Category: Research Insight

Providing Dynamic Feedback to Motivate Customers

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Whether chasing after a premium tier in a loyalty program, trying to lose 20 pounds with a weight loss product, or vying for the top spot in the leaderboard of a mobile game, consumers often are doing more than just buying or using your product or service. They are also trying to achieve a small or big goal they have set for themselves. In such situations, it is to your advantage as a marketer to keep consumers on track with their goals and give them little nudges toward the finish line. One standard practice used by businesses is to give customers feedback on their progress. In a loyalty program, this could be in the form of a monthly statement telling them how many points they have in the account and/or how far away they are from making the next reward or tier. Research shows that when and how you offer such progress feedback can make a big difference in motivating consumers. You need to offer dynamic feedback based on where people on on their goal path.

Looking Forward or Looking Back

Imagine you are on a path between two points. You can look ahead and see how far you are from your destination point. As you make progress on the path, you will gradually close that distance to the destination until it becomes zero. Another way to assess your progress is to turn around and see how far you have come from your origination point. The more progress you make, the farther you will be from the origination point until you cover the entire length of the path. In a loyalty program context, a forward-looking progress feedback will be the equivalent of “you are x points/visits away from the next reward”, and a backward-looking progress feedback will look like “you have accumulated x points/visits so far” or “you have x points/visits in your account”. Which one of these is more effective? Research suggests that it depends on where people are along the path. When people are in the early stages of chasing their goals, they are still far away from the destination. At this point, they need reassurance that their actions are making an impact. Looking backwards at their achievement so far is likely to make that impact more visible, as going from 0 point to 100 points seems like a big difference (compared with going from 1000 points away to 900 points away from the goal). But as people move more toward the goal and are at later stages of their goal pursuit, they prefer to look forward to see a bigger impact of their actions. That is, they now want to see how they are closing the gap from being 200 points away to only 100 points away, instead of from 800 points to 900 points. The two researchers behind these findings, Koo and Fishbach, call this the small-area hypothesis, where paying attention to the smaller segment of the goal path motivates people more (see the linked document above if you want to read the original paper). Continue reading “Providing Dynamic Feedback to Motivate Customers”

How to Build Customer Habits Through Customer Relationship Management Part 3

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Welcome to the third and final part of this series on how to build and leverage customer habits throughout the customer journey. In Part 1 and Part 2, I shared with you the differentiation between a habit shaping window and a habit maintenance and transformation phase in a customer’s lifetime with the business and how habit disruption can serve as a beacon for possible customer defection. Today I would like to talk a little about what you should know about loyalty and habit in the customer expansion phase. Oftentimes your business may not be content with just retaining your existing customers. Your ambition may be to grow your existing customers’ relationship with you by getting them to buy more, upgrade, or buy other product lines that you also offer. To do this successfully, you need to understand what drives your customer and know if your customer loves you or they are simply habitual or both.

Segment Customers by Attitudinal Loyalty and Habit

Before implementing a customer expansion (cross-selling or up-selling) campaign, it is important to know where your customers are in the two-dimensional space of loyalty and habit. By loyalty, I don’t mean just behavioral loyalty such as buying a lot, because habitual customers may look exactly like that too. Instead, I refer to loyalty in the sense of how consumers feel about your brand. The attitudinally loyal customers are ones that love your brand, believe in the quality of your product, and prefer you over competitive products when asked. Because attitudinally loyal and strongly habitual customers are both likely to buy a lot from you, they may look very similar in their behavior in terms of how frequently they purchase or how much they spend. You have to dig a little deeper into their behavior to identify which is which. The key difference is that habitual customers tend to demonstrate a certain level of consistency and stability in what they do. They may buy around the same time, from the same location, repeatedly buy the same product, almost always (or never) use coupon, etc. The ones who are attitudinally loyal but NOT habitual will also buy a lot, but you won’t see the same stable behavioral pattern. The table below will help you make a determination based on what your customers do. If you are interested in a more nerdy academic dive into the differences, check out my published paper Not All Repeat Customers Are the Same.

 

 True LoyaltyHabit
What drives behavior?Belief about product superiority and/or emotional connectionThe presence of contextual cues (e.g., eat cookie -> want milk)
AwarenessConscious decisionAutomatic process with no clear decision-making process
Purchase patternErratic as need arisesConsistent in terms of time, location, and context (see more below)
Reaction to competitive offeringsAware of competitive offerings but relatively resistant due to loyaltyBlind to competitive offerings
Deal breakersDissatisfaction, product quality issues, service failure, etc.Change of contextual cues, such as store layout redesign, location change, etc.

Before I move on, I would like to add that habit is easier to observe through behavior than attitudinal loyalty, as habit has a certain pattern to it. To accurately gauge attitudinal loyalty, it would be best to survey your customers and ask about their thoughts and feelings about your product. But if that is not possible, the table above combined with customer purchase data should still help you separate those frequent customers who are driven by habit vs. not habit (e.g., loyalty). Customers’ social media conversations with you can also give you some clues as to how loyal they are to your brand. Continue reading “How to Build Customer Habits Through Customer Relationship Management Part 3”

How to Build Customer Habits Through Customer Relationship Management Part 2

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Last week I wrote about how you should design your habit building strategy during the customer acquisition phase. In this Part 2 of the series, I would like to share some research insight on maintaining customer habit in order to reduce customer attrition. I don’t think I need to preach to you about the importance of retaining your customers. But what’s habit got to do with customer retention? Isn’t customer retention about how happy people are with your business? Well, habit has a surprisingly important role in this process.

Declining Habit as Early Warning Signs

There are many reasons why a customer may leave a business, such as no longer having the need for the product, experiencing a negative customer service episode, or seeing a more competitive offering somewhere else. Understandably, businesses devote a lot of energy to keeping their customers, mostly focusing on improving customer experience and delighting customers. These are certainly great things to do, but they are not for everyone and they should not be the only response. Why? Because the harsh reality is that consumers don’t care what they buy most of the time. They might have tried something incidentally, it was good enough, and they ended up sticking to it because it wasn’t important enough for them to try to find “the one”. Even for consumers who cared at the beginning, many eventually fall into a simple habit of buying and consuming a product without a second thought. These are situations where maintaining customer habit is important. In my research, I have seen declining habit as a good early predictor of customer attrition. Depending on the type of product, habit decline is observed from three months to as early as ten months prior to customer leaving the company or becoming inactive. So if you are tracking a customer’s habit and see such a decline, you will have precious time to do something before it is too late.

I should point out two things here. First, it’s not so much the level of habit but the decline in habit strength that spells trouble. So continuous monitoring of customer habit is important. Continue reading “How to Build Customer Habits Through Customer Relationship Management Part 2”