Category: Academic Life

Turn Loyalty into Habit and Habit into Loyalty

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Recently I was interviewed by the creative minds at Venables Bell + Partners on the topic of customer habit and loyalty. One of the questions asked was how businesses can turn loyal customers into habitual customers and vice versa. That conversation inspired me to write this blog post, to share with you how a business can bring loyalty into habitual behavior and vice versa develop loyalty into automatic habits.

Why Do You Want To Turn the Customers?

Why would your business want to turn one type of customer into the other? Consider Jane, who loves your brand and is a loyal customer. She purchases your brand heavily and is in the top 20 percentile in terms of her spending. A paradoxical fact about loyal customers like Jane is that they are also often the most demanding customers. They negotiate the hardest and have the highest expectations because they have been so “loyal”. By encouraging Jane to become a habitual customer, you help make her brand choice process more automatic, reduce her overthinking, with the added bonus of having more regular, predictable behavior.

Now imagine the opposite case. Tom is also a frequent customer. He visits your store and buys your products habitually, but he does not have strong opinions about your store one way or another. I know what you are thinking. “Wait a minute! How is it possible for Tom to buy so much without liking you a lot in the first place?” You are certainly right that habit a lot of times evolves out of our passion for doing something. Over time, it becomes a habit. But for many products and services, consumers don’t necessarily care enough to want to choose the very best. Instead, they try the first thing that is available. It works reasonably well. They don’t care enough to go search for a better alternative. So they settle down right away and repeatedly buy that first product, eventually becoming a habitual buyer.

The above is just one example of how you can have a habitual customer who buys a lot but does not have strong feelings for you. Why do you want to turn someone like that into a loyal customer? The reasons are pretty straightforward. It could be a defensive move. If Tom loves you, he may not be so easily lured away by your competitors. He may also be more inclined to try other products from your brand. When unexpected things happen that disrupt his habit, you can hopefully have his loyalty to fall back on to keep him buying. Continue reading “Turn Loyalty into Habit and Habit into Loyalty”

5 Criteria for Assessing Your Loyalty Program Value

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To encourage customers to actively participate in your loyalty program, they need to see value in doing so. From a program management perspective, it is important that you regularly audit the value provided by your program in order to create sustained engagement with your current and potential program members. This is especially critical if you have recently made changes to your program or are about to implement changes. A classic loyalty program article in the Harvard Business Review suggests a really useful framework that lays out five criteria for assessing loyalty program value. I would like to explain these five criteria here and offer an illustration of how several well-known loyalty programs fare on these criteria.

Criterion #1: Cash Value

This first criterion should be a no brainer. It refers to the financial value consumers receive from participating in your program. You can determine your program’s cash value by calculating its reward ratio. That is, how much does a member receive in terms of free rewards for every dollar spent? Take Starbucks Rewards as an example, consumers earn 2 stars for every dollar spent (without promotion). A free reward is issued every 125 stars accumulated, or $62.5 spent. Assuming consumers redeem the free reward for the more expensive items on the menu (say, with an average price of $5), they would receive a cash value of $5 for every $62.5 spent, or 8 cents per dollar spent. That is the reward ratio for the program. To calculate your program’s reward ratio, use this more general formula: reward ratio = (average reward value/average point threshold) x number of points earned per dollar. In the case of Starbucks above, reward value ratio = ($5/125)*2 = $0.08 per dollar (or 8%). This is actually really high compared with typical credit card reward ratios of 1-2%. If you already know the average value per point, you can also directly calculate your reward ratio as average $ value per point*number of points earned per $1. Continue reading “5 Criteria for Assessing Your Loyalty Program Value”

The Future of Influencer Marketing

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Influencer marketing has been a buzz word for the last few years. It is a highly attractive marketing tactic, leveraging the social influence of high-visibility opinion leaders to spread words about products and persuade consumers. This is similar to the long tradition of celebrity endorsement, but with the added intimacy of social interactions and the approachability of “I could be her too”. Major brands such as Motorola and American Express have successfully engaged in influencer marketing. In this article, I would like to discuss recent shifts in the influencer marketing landscape and where I see influencer marketing to be heading.

Recent News about Influencer Marketing

Two pieces of news broke recently that may have long-term impact on influencer marketing. In one, several brands’ CMOs spoke against influencers at Cannes this year. The criticisms raised included inflated follower numbers and lack of brand authenticity in some cases.

Separately, Girl Up, a United Nations Foundation organization, surveyed Gen Z women aged 14 to 19 in seven countries. The survey found that Gen Z women are less affected by influencers. They are aware of the financial incentives offered to influencers and as a result some of them may not trust these influencers. Instead, Gen Z women are more driven by brands’ stance on socially important issues and by brand authenticity.

Do these developments indicate the end of an influencer marketing golden era? Will influencer marketing become passé? In my opinion, influencer marketing will continue to be part of the marketing toolbox. However, I believe there will be several significant changes in the influencer marketing landscape.

Prediction #1: The Rising Power of the Average Joe/Jane

As newer generations of consumers become wary of mass influencers, brands will need to rely more on the average Joes and Janes among their customers. These customers have actually experienced the brand and will bring more authenticity to their word-of-mouth. Supporting this idea, both Samsung and eBay CMOs mentioned at Cannes the desire to shift their focus to the business’s actual customers.

One concern with relying on average customers is whether they can generate the same reach as mass influencers. Fortunately, even without superpowers, average Janes and Joes can still get the message pretty far and wide. Although the message from these customers may only get to a smaller number of people at first, the amplification effect through social networks can still lead to a large mass. If one person tells ten people, and each of those ten people tell ten new people, the total reach after 10 rounds will be an astounding 1 billion. Of course the number in reality is generally much lower because you and I may share some common people between our respective networks. My own research shows that a moderately diverse group of people are best for maximum message reach.

The implication from the rising power of average customers is that brands need to see each consumer as more than a single consumer. It is no longer simply a brand-customer dyad. Instead, brands need to be conscientious of the consumer’s network of social connections. To use an analogy, when you marry someone, you are also marrying his or her entire family. I suspect this ability to deal with circles of customers will be crucial to competitive advantage once the current efforts at improving individual customer experience maxes out in its potential. The best brand loyalty will be brand loyalty shared with friends. Continue reading “The Future of Influencer Marketing”