19 May 2011  Research & Ideas

Empathy: The Brand Equity of Retail

Retailers can offer great product selection and value, but those who lack empathy for their customers are at risk of losing them, says professor Ananth Raman.

 

There's a famous line from the movie The Godfather, which is often repeated in corporate settings: "This is business, not personal." Ironically, though, that statement is actually bad business advice.

During the Consortium for Operational Excellence in Retailing (COER) conference held May 10-11 at Harvard Business School, professor Ananth Raman discussed the importance of empathy in customer-facing business.

"As we're talking about things like retail efficiency and profitability, this is a topic that I think needs more attention," Raman told an audience of retail executives.

"Are you in the business of rationality or emotionality?"

To kick off the conversation, Raman relayed what happened when Cleveland Clinic CEO Delos "Toby" Cosgrove visited a class at HBS a few years ago to discuss a case study on the renowned hospital. Dr. Cosgrove was intending to highlight the clinic's record of operational excellence, when a student, Kara Medoff Barnett (MBA '07), threw him a curveball of a question: "What is the hospital doing to teach its doctors about empathy?"

It turned out that Barnett's father, also a doctor, had undergone a mitral valve replacement in 2000. Although the Cleveland Clinic had been consistently ranked No. 1 by US News & World Report for heart surgery survival rates, her father opted to go to the No. 2 ranked Mayo Clinic. The reason for his choice: doctors at the Cleveland Clinic had a reputation for communicating badly before and after surgery.

In other words, the Cleveland Clinic had lost business solely due to a lack of empathy. "It was like the prettiest girl in class not getting a date," Raman said. For Cosgrove, Barnett's story was a transformative experience that led the hospital to establish the Office of Patient Experience in 2009.

Raman also told the story of patient advocate Jackie Gruzenski, who faced an all-too-common experience when her husband was hospitalized for a cerebral bleed in 2009. Gruzenski was only allowed to see her husband during very strict visiting hours for the intensive care unit—four times a day in 30-minute increments. The hospital would not bend the rules, in spite of the patient's repeated plea: "She's not a visitor, she's my wife." The patient spent 8 of his last 16 days alive in the ICU, denied important time with his wife because of systematic rules.

Raman asked the executives to consider the story and apply it to their own work.

"It's a core question for all of you: Are you in the business of rationality or emotionality?" he said. "If empathy is lacking in a nonprofit such as a hospital, what hope is there in retail?"

To that end, one COER attendee noted that an empathetic salesperson can make the difference between a customer's decision to shop in a store rather than online. This is a key issue at a time when many potential customers will walk into a store, use their smartphone to snap a photo of a product they like, then return home to search online for a cheaper price.

Another attendee agreed, sharing the story of a woman whose luggage was lost on the eve of her husband's funeral. Staff at a local Nordstrom store responded by staying open so she could purchase a few outfits, and her family has been loyal to the retailer ever since.

"Empathy can be the brand equity of retail," Raman said.

"One of the challenges we face in retail service operations is that the customer is part of the operating process"

Raman also talked about empathy in dealing with difficult customers who hurt business by disturbing other customers or by complaining publicly about the service. He cited the example of a hospital patient who consistently refused to follow medical orders, gave all the doctors bad reviews in customer surveys regardless of quality of care, and eventually threatened to strip naked in the hospital lobby and threw a tantrum. At that point the hospital faced an ethical dilemma. Should it refuse to treat the patient further because he was bad for business, even though his life depended on future treatment? (The hospital's legal team advised refusing treatment; the doctor, who was often the recipient of the patient's anger, disagreed noting his oath to always be there for the patient.)

Some COER attendees pointed out that in most of the retail sector, ceasing service is not a matter of life-and-death. "Sometimes you have to fire the customer," said one executive. Another related a mentor's advice that one of the smartest moves he could make in business was to allow difficult customers to defect to competitors.

"One of the challenges we face in retail service operations is that the customer is part of the operating process," Raman said.

Toward the end of the session, Raman reminded attendees to consider the role of the customer's empathy, too. He shared the story of a daycare center with operating hours from 7:30 a.m. to 4:30 p.m. The teachers were frustrated because several parents were consistently late in picking up their children, so the daycare instituted a new policy: a $3 fine for every late pickup. But rather than discourage tardy parents, late pickups increased dramatically. Now that they could pay for showing up late, the parents stopped feeling guilty and made it a habit.

"If you put a money value on the incentive, you often take away the pressure to conform to norms," Raman said. "It's a challenge…there are always big opportunities for us to do very dumb things. And it's always tempting to say, 'Can we just tweak the incentives and hope the problem goes away?' But that can come back and bite us very badly."

The Consortium for Operational Excellence in Retailing is focused on advancing retail operations from a combined academic and business perspective. The annual conference is used to present the latest academic research for participants to exchange ideas, thoughts, and challenges.

About the author

Carmen Nobel is the senior editor of HBS Working Knowledge.

