Monday, August 20, 2018

What animals teach us about customer relations

Scientists and philosophers have spent a lot of their time and energy trying to describe what makes humans different from animals. So have economists.

Blue-striped cleaner wrasses at work. Photo by Gregory R. Mann
But it turns out that animals have economic market behaviors similar to humans, such as customer differentiation (a fish called the cleaner wrasse) and bidding out their labor (the paper wasp).

For this blog post I am indebted to Stephen J. Dubner's "The Invisible Paw" podcast. He interviewed a scientist who described how the cleaner wrasse, which removes parasites and dead scales from other fish, treats its "clients" in line with the principles of market economics. (Photo is from the WildCoastBlog).

Each cleaner wrasse sets itself up at a particular spot on a coral reef, and fish come to them all day long to get cleaned. A wrasse's clients are of two kinds, according to behavioral ecologist Redouan Bshary. The "residents" of the coral reef are fish who can't travel far and thus are stuck with limited options in terms of the wrasses they could go to for a cleaning. "Visitors" are fish that range farther afield and can thus pick and choose among the wrasses they go to for a cleaning.

So, in line with market principles, the wrasses give better service to the "visitors", who have more choices. The wrasses take care of them first and make their regular clients, the captive audience of residents, wait to be serviced.

"What’s incredible here is the cleaner wrasses themselves are able to recognize and understand which species of fishes have other options. And they will actually tailor their level of service depending on the competition," said Ben Frair, a journalist and author of "The Secret Economic Life of Animals".

What wrasses really prefer to eat, though, is not the dead scales and parasites but the nutritious mucous and live skin of their clients. So who gets bitten more often? The resident clients, who have little choice. And in an experiment when the population of wrasses was reduced, giving clients fewer choices -- a seller's market, in other words -- the wrasses were more likely to bite their resident clients, Bshary found.

You can read more about wrasses and paper wasps (whose workers get away with foraging less when there are more hives and their labor is in demand) in the Stephen Dubner podcast mentioned above.

You can't please everybody

The economic lesson for an entrepreneur might be that you have to decide which clients are most important to you. For the cleaner wrasse, it can increase the number of clients by focusing on that hard-to-reach audience of visitor fish without fear of losing its existing client base of resident fish. The wrasse is making a cost-benefit calculation.

Consultant Steve Blank has articulated this principle to many entrepreneurs: "Your job is not to make every possible customer happy."

Blank described how an entrepreneur he was coaching was spreading the resources of his company too thin in trying to give every potential customer everything they said they wanted from his online business.

Blank counseled a disciplined approach that would mean risking the loss of some potential customers but gaining more of those most likely to pay and benefit his business.

To get the big fish, you might have to give up some of the little fish. It's an economic calculation that every entrepreneur has to make.


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