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Robo-advice: in the wake of the FCA review, here’s the problem that no one is talking about

By Opinion No Comments

This week’s FCA review of Automated Investment Services (“robo-advice”) emphasised once again that debate on this topic is still yet to mature from the regulatory and technical phase i.e. what the product is and what it does. But for those investing in robo-advice – and relying on it finding popularity with end users – the focus now needs to shift to understanding how those end users feel about the experience of actually using the product.

The gap in the understanding of robo-advice

As far as I can tell, there has been little in the way of in-depth analysis of real customers’ moment-to-moment experience of using robo advice tools. This is an issue that will only grow larger as we move forward – and if robo-advice is to be the robust and long-term solution to providing cost effective advice to the mass market that businesses are seeking, then understanding what works and what doesn’t about the experience of using it is critical.

The current focus on regulatory, service and technical models will undoubtedly resolve the delivery issues and make the offerings FCA-proof – but this will have no bearing on whether individual consumers will actually engage with the tools.

In other words – the operation could be a success but the patient could still die!

Why this matters

Customer experience is now more vital than ever to a product’s chances of success – a study of 10,000 US consumers by Tempkin Group revealed that 77% of customers who were likely to recommend a product would need to consider the experience of using that product as ‘Excellent’, while 79% would need to consider an experience ‘Excellent’ in order to be likely to trust a product.

It’s important to note that customer experience isn’t to be confused with user experience, which focuses simply on the interaction with the system. Customer experience is more holistic and encompasses customers’ cognitive, emotional, social and physical responses to using a product – taking into account aspects the provider can control (e.g. service, interface, results etc.) and those they can’t (e.g. influence of others, environmental factors, moods, etc.).

Why no one is talking about it

For these reasons, customer experience isn’t simple, and it’s not easy to do well – so it’s perhaps little wonder that the current robo-advice focus tends to be on more quantitative and regulatory aspects.

The trouble is, getting the customer experience right is critical to robo-advice becoming genuinely mass market, and we are fast approaching a point where those investing in and promoting the use of robo-advice cannot afford to sideline it any longer.

The solution

For those building, investing or promoting the use of robo-advice products, how can they ensure they’re on a path to a product which provides a positive user experience?

The answer is to ask the users themselves, by conducting direct customer research. Not just in terms of usability, but by observing, interviewing and interacting with consumers before, during and after the product experience, exploring not only what they do but why they do it, and understanding why their perception of the product is good, bad, or indifferent.

Such research has been proven to be hugely effective and reliable when undertaken with small groups of participants in similar fields, and the results provide clear insight on what the consumer actually experiences – as well as how any potential issues can be resolved.

Next steps

In time I hope the FCA will move on from the technical aspects and begin to take a view on customer experience in robo-advice – but in the meantime those who are relying on its success might wish to consider how much true understanding of the customer’s experience they really have.

But customer experience research is not an amateur activity – our team of psychologists, anthropologists and ergonomists are highly skilled in creating the right interview question sets and establishing the correct environmental setting in our labs.

Get in touch with us to discuss how we can assist with testing and improving your robo-advice product and your customer’s experience.     

 

4 reasons millennials don’t engage with personal finance (according to millennials)

By Explanation, Opinion, Opinion No Comments

Part 2 of a series on millennials and personal finance. You can read Part 1 here

We’re currently conducting research with a group of twentysomethings – our Millennial Cohort – to find out why millennials aren’t engaging with their personal finances in the same way as previous generations.

They’d already told us that they felt underserved by current budgeting and day-to-day financial management tools, so we challenged them to create their own. We asked them to visualise their personal finances however they wanted, using a variety of pens, paper and physical tokens (oh, and glitter and Play Doh).

What we discovered should be of interest to banks. Our four key takeaways were as follows:

1) Millennials distrust financial services companies, and struggle to care about their personal finances

“I don’t trust investment companies or insurance or that kind of stuff and I don’t really care about those issues”

This is what one participant told us, and the same sentiment was expressed by others. Millennials’ distrust of financial services companies is likely to be one reason why they are less loyal customers – and more willing than older generations to switch to neo-banks or potential services by firms such as Google and Amazon.

2) The ‘one size fits all’ approach to personal financial management is inadequate

An inflexible approach to digital person finance services is also restricting banks from building loyal, engaged relationships with millennial customers. One participant commented:

Usually with financial stuff it’s very restrictive. This was all completely under my control – the paper and everything was completely blank and I liked that.”

What they produced is below – and it’s certainly unlike any of the digital interfaces available from major banks today. Aesthetics aside, its focus on goal setting and future spending is in contrast to the historical transactions emphasised by most major banks’ personal finance tools.

Participants found the ability to personalise their ‘interface’ helpful

The current statement- and spreadsheet-based personal financial management tools that banks offer are impersonal, one-size-fits-all approaches that provide plenty of raw data, but little in the way of interpretation or analysis. For a generation which are already disengaged with their finances, the need to do the heavy lifting in terms of translating data into actionable strategies is a major barrier.