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Comments

    • Anonymous

    Can you imagine the sea change in stress reduction and resentment (for consumers) if all purveyors of services and products adopted these principles? .... if, e.g., cell phone providers offered honest, large-print summaries of the ACTUAL "deals" they were promoting; if the dentist who botched your fillings, resulting in multi-thousand dollar root canal repairs said, "I'm really sorry", and waived the fee for correcting his mistakes; if your new car dealer service manager said, "you know, it really doesn't cost me $400.00 to change four spark plugs .... we'll do it for parts plus an hour labor .... a hundred bucks"; etc. We would all be singing, "Age of Aquarius", we'd all be a hell of a lot happier, and the businesses who practice these principles would obliterate their competition.

     
     
     
    • edwin rutsch
    • director, Center for Building a Culture of Empathy

    May I suggest a further resources to learn more about empathy and compassion. The Center for Building a Culture of Empathy The Culture of Empathy website is the largest internet portal for resources and information about the values of empathy and compassion. It contains articles, conferences, definitions, experts, history, interviews, videos, science and much more about empathy and compassion. http://CultureOfEmpathy.com

    I put a link to this article in our Empathy in the Workplace Magazine http://bit.ly/dL0GRE

     
     
     
    • Joe Roselle
    • 38 year veteran in retail sales

    We must all stop trying to fit the customer into our organization and understand that that the customer IS our organization. Unless you sell an extremely rare proprietary product, which in itself is a rarity, you can be replaced in todays world very easy. Empathy is the number one factor for competitive advantage. When dealing with people you are always dealing with emotions. If you don't learn to recognize others emotions and be empathetic, you will struggle until the world ends to figure out how to keep them loyal. Simply CARE about what customers want and need and they will come back to you. You only need to know your products' features and benefits that fit customers wants. People respect an expert very highly. They will become loyal. In fact they will even pay a premium just to deal with a trusted advisor.This minimizes the problem of selling on price alone. Again I stress, you are dealing with emotions; there is never going to be an effective one size fits all policy. The good news is that most customer service problems we face can be resolved. There really are very few you can't handle effectively if you CARE.

     
     
     
    • Shakti Saran
    • Computer Scientist, Entrepreneur, www.personalfoldersoftware.com

    Hello Everyone,

    This is one of the most basic and important things that one can teach to others and that many are even taught it at least as children. This also seems to be one of the things that most businesses don't do well.

    I spend a lot of effort, as and when I can, on experiencing things also because I think that providing and gaining value and experience is what everything's about and that I can provide them better by having experienced many things well myself. I like http://www.easydayindia.com/ because whenever I purchase there, I'm greeted with a smile to have an easy day. For experiences that I don't like and which affect a lot of people, I also try to do something about them through communities. I've just started "Landline / Mobile - Do Not Call / Disturb Issues - India" http://www.facebook.com/pages/Landline-Mobile-Do-Not-Call-Disturb-Issues-India/202531089788904 page.

    I've shared this article on "Parents In Education" http://www.facebook.com/pages/Parents-In-Education/181477255197417 page and "Chief Marketing Officer - India" http://www.facebook.com/pages/Chief-Marketing-Officer-India/110457382365734 page. Harvard is awesome and that I had gone there for a summer school. Also, I've read Harvard Business Review for years which I recommend to everyone. I also have a "StudyLearnAssessTrainEmploy" http://www.facebook.com/home.php?sk=group_309232032777 group which is a part of my www.slateandchalk.net web-site.

    Best, Shakti Saran

     
     
     
    • V.G.Pillai
    • Retired professional

    Hello folks, I feel real good in reading this article .The concept of empathy is something one rarely finds in India. I felt it missing in hospitals, malls and consulting rooms. I wish the upcoming management students in this country chew on this factor in their future pursuits whatever they may be. My heartfelt regards to Prof. Raman.

     
     
     
    • john goodman
    • vice chairman, TARP

    I find that the primary reason for the situations you describe is not an inherent lack of empathy but an inability to "break the rules" when the situational circumstances call for it. We have found that what we call "flexible solution spaces" allow the front line employee to break the rules without breaking the rules.

    Such flexibilty also eliminates employees having to defend policies that make them cringe and say, " I agree it is a stupid policy but it is our policy that I must enforce". Employee morale goes up with cusotmer satisfaction.

    I believe that Cleveland Clinic is actually working to create such flexibility to reduce such situations and retailers like Bath and Body Works already have them in place.

     
     
     
    • Kapil Kumar Sopory
    • Company Secretary, SMEC(India) Private Limited

    The basic need is to step in the shoes of the other and feel how it pinches. I have been a banker at stages when most of the activities were carried out manually (no computers). As a supervisor and a manager, my advice to self, peers and juniors was to watch the person in the queue before you as if it is you standing there to be helped/guided/served. (And it would in fact be you at another outlet). This is an automatic root for imbibing empathy in our attitude. Once done, lot of inner pleasure would be derived. I do not agree with a generalised statement of Mr. V.G.Pillaii about total absence of empathy in India. I have had similar experiences abroad - even Prof. Raman has given US examples in the article ! No customer comes to a vendor merely to purchase a product. He expects a helping management as his feelings and emotions are more important to him. Purchase he will but at which location will depend on the behaviour meted out to him.

