Businesses large and small want happy customers, happy employees and happy vendors. Regardless of whether a multinational corporation or a “Mom & Pop” store, enthusiastic supporters are a marketing asset while a single outraged person is a liability. Studies have shown that the average “satisfied customer” refers five people while the average “dissatisfied customer” finds 11 people to chase away.
Businesses and whole industries spend huge sums of money meeting customer expectations and even larger sums of money raising those expectations further. It is a never ending chase and if you lose, twice as many people will hear from the disappointed than ever heard from the content.
The key then is to manage the factors that determine the satisfaction of customers, employees and vendors with their experiences interacting with a business.
Let Your World PIVOT Around Them!
When people are born, they believe that they are the center of the universe. As children grow and mature into adulthood, they slowly learn that the world does not revolve around them. Businesses seek as part of their customer service approach to make customers feel that again the world revolves around them. Rather than reverting to childhood, a business seeking enthusiastic supporters should make the experience PIVOT around them.
The PIVOT model provides a simple mathematical approach to understanding and even predicting the societal and individual response to an experience. The PIVOT model is another lesson learned from the disaster field office. PIVOT stands for:
P = Probability
I = Impact
V = Vulnerability
O = Outrage
T = Tolerance
Each component of the PIVOT model places a numerical value on the factors that determine the response to the experience a business provides. It is a predictor of “Customer Satisfaction.” To apply the PIVOT model each component must be understood.
Probability = The likelihood of an experience occurring (0% to 100%)
Drawn from traditional risk management and actuarial sciences, the probability of an experience or event occurring is a value based on the historical frequency of an experience or event occurring. Most simply, probability is the number of times an experience or event occurs divided by the total number of possible experience and events.
Impact = The impact of an experience (positive or negative) on a scale 0 to 3
(0 = No Impact; 1 = Minimal Impact; 2 = Moderate Impact; 3 = Significant Impact)
It is often said that no event or experience is without impact, but assigning a value to the degree of impact is often complicated. The PIVOT model deals with response to an experience or event and is inherently subjective, thus Impact is a subjective measure based on past occurrences of the experience or event.
Vulnerability = The susceptibility to the impact on a scale 0 to 3
(0 = None; 1 = Minimal; 2 = Moderate; 3 = Significant)
Like Impact, Vulnerability is a historically based, subjective measure of the susceptibility to the Impact. Obviously, if something has occurred previously but had not Impact, the Vulnerability is zero; however, when an Impact has occurred in the past, people have an inherent and subjective sense of Vulnerability which can be subjectively measured.
Outrage = The perception of the experience on a scale -3 to 3
Outrage was first identified as a component of risk communications by Paul Sandman, PhD. In his model, Sandman identified two factors that influenced and predicted the need for risk communications in the event of a business debacle, Hazard & Outrage. Sandman found that while a high perceived Hazard necessitates risk communication, low Outrage mitigated that need while high Outrage necessitated risk communication even with a low perceived Hazard.
Sandman never quantitated the level of Outrage, but in the PIVOT model, Outrage is a calculated value. Calculation of Outrage requires an understanding of two additional values, Expectation and Satisfaction.
Expectation = Perception of what reality SHOULD BE on a scale 0 to 3
(0 = None; 1 = Minimal; 2 = Moderate; 3 = High)
Satisfaction = Perception of what reality ACTUALLY IS on a scale 0 to 3
(0 = None; 1 = Minimal; 2 = Moderate; 3 = High)
Understanding Expectation and Satisfaction, Outrage can be calculated:
Outrage = Expectation – Satisfaction
The interesting result of calculating Outrage is the insight this provides. Since Expectation is the perception of what reality should be and Satisfaction is the perception of what reality actually is, and given that a business cannot change people’s perception, Outrage is actually the difference between Expectation and REALITY.
Tolerance = The sentiment regarding the experience or event.
Tolerance is the measure degree of Enthusiasm or Anger in response to an experience or event and like the calculation of Outrage, calculating Tolerance gives tremendous insight into why seemingly bad business news results in good while seemingly good business news can become a full fledged business disaster. To calculate Tolerance, first calculate Hazard and Risk.
Hazard = Impact + Vulnerability
Risk = Probability x Hazard
= Probability x (Impact + Vulnerability)
Having previously calculated Outrage and now having quantitated Risk, Tolerance is simply calculated, noting that if Outrage is a negative number, the positive number (absolute value) is used to calculate Tolerance.
