July 19, 2017

Companies as Digital Happiness Engines

BY :     July 19, 2017

 

Digital Happiness

The degree in which someone judges positively on the contribution of digital technology to the experience of positive emotions, getting in a state of flow, or having the feeling to live a meaningful life.

My earlier call for companies to Pursuit Digital Happiness is meant as a wake-up call. Customer centricity is becoming a boring ‘must have’ for the customer. Go beyond customer centricity and you’ll be able to experience the happiness advantage: happy customers are more loyal, make better references, increase the profitability potential and enhance your employee’s sense of purpose and confidence.

I want to present three companies that can be seen as Digital Happiness Engines.

1) Lemonade, an insurance company with a conscience

The pleasant life is fully addressed by Lemonade by optimal efficiency and effectivity: the company is claiming the absolute world record for speed by having paid a customer’s claim within 3 seconds of filing it and with zero paperwork. Everything between signing up for coverage to filing a claim, is automated and easily accessible through chat on your smartphone.

A customer files his claim for damages through posting a video that is immediately analyzed for irregularities by 18 anti-fraud detection algorithms in mere seconds. An important step for the insurer, since in the U.S. alone insurance scams add up to $80 billion every year. These scams raise everyone’s premiums to hundred’s of extra dollars per year. Besides a reactive analysis on the customer’s video claim, the company uses insights from behavioral psychology as a preventive nudge towards honesty. Lemonade even hired Dan Ariely, professor in psychology and behavioral economics, as their Chief Behavioral Officer. Ariely sees conflicting interests between traditional insurance companies and its customers: “Every dollar your insurer pays you is a dollar less for their profits. So when something bad happens to you, their interests are directly conflicted with yours. You’re fighting over the same coin.” Lemonade wants to change this model by reserving twenty percent of the premiums to cover their costs and to make a modest profit. Everything else that isn’t paid out in claims will be send to a charity of the customers choosing, which contributes to the feeling of meaning and being part of something bigger than yourself. In addition, in this manner the customer keeps ownership of his premiums which, as Lemonade expects, will help reduce fraud. Another way to nudge people towards honesty is by asking them to pledge, with the aforementioned video message, that they are telling the truth when they file their claim.

So far Lemonade is doing pretty well, expanding their operations beyond New York to Illinois and California.

2) Stitch Fix

Stitch Fix thrives on the insight that people get happier from purchases that better match their personality and is simultaneously offering a solution to the paradox of choice. They offer an online styling service and do the shopping for you; you just have to trust them. After filling an extensive form, detailing style preferences, clothing needs and price criteria, Stitch Fix’s algorithms then pre-selects a range of potential choices. One of its 3,400 stylists then selects 5 items for final delivery, fully customized to the individual’s style. Anything the customer doesn’t like can be returned for free, but when the customer decides to keep the whole package he receives a 25% discount. Eric Colson, formerly a top data scientist at Netflix, explains that data science allows them to sometimes know even better what the customer likes than they do themselves: “Customers say, ‘This thing you picked out for me, I would never have picked it out for myself’.”

The teamwork between algorithms and human stylists is visible in this chart:

Founded in 2011, Stitch Fix has been profitable since 2014. For the fiscal year that ended July 2016, the company recorded sales of $730 million. The retail landscape undergoes a metamorphosis due to changing consumer behavior and expectations. Department stores are struggling, while bargain hunting happens online.

3) Nike+ Running App

With their free running and training apps Nike reaches tens of millions of people. The smart running app needs two weeks to get to know your motivation level, your base speed, and your condition and then offers a personalized training schedule. It uses a digital motivational-coach who encourages you through your headphone when you are slowing down and plays an applause when you get a ‘like’ on your running-update on social media. Through this app Nike improves its customer relationships and get’s to study tons of health data. It’s an upwards spiral: 1) Nike get’s to know the customer better, 2) Nike is able to offer better and more personalized products, 3) More people will use the product more often 4) Nike harvests more data, and back to 1. One of the ways Nike used this in their advantage is by making personalized video’s with the successes of their users. But, as we all know, it is difficult to determine the right balance between the wish to know the customer and going too far. By the end of 2016 Nike was found guilty of privacy violations in their running app after an investigation by the Dutch Data Protection Authority (Dutch DPA). Nike did not provide sufficient information to their users about the collection of their health data. In the new version of their app, Nike explicitly requests consent for the collection of health data. It is important to stay sharp and to continuously get in the mind of the customer. Always ask the question what the consequences could be and don’t just do it.

To conclude

Despite the difficulty of finding the right balance, companies have to step up and embrace insights from Positive Psychology and Positive Technology research to stay ahead of their competition. We have persuasive technologies that allow hyper personalized marketing, and to act real-time on the expressed emotions (change advertisement, difficulty level, or change the user-interface when the user loses attention or expresses a sad facial expression). This allow companies to really alter someones happiness. The advanced state of digitization requires a holistic approach with the ultimate question in mind: do the product, service, and organization contribute to the Digital Happiness of the customer? Why should someone buy your product while a competitor offers the same, plus some integrated tweaks to make her actually happier?

Sources:

Menno van Doorn, Sander Duivestein, Michiel Boreel.

The Present and Future of Positive Technologies: http://online.liebertpub.com/doi/abs/10.1089/cyber.2011.014

http://www.insurancefraud.org/statistics.htm

https://www.fromthegrapevine.com/innovation/lemonade-insurance-dan-ariely

http://journals.sagepub.com/doi/abs/10.1177/0956797616635200

https://blendle.com/i/the-new-york-times/a-wardrobe-by-mail/bnl-newyorktimes-20170511-27_1?sharer=eyJ2ZXJzaW9uIjoiMSIsInVpZCI6InRwZXBwaW5nIiwiaXRlbV9pZCI6ImJubC1uZXd5b3JrdGltZXMtMjAxNzA1MTEtMjdfMSJ9

 

Thijs Pepping

About

Thijs is passionate about (new) technology and for the human life. In VINT he combines his interests with the synergy between humans, society, and technology. This includes AI/MI, E/M-Health, Virtual Reality, Augmented Reality, Smart Cities, Embedded Software, Quadcopters, and Medical Robots. VINT provides practical insight into the likely impact and innovative applications of new technologies for organizations worldwide. This valuable intelligence helps public and private sector enterprises to anticipate and plan for the complex dynamics of the future. The use of new technological developments is aimed at generating value that anticipates future developments.

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    *Opinions expressed on this blog reflect the writer’s views and not the position of the Sogeti Group