February 23, 2010
Empowering skeptical customers
Of course, there’s nothing new about increasingly skeptical consumers – starting in the 1960s, the baby boom generation led the charge on questioning authority. You could see this in attitudes toward just about every traditional institution – churches, Government, the media, big business.
What’s different today is how this skepticism has translated into changed behavior, with the internet playing a crucial role.
Sometimes it’s hard to remember the days before the internet. Fifteen years ago, information was hard to come by – perhaps the greatest long-term impact of the net will be the remarkable fashion in which it’s leveled the information playing field. Access to information has dislocated business models of intermediaries such as travel agents and put traditional media like newspapers under huge stress.
And it’s also led to much tougher questions from consumers to everyone they deal with – for instance, doctors talk about patients coming in with pages of questions they’ve printed off the net.
Many Americans changed their attitude to their financial advisor and the financial industry as a result of the events of last year. That said, when you look at what’s happened elsewhere, you can make the case that this spike in skepticism was overdue – and the financial industry is just playing catch up with everyone else.
A short attention span world
It’s not just the amount of evidence needed to back-up recommendations that’s changed – it’s how investors want to receive that evidence.
Investors are less tolerant of financial bafflegab and industry-speak and more demanding of candor, substance and transparency on things like fees.
And there’s less appetite for reading.
Historically, financial communication was paper-based – articles, newsletters and lengthy reports. Clients have long complained about the avalanche of paper they get – long on disclosure to satisfy legal requirements, short on meaning.
Many financial advisors doubt whether most of what they send gets read.
“Our firm’s economist publishes a monthly report that we’re encouraged to send clients,” one advisor told me. “In my view, the chances of most clients looking at that report approach zero. The firm would be much better off sending a short video.”
The power of video
In early 2009 I conducted a series of full workshops, outlining strategies to improve communication with clients.
Among the ideas I covered was supplementing face-to-face and telephone conversations with regular emails of articles from credible sources such as the Wall Street Journal, the Economist or Fortune.
A few weeks later, I got a call from an advisor who had attended the workshop. He had started emailing clients articles and had received a generally positive response. Then one day he decided to try emailing a video of a CNBC interview with Warren Buffett instead – and was blown away by the feedback.
As he put it: “The response to the articles was good but the feedback from the video was great. Partly because it was Warren Buffett, but a big component was that for the first time clients could actually see and listen to him and get a feel for the man. Even if I’d sent an article by Buffett, it wouldn’t have had anywhere near the same impact.”
Introducing sight and sound
What makes video so powerful is not just that clients are more likely to watch it than read an article – it’s also the impact of the sight and sound that video brings.
Of course, the impact of sight and sound on the effectiveness of communication is far from new.
Advertising as we know it today first appeared with the launch of newspapers about 1700 – and for over 200 years, newspaper ads were how companies communicated to customers.
In the early 1920s, radio came along – and the first major revolution in customer communication entered the scene – now firms could take static words and pictures and add sound to the mix.
And in 1941, the first television ad appeared, a commercial for Bulova watches targeting 7,500 households with television sets in New York City – and with that sight was added to sound and mass communication changed forever.
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