Web companies hate losing customers. The cost to acquire new customers is high, and engaged users are the revenue-generating lifeblood we all desperately need to keep going.
We spend a lot of effort creating new content and building new features to bring value to current users and entice them to stay. When users do leave, the prevailing wisdom is that something must have been wrong with the product. We build cancel questionnaires around this assumption, with options that are largely product-centric.
Assuming every problem is product-related drives a product-centric approach to fixing them. But what if problems are more complex than simple fixes to content or features?
An engineer I used to work with once said — and this is incredibly insightful advice for product managers — “People are complicated.”
I work for a video-streaming service with a monthly subscription model (similar to Netflix). A few months ago we ran a survey with a group of users who’d cancelled the service. We asked about satisfaction across three product areas: usability, content (videos), and access (can you access the service on your preferred devices). The results were surprising. Even users who’d canceled the service rated their satisfaction high in all three areas. And their overall satisfaction with the service was rated just as high. Needless to say, we were perplexed. Why would someone cancel a service with which they were highly satisfied?
It wasn’t until a few weeks later, as I was reading Daniel Kahneman’s book, Thinking, Fast and Slow, that the answer became clear.
What makes someone satisfied?
Kahneman, a psychologist and Nobel Laureate in economics, dedicates a significant portion of his book to examining the psychological underpinnings of how people make decisions. The part that struck me specifically was his discussion of the way an object’s utility impacts our desire to have it — and, ultimately, how it impacts our satisfaction.
The utility of an object is defined as its perceived ability to satisfy a need or desire. The more utility a person perceives something to have, the more satisfying it is for them. Kahneman explains this from an economic perspective:
A gift of 10 [dollars] has the same utility to someone who already has 100 [dollars] as a gift of 20 [dollars] to someone whose current wealth is 200 [dollars]. We normally speak of changes of income in terms of percentages, as when we say “she got a 30% raise.” The idea is that a 30% raise may evoke a fairly similar psychological response for the rich and for the poor, which an increase of $100 will not do.
To extrapolate, a gift of $10 has less utility (and satisfaction) to a person who already has $200 than it does to someone who only has $100. The basic concept is that everyone who is considering purchasing a product weighs its perceived utility against its cost. If the utility seems high enough to justify the cost, the consumer is more likely to buy.
So, a customer comes to your service. They weigh utility vs. price, choose to purchase it, and are satisfied with the experience. Why would they still decide to cancel?
This is where things get interesting. The original idea, put forth by Daniel Bernoulli in 1738, emphasizing the role of utility in decision making is actually flawed. It assumes that it is the inherent utility of an object that makes a person more or less satisfied — that if you and I both have $100 we will be equally satisfied based on the inherent value of $100. As Kanheman shows, this assumption is wrong:
Today Jack and Jill each have a wealth of 5 million.
Yesterday, Jack had 1 million and Jill had 9 million.
Are they equally happy? (Do they have the same utility?)
It is pretty clear that Jack would be stoked and Jill would be reeling — even though they both have $5 million, which should have the same inherent utility. As Kanheman puts it:
The happiness that Jack and Jill experience is [actually] determined by the recent change in their wealth, relative to the different states of wealth that define their reference points (1 million for Jack, 9 million for Jill).
This was my aha moment.
Satisfied people aren’t canceling because the inherent value of the product has changed. What has changed is the utility they perceive in that moment, based on their current life state.