The Draining of Target’s Emotional Bank Account

Fourth quarter sales were down for Target following the data breach that compromised the personal information and credit card information of 110 million shoppers last December during the height of the holiday shopping season. Some might say the sales were down because of the data compromise, and I would say that they are almost right. The reason that Target suffered a disappointing 4^th quarter is because when they disappointed their customers they had nothing in their emotional bank account…and they were overdrawn.

Emotional bank accounts are a concept that most organizations don’t really think about as much as they should. They are a concept derived from the works of the late, great Steven Covey, author of “The Seven Habits of Highly Effective People”, a book that helped build the foundation of my career. In his book, Covey describes the emotional bank account as the deposits that we all make into one another’s accounts, doing favors, helping out when it is needed, etc., and then the withdrawals we take when we need a favor or help in return.

Organizations have these accounts with their customers as well. These accounts are critical to customer retention. Good things and bad things are going to happen with your customers. When you have a lot of good things stored up in the emotional bank account when the bad things happen, your customers are more forgiving. But when you don’t, well … you have disappointing 4^th Quarter earnings.

People say a customer experience is about only rational things. How wrong they are! This example from Target is a great example of how emotions affect the bottom line. Target still has the same store layout, the same pricing, and the same quality of products that it did before the data breach.  These are all parts of the rational experience. But there isn’t the same is the feeling of security that it had before the breach. Emotionally and subconsciously, the shoppers were feeling that and shopping elsewhere.

Last month I wrote about Target and Snapchat’s data breaches over the holidays. In it I discuss how customers have to, at the very least, feel secure in their purchases with your organization. This is described in Maslow’s Hierarchy of Needs and demonstrated in his famous pyramid by having Safety listed right near the base of the famous pyramid. Customers need to trust you if you want to keep them.

Target’s customers would likely have trusted them more if they had more saved up in their emotional bank account with the giant retailer. But since the customer’s base of trust was rattled by the data breach and there wasn’t a big enough balance in the account, they didn’t shop there for the rest of the year. Add to the fact that January has been one of the worst in history for bad weather for much of the US, which has led to disappointing sales for retailers of all types so far in 2014 (Hurst Par 16-18), and you can see that the executives over at Target certainly have no shortage of woes right now.

Every organization has a level of emotional engagement with their customers, called an emotional signature. These signatures are tied directly to the emotional aspect of customers’ experience with the company. Defining this signature is critical to designing an effective customer experience (To read more about how to define your organization’s Emotional Signature click here).

Despite this fact, many organizations don’t know what their organization’s emotional signature is. They prefer to focus on things that they can make a correlation to their bottom line and for which they can easily calculate an ROI.

I would argue with these companies that there are ways to calculate your ROI on customer experience investments. Recently I worked with the Economist Intelligence Unit on a project that helped connect the ROI on Customer Service.   While there is no “industry standard” on how this is done, any organization can connect their investments into improving their customer service with a measurable metric that will define the ROI. You simply need to choose one and monitor it, whether that’s a score on customer satisfaction surveys, or the spend amount for loyal customers, or even the percentage of churn you have with customers. Basically, pick what matters to you most and keep track of it.

Still, most companies do not define or even have a basic awareness of what their emotional signature is with their customers. They continue to do things the way they always have.

This works fine as long as everything is fine. It’s when everything isn’t fine that it really becomes apparent that the emotional signature might need some attention. Like when you have to announce disappointing earnings, refer to 2013 as a “challenging” year and figure out how you are going to get back the millions you just lost in revenue last year as a result of neglecting it–the three things Target just had to do. Customers may have had their personal account information compromised but Target was definitely the one who had their account drained.