3) Budgeting is hard, scary and emotionally difficult to deal with.

Whilst millennials want to be able to financially plan, these are still a source of stress for many in this generation. Participants commented that they are “scared that [they’ve] spent more than they ought to” and that in the future they’ll realize “[they] should have been more careful”.

Reflecting this, some participants used the project as an opportunity to simplify the process of keeping track of their expenditures. Below, a box of beads gives an at-a-glance view of how a participant’s money was spent, with each colour representing a different type of purchase.

There was a common consensus even among those who professed not to currently care about their finances that they were aware that understanding and managing them would be important for the future. But finding personal finance, in the words of one participant, “a complicated, tangled thing”, full engagement often felt out of reach.

4) There are no associated specific ‘real world’ goals with personal financial planning.

 A struggle to make the personal data provided by their banks feel tangible or relevant to everyday life was a common thread among participants.

Several used the research project as an opportunity to start planning towards both long and short-term spending goals, such as trips abroad or reducing the amount they were spending on incidentals such as coffee.

One participant commented that bank data “is quite bland, because it’s just digits” while another added that the project’s visualisation challenge “made me more creative in thinking about my finances”. These insights are borne out in how participants approached the project, choosing to focus on representing specific goals rather than dealing with their financial data in the aggregate.

These four learnings indicate banks are missing the mark for millennials – and in world of open banking and booming fintechs, that’s bad news for those unwilling to change. Find out why banks should be worried about these findings.

If you’d like to understand how our research techniques can help your business understand its customers better, contact us at www.experience-lab.com/#contact.

What Is Co-Design? We Demystify It

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“People don’t know what they want until you show it to them” – Steve Jobs

Steve Jobs didn’t always get it right. While the iPhone showed that the ideas of a single visionary can be revolutionary, most of the time it’s counterproductive – even dangerous – to assume that as a service provider, you know better than your customers.

Co-design is the antithesis of the paternalistic, board-room-knows-best approach to service design. Part brainstorm, part market research, part evidence gathering session, it’s a method of placing the user at the centre of the development of how a service is delivered.

How is this done? Businesses bring customers into the boardroom – not metaphorically, but literally. Co-designing assumes the customer is the expert, while the decision making and project delivery apparatus of the business are facilitators, there to extract and action the customer’s insights. 

Customer-centricity is a well-worn buzzword, but co-design makes it actionable. Here’s how.

How Does It Work?

  1. First, some customers will need to be recruited. A fairly broad cross-section is usually best – what that will look like will, of course, very much depend on the business’s product.
  1. With a group of participants chosen, the first step is to have participants self-reflect. This is to gather the initial insights which will inform the co-design session. In order to best discover participants’ impressions of the service, a range of techniques can be employed. Participants might be asked to keep a diary of their use of the product, or complete a daily or weekly survey.
  1. With self-reflection complete and the data gathered, it’s time to invite participants on-site – for a session that usually lasts 1.5 to 2 hours.
  1. The session is often split into two halves. The first might be an extension of the self-reflection exercises set prior to the session, and focuses on interviewing participants on their current experiences.
  1. With that data gathered, part two focuses on the co-designing itself. A mix of the company team members and gathered customers participate in a range of exercises – these will very likely be physical, tangible, and creativity focused. If it’s not fun, you won’t get the best out of your participants.

Here’s an example – say our co-designing firm is looking to understand its key customer groups better. We might invite our customers in, and have them craft Facebook or Instagram profiles for imaginary customer archetypes – cutting images out of magazines to create visual personas with glue and craft paper. It’s fun and interesting for participants, but it also provides crucial insights to us as a brand. The key with co-design exercises is to keep them open-ended, but give participants enough constraints that they aren’t overwhelmed.

  1. Once participants have completed the exercise, it’s key to capture the insights and debrief everyone. This final step lets them know what they’ve helped you understand with the exercise – and ensures that no learning from the session is lost, by capturing it when its still fresh in participants and researchers’ minds.

Why Co-Design Is Needed

You might be thinking that this sounds like a lot of effort. Why go through the steps necessary to run a co-design session, when you already gather insights from your customers via regular feedback forms and surveys? 

Surveys can be helpful – they’re often a key component of the self-reflection stage – but as a fire-and-forget method that focuses only on gathering data, they can’t effect business change in the same way as co-design. We’ll leave you with three reasons why:

  • Co-design provides the crucial, actionable evidence that businesses need to make big decisions. The executives or consultants who lead change within a business often feel that they ‘should have all the answers’. In reality, they probably don’t. But their customers do, and co-design is a much more powerful method of extracting them than surveying.
  • Teams within a business are often siloed. What one might see as an issue, another might see as an essential part of the service. Talking to the people actually using the service can bring clarity to these internal disagreements, and bring teams together to work cohesively on a problem.
  • As companies scale, executives can naturally lose touch with customers, who find themselves buried further and further behind layers of customer service and account management. Co-design reconnects the people designing the product with those using it, cutting through the bureaucracy and making customers happier.

 

Ready to start your own co-design session? Talk to us