     
     
     
    • Phillip Gelman
    • Principal, MARKETING MANAGEMENT, Pro Tempore

    What does it cost to be nice? There is no reason to treat customers (patients, clients, workers) poorly or carelessly. Understanding others' feelings and attempting to help them is the cheapest way to do business: if an error is made and rectified quickly, resentment will be mitigated if not eliminated. Supposedly we are equals in America - from the rich man buying an expensive suit to the presser who finishes it. Listen to your customer, reassure him and smile. It is the easiest way to operate.

     
     
     
    • Mark
    • Piwkowski, Remark

    Great topic Ananth! To me this is a real cultural matter that starts from the foundation of leadership and leaders as teachers in their organisation. You often hear that the foundation of a childs values starts at home. It is the same in business whether product or service. More than ever the most effective organisations have well structured interdepartmental relationships, clearly defined functional responsibilitities and matrix based structures that are focused on a common goal. It is these same foundations applied consistently internally that are applied externally to their customers.

    Leaders in an organisation are wholly responsible and set the tone for how effective a company is at creating empathy with the genuine interest to serve their customer as their core principal and not profits alone. The fact remains if you are empathic towards your customers needs with a genuine interest in their needs then reputation, repeat work, reference points and profits will look after themselves.

     
     
     
    • Anonymous

    A story in affirmation of the comments of John Goodman (above, re. "breaking the rules"): My wife and I are in our 60's. We've shopped weekly at the same suburban chain grocery store for over 30 years. We know the staff, and they know us. We've spent well in excess of $150,000 at this store, always paying by check, and never writing a "bad" check in 30+ years.

    Recently the company that prints our personal checks mis-printed our account number on a new order of checks, resulting in a check "bouncing" at this store (approx. $100. purchase). The check printing company immediately admitted their error, and wrote a PERSONAL letter to the grocery store, explaining it was totally THEIR mistake, not ours. They also sent a new order of checks, with our account number printed properly, and offered to pay the "bounced check" fine the store has assessed on us.

    When I went to pay off the amount due (approx $100.), I presented the letter from the check-printing co., and one of the the new (correctly printed) checks. The person at the service desk (who has known us for many years) said I could NOT pay the balance due with a check, that company policy required us to pay the amount due in CASH only .... this with a line of our neighbors behind me looking on.

    End of story: A letter to the store manager, describing the humiliation of the moment, and our resentment at being treated like total strangers, after thirty years of loyal patronage, earned an apology from the manager, and a $50. shopping card to reinforce his apology. As far as I know, their corporate policy still makes no distinction between customers with decades of patronage, vs. total strangers in a similar circumstance.

     
     
     
    • Sid
    • CEO, Foremost

    Great but how do we implement this? Measure it in employees? The traditional approach is to hire employees who already have empathy as people. This is what Four Seasons Hotels do. Obviously that leaves the 99% they reject. How does one instill empathy in to them?

     
     
     
    • Paul Nicholas
    • Director, Soul-Chaplain Consultancy

    This is an interesting read - thank you.

    The ability to feel empathy is part of our evolutionary heritage as a social species - for which individual survival depends on the group and the effectiveness of interaction within it. Unfortunately lack of empathy seems most commonly to derive from a variety of cultural overlays and learning.

    Naturally empathic individuals feel empathy for all - colleague and customer alike - their mirror neuron systems do not allow them to escape it, even if other considerations impinge upon its conscious manifestation: their ethical behaviours are an analgam of their nature and their experience.

     
     
     
    • Anonymous

    Great article! Wonderful that the "soft skills" are finally getting some respect.

    As I see it, there are a couple of problems in the current business climate: lack of recognition that Customer Engagement is linked to Emotional Intelligence, as this article suggests, and lack of trust & communication between company leadership and front-line employees.

    Hiring managers should consider applicants' emotional intelligence (i.e., whether they'll be able to empathize with customers) and leaders should trust front-line managers enough to let them determine when to "bend the rules" as John suggests above.

     
     
     
    • Anonymous

    This article brings to mind the question: what does empathy look like in healthcare? Arguably, the answer lies within each individual situation of patient experience. If this is the case perhaps those looking to increase the level of empathy in healthcare can learn something from the message Oprah related during the final episode of her tv program - that the biggest lesson she learned over time is that "people just want to be heard."

    It has been demonstrated that a large percentage of patients who access walk-in and emergency medical services do not actually required medical care. What do the rest of them require? To feel like someone is there to listen to them. To have their concerns heard. To have someone say to them that it will be ok. A vast majority of patients who access medical services are not suffering from medical problems requiring physicians, more than often, they just need someone to talk to.

    Arguably, there are great strides to be made in medicine from recognizing the value in the first lesson about the art of caring that every nurse is taught - sometimes the best thing you can do is simply listen.

     
     
     
    • Amjad Ali
    • Team Lead, Tradekey.com

    It is very important but it doesn't mean that each and every customer needs it. Sometimes, aggressiveness also results in business, but it depends on culture, norms of that particular region and mentality of particular customer as well.