The ancient philosopher Heraclitus said that “Life is Flux”. That statement has important meaning to how a business should connect with its customers. Consumers’ needs change constantly depending on what is happening in their life at the moment. It is impossible to catch every ripple in life. But a business needs to anticipate and respond to the most significant life events in order to build long-term loyalty. The first step is to understand what it means to have a significant life event, what happens to consumers during that time, and how it manifests in consumers’ activities. I will offer some answers in this article based on my own and others’ research in this area.
Consumers’ Experience of Significant Life Events
Significant life events abound in everyone’s life. Some of these are positive events, such as getting married, having a baby, or getting promoted at one’s job. Some are not so happy, such as getting a divorce, losing a loved one, or getting laid off. There are also events with bittersweet feelings such as retirement and sending kids off to college. Whether good or bad, these events are considered “significant” because they change our identity. That is, who we are as a person. For example, getting married means the addition of a new role as a husband or wife. Losing one’s job means the loss of an existing role as a worker and bread earner.
Such role transitions and identity shifts often create a sense of instability and can be quite stressful to the person going through the transition. To cope with the demand of role transition, existing research shows that one can simply cope with the emotional stress itself, or one can take a more proactive approach to do one or both of two things: (1) clarifying what one’s role will be following the significant event; and (2) adjusting one’s resource mix to be prepared for the new role.
Take having a baby for the first time as an example. A soon-to-be parent may talk to others to gain a perspective on what it is like to be a parent (role clarification). The future parent may also try to line up financial resources (e.g., more money in the bank) and human resources (e.g., getting onto the waitlist for a daycare or soliciting family support) to make sure that he or she is ready for the baby (resource preparation).
A 4×3 View of Significant Life Events
It is clear that people tend to make adjustments as a result of role transition as described in the last section. Oftentimes we can sense these significant life events through observable actions by customers. My colleagues and I have been working on predicting significant life events through changes in observable account activities. Our research has created a framework for analyzing manifestations of significant life events through a 4×3 matrix. One dimension of the matrix represents specific needs the consumer’s manifested activities are trying to address. Most activities address one of three needs:
- Survival. Survival represents the most basic of human needs. Activities in this category reflect a desire to ensure current and short-term survival (e.g., ability to pay bills).
- Security. Activities in this category represent the need to create a longer-term safety net. Examples include creating a will or starting a retirement account, etc.
- Personal development. At the highest level in Maslow’s famous hierarchy of needs, personal development involves a desire to better oneself. Investing in a better future, not for a sense of security but for pursuit of delight and better things, would belong to this personal development need.
Along the other dimension of the matrix, we identify four different types of activities:
- Knowledge/information acquisition, which means to learn something new and obtain information that one does not have before.
- Existing resource maintenance, which involves tallying and in some cases adjusting the resources that one already has.
- Adding new resources, such as buying a new house or obtaining other resources that one does not currently possess.
- Removing old resources, which involves shedding one’s current possessions such as selling an old house or donating money to charity.
4×3 View in Practice
Putting the 4×3 view above into practice, the table below shows some sample activities in each of the 12 cells.
| Survival | Security | Personal development | |
|---|---|---|---|
| Knowledge/Information Acquisition | - Browse apartments for rent listings - Solicit recommendations for a pediatrician | - Inquire about insurance products - Learn about retirement planning and savings | - Go back to school to get new or additional training - Research vacation destinations |
| Existing resource maintenance | - Pay credit card bills - Grocery basket variations | - Change one’s insurance coverage - Update one's will | - Renovate one's home - Update the investment portfolio |
| Adding new resources | - Apply for a new personal loan or credit card - Buy a car | - Install a new home security system - Buy an infant/child car seat | - Open a new investment account - Join a gym |
| Removing existing resources | - Pay off a personal loan - Host a yard sale | - Cancel an insurance policy - Close a retirement account | - Donate to charity - Sell a timeshare |
I want to note that the classification of each activity into this matrix is not absolute. Depending on the nature of some activities, they may fall into different categories. For example, buying a car can be typically considered as adding new resources for short-term survival needs. But if you are a luxury car dealership, buying a car from you is more likely to belong to the personal development+adding new resources category instead. This means that the classification of activities requires a clear understanding of your customers and your products.
How to Leverage the 4×3 View in Your Business
To implement this 4×3 view of significant life events in your business, the first step is to catalog all of the observable activities you have or can collect from your customers on a fairly continuous basis. Then these activities need to be classified into the 12 cells as shown in the table above. These function as vital signs of the customer. Create a system to regularly monitor the level of activities in each area. Significant changes in activity levels in one or more of these areas likely indicate a pending or recent significant life event.
For certain events, there may be common activity signals. For example, a person planning a big wedding may monitor his or her savings accounts more frequently to avoid overspending (survival+existing resource maintenance). Or someone who just had a baby is likely to think more seriously about long-term security and create a will (security+adding new resources) or update an existing insurance coverage (security+existing resource maintenance).
In the meantime, my research does indicate distinct segments of people who show different patterns of activities for the same event. Therefore, how these activities will manifest in your business may be different depending on the nature of your business and the types of customers you have. The best approach is to identify past significant life events you already know among at least some of your customers, and use their activity levels before and after the events to build a good predictive model of those events. This will require a combination of business acumen and data crunching skills. Alternatively, if there are insufficient data to build such a predictive model, qualitative studies of a sample of your customers through in-depth interviews and focus groups may also be helpful. These studies can help understand how your customers deal with significant life events through each of the 12 areas.
I hope you find this discussion helpful in monitoring and anticipating significant life events among your customers. If you need help with deploying this framework in your business, my research team at the Collaboratory for Customer Insights and Strategy (CASC) would be happy to work with you. Just drop me a note. Until next time, happy reading!