the likelihood of a positive response – ie loyalty to your company, word-of-mouth recommendations, and repeat purchases.
