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I was puzzled by some recent conversations with investors, until I read a column in the New York Times about how to maximize the pleasure from vacations.
The column stemmed from research by behavioral psychologists on how to structure activity to generate the most impact – and led to some striking findings both for planning vacations and for structuring how clients experience their interactions with you.
Understanding how “peak-end” works
One of the most important findings is something called the “peak-end” phenomenon.
Quite simply, there are two things that shape how people remember an experience, whether it be a vacation, a restaurant meal or an interaction with a financial advisor.
First, what people remember most strongly is what happens at the end of an experience. Even if the vacation as a whole was a bit on the ho-hum side, if it ended on a high point people tended to remember it more fondly.
In terms of timing, the next thing that sticks with people is what happens at the beginning of an experience – what takes place in the middle still matters, of course, but much less.
And next, people remember the high and low points, the things that really stuck out most intensely – what are called “peak experiences.”
Structuring interactions for maximum impact
Which brings me to the client conversations that baffled me...
One elderly investor went on at length because her advisor remembered exactly how she took her tea and always had her favorite cookies on hand when she went into her office for meetings.
Another investor raved about her advisor because she’d sent her three books over the course of 20 years working together. The key thing about those books was that they all responded to things she’d mentioned in conversation – she was taking up golf, her daughter-in-law was expecting her first grandchild, and she was taking her grandchildren on their first trip to Disneyworld.
The significance that these investors gave to the cookies and the books was way out of proportion to their actual importance. In a rational world, how could things that were trivial on the surface have this kind of impact?
The reason is quite simple.
Things that superficially seem to be mundane resonate with clients because they stand out for the level of personal acknowledgement – they provide that “peak experience” that psychologists talk about.
And in fact “peak experiences” is what advisors should strive for in every client interaction.
Getting the most from client entertainment
An issue that advisors must consider in structuring client interactions is the “familiarity trap.”
Many advisors take their best clients out to lunch or dinner on a regular basis.
The problem: Even if someone was impressed the first time this happened, research show the challenge is that people assimilate experiences – things lose their impact with repetition.
So instead of doing a number of smaller things to build relationships, advisors would be better off doing fewer but more dramatic things.
For example, rather than taking a client to an annual lunch, spend the same money to do something that will really stand out, ensuring that every experience is special and unique.
After a few years of working together, one advisor surprises top clients at a birthday lunch by inviting two or three of their best friends to join them – more money for certain, but also much greater impact.
The key is that he does this once and only once – and then the next time that he wants that client to feel acknowledged, finds another way to do it.
There’s a simple rule of thumb at work here – if something is designed to deepen relationships with clients and let them know they’re valued, you need to do things that make clients say “Wow.”
If it doesn’t meet that standard, chances are that it won’t have the desired effect.
Yes, this takes more thought and effort and costs more, but by doing things less frequently and making each activity truly memorable, you’ll get a much better return on the expenditure of time and effort.
