Adam Smith and the Customer Experience

The oft heard joke among employees is “this job would be great if it weren’t for all these customers”. Hopefully this is no more than a fleeting thought on a particularly bad day.

A search on Amazon shows 20 pages of books on “customer experience”. Granted there are a few non-book items listed, but you get the picture: everyone thinks they have what you need to create the optimal customer experience, if you buy their book. Since I can’t (nor want to) read them all this is not a critique of their work, I am sure some of it is very useful, but as student of history, I am always interested in who thought of it first. And it’s probably simpler than most would have you think.

I am not an economist, but I do play one on TV and being a little “old school” I tend to lean toward the classical. Adam Smith is arguably the modern world’s first economist so it is always worth looking at what he has to say on the subject. He is known for his influential and some (not me) would say controversial work: An Inquiry into the Nature and Causes of the Wealth of Nations. Better know as the Wealth of Nations (WN). No less important was his Theory of Moral Sentiments (TMS) which should be read first to fully understand the Wealth of Nations.

Smith believed that an individual is responsible for his own interests and happiness and equally the interests and happiness of others.

In TMS Smith saw commercial societies, those bound together by the customer relationship as the most favorable for “moral development and social cooperation”. For the customer relationship to be beneficial it requires the correct psychological distance. Closer than strangers more distant than family and friends.

Family and friends are bound emotionally which is inappropriate for a business relationship. Strangers, on the other hand, are indifferent at best. A customer relationship is a proprietary relationship.

In How Adam Smith can change your life, Russ Roberts wrote: “But all Adam Smith meant by proprietary or proper behavior is an idea we all understand – acting appropriately. By that he meant by meeting the expectations of those around us - acting in way that they expect and that allows them to interact with us in the way that we expect.”

So, what does it take to act appropriately? Smith saw two essential elements.

Sympathy is defined as an understanding between people; common feeling. An affinity, association, or relationship between persons or things wherein whatever affects one similarly affects the other, inclination to think or feel alike, emotional or intellectual accord.

Experiencing sympathy involves imagination. Through using our imagination, we can feel what another feels in his situation. That is, instead of just putting ourselves in another person’s place, we can imagine ourselves as another person. (1)   

This is especially important when the firm has not lived up to expectations and customers are dissatisfied.

Both the company and the customer must imagine themselves in the other’s shoes. From the perspective of the firm how do you get the customer to imagine and sympathize with your view? Set proper expectations and be honest. A wise man once said “no is a good answer”.

By acknowledging what each party is trying to achieve: revenue and profit for the company, a product or service that lives up to expectations for the customer, reasonable expectations are set. The rest is details.

Speaking of honest, I once heard a prominent CEO say, when asked about competing with a company that was losing money he responded “we are a for-profit company”. That is the funny thing about honesty. You have to say in your “outside voice” what others only think.

This brings me to the second element: Self-interest.

Self-interest is required to create the beneficial customer relationship. The customer wants the best product or service at the best value. The company wants to make a profit and both want to build a long-term relationship. Acknowledging self interest is the ultimate honesty.

When combined, sympathy and self interest become the bedrock for long term relationships with customers.

Engineers and social scientists offer useful processes and procedures for enhancing the customer experience at a functional level. But before we train everyone on the manuals and the flow charts we must create the proper mindset for providing the best customer experience. Customer experience has a motif: sympathy and honesty. Is it simple to say you should treat people the way you want to be treated? Sure.

(1)  Beyond economic man: Adam Smith’s concept of the agent and the role of deception, Caroline Gerschlager

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