Tolerance = (Risk)|Outrage|
Therefore Tolerance (anger or enthusiasm) equals Risk raised to the power of Outrage.
Choosing Epidemic Enthusiasm
A look at two classic historical business examples demonstrates how accurate and powerful the PIVOT model is for influencing public and individual sentiment.
McNeil Pharmaceuticals is the textbook example of risk communications after the cyanide contamination of their Tylenol product. Applying the PIVOT model, the probability of dying from a contaminated pill 100% and the impact if such an event occurred and the vulnerability were both high thus each scoring 3 points. Calculating for Hazard and Risk yields a Hazard score of 6 with a Risk score of 6. The Expectation of the general public was also high (3 points) as there had never before been a significant problem with a McNeil product.
When the company responded by publically withdrawing the product from the market and pledging to not return to store shelves until safety could be assured, Satisfaction was moderate (2 points). But, when McNeil made good on their promises, Satisfaction was high (3 points). Outrage, which could have crippled the company’s return to the marketplace, was effectively reduced to zero.
When Outrage is zero (Expectation = Satisfaction), the Tolerance score always equal to 1. (Mathematically, any number raised to the power of zero equals 1).
The textbook contrast to McNeil / Tylenol is New Coke / Classic Coke. The Coca-Cola Company dominated the cola market for decades when market research began to show that Pepsi cola was eroding a small percentage of Coke’s market share. In a carefully researched and planned effort to regain that small market share loss, the Coca-Cola Company reformulated Coca-Cola. Again applying the PIVOT model, the probability of bringing the new product to market was 100%, but market research and focus groups had found that the Impact would be minimal (1 point) although the Vulnerability to the Impact moderate (2 points). Calculating or Hazard and Risk yields a Hazard score of 3 and a Risk score of 3.
When the new formulation arrived on store shelves, Expectation was high (3 points), but Satisfaction with the new formula was nonexistent (0 points). The Tolerance score of 27 predicts what followed. Consumers began to hoard “old Coke” and picket against “New Coke.” Re-examining the anticipated Impact and Vulnerability shows that loyalty to the taste of the “old Coke” formula meant that the both Impact and Vulnerability were actually each 3 points, thus Hazard was 6, Risk was 6 and Tolerance was 216 (highest possible score). Despite the reintroduction of “old Coke” as “Classic Coke,” it was years before the Satisfaction score rose and the Tolerance score exponentially fell.
When Outrage is a positive number (Expectation > Satisfaction), the Tolerance score is a reflection of the Anger (negative image) felt towards the business.
But this is not the end of the New Coke / Classic Coke story. An unintended, but not unexpected beneficiary of the Coca-Cola Company’s misstep was Pepsi cola. Regardless of the success or failure of the new Coca-Cola formulation, the probability of the product making to store shelves was 100%. Had Coca-Cola’s market research been correct, the Impact on Pepsi cola would have been high (3 points) and as the number two product in the marketplace, Pepsi’s vulnerability was also high (3 points). Pepsi cola had a lot riding on Coke’s reformulation with a Hazard score of 6 and a Risk score of 6.
When “New Coke” disappointed Coke consumers, Pepsi consumers were heartened by the fact that Pepsi was NOT being reformulated. The Expectation for a change in flavor was nonexistent (0 points) while Satisfaction remained high (3 points). For Pepsi cola, the Outrage score was negative (-3) yielding a Tolerance score of 216, but unlike Coca-Cola customers, Pepsi customers were predictably enthusiastic about their preferred product. Same event, same reality, different outcome based on perspective and expectation.
When Outrage is a negative number (Satisfaction > Expectation), the Tolerance score is a reflection of the Enthusiasm (positive image) felt towards the business.
Manage What is Manageable
Ultimately, Probability, Impact, Vulnerability, Perception and Reality cannot be changed. Of all the factors that determine public and individual sentiment and predict anger versus enthusiasm, Expectation is the only factor that can be changed before and to a lesser degree during an event or experience. Thus if Expectation can be preemptively made to matched reality, Outrage is changed. Through expectation management, Anger is downgraded to Concern; Concern is converted to Opportunity, and Opportunity is upgraded to Enthusiasm.