Category: Research Insight

How to Build Customer Habits Through Customer Relationship Management Part 1

Posted on

Recently I had the honor of speaking at the Habit Summit, a cool conference on habit building and other behavioral design issues. I shared with the audience how companies can build better and more profitable customer habits through proper customer relationship management. This talk was the culmination of my more than 10 years of research on consumer habit by analyzing tons of customer data from a variety of industries including retail, financial, and travel industries. In this three-part blog series, I’d like to share some of those insights with you. In this part 1, I will talk about how to facilitate habit shaping and development in the customer acquisition phase. Then in part 2, I will discuss the role of habit in customer retention. Finally in part 3, I will share how to build on habit and even more importantly not mess up with habit in customer expansion strategies.

Habit Evolution Over Time

In my research, I have tracked the pattern of customer habit evolution over time. Again and again, I see a U-shaped curve like the figure below. In the beginning, consumers are new to the company. Although the novelty makes them buy frequently, there is a lot of exploration going on, trying to understand what the company has to offer. This is why you see a dip in habit in the figure. Then as consumers become familiar and comfortable, they settle into a more stable behavioral pattern and their habit strength associated with the company goes up.

What does this U-shaped curve mean to your business? It means that there should be two distinct phases in your habit strategy. The first part is what I call the habit shaping window, where your strategy should focus on leveraging consumers’ exploration tendency to shape the most desirable habit for your business. Then in the habit increase stage, your strategy should enter into a habit maintenance and transformation phase, focusing on sustaining habit and not disrupting it unnecessarily. More on that second phase in latter parts of the series. Let’s focus on the habit shaping window and what you should do in this phase for now. Continue reading “How to Build Customer Habits Through Customer Relationship Management Part 1”

1 Point Per Dollar or 100 Points Per Dollar?

Posted on

When designing a loyalty program, have you ever wondered whether you should give customers 1 point for each dollar they spend and require 100 points for a free reward, or if it’s better to grant 10 points per dollar and require 1000 points for the reward? On the surface, these two setups require the exact same effort from consumers and should make no difference to the effectiveness of your program. But an article by Professor Rajesh Bagchi and graduate student Xingbo Li published in the Journal of Consumer Research says it’s not quite as straightforward as you may think. Which option is better depends on whether you have a straightforward single point structure or a mixed structure, and whether your focus is on encouraging low spenders or rewarding heavy buyers.

numbers
Photo by Flickr User twitchcraft | CC 2.0

Context

The authors conducted two lab experiments. The first experiment was based on a grocery store loyalty program and involved 246 undergraduate students. Various aspects of the loyalty program were manipulated, and the respondents reported how likely they would recommend the program to others and whether the program would increase their loyalty toward the store. In the second experiment, 375 student and non-student respondents made simulated purchases given a restaurant loyalty program. At the end of the simulation, they also reported their recommendation likelihood and perceived loyalty effect. Continue reading “1 Point Per Dollar or 100 Points Per Dollar?”

Loyalty According to Tweeple

Posted on

A while ago, I created a search column in Tweetdeck to see what people have to say about loyalty on Twitter. To my surprise, once the column was created, tweets just started flying in. There has been rarely a day when I do not see at least a few hundred public tweets containing the word “loyalty”. Apparently, loyalty is on people’s mind often. Out of curiosity, I started to dig a little deeper and more systematically into what is being said about loyalty in these tweets. While I’m not quite done with my analysis yet, here I’d like to share some of my initial discoveries.

What/Whom Are People Loyal to?

When we talk about loyalty, we usually imply an object or person that we are loyal to. From the tweets that I have analyzed, here are the most often objects of loyal passion:

  • A romantic relationship or partners in the romantic relationship
  • Friends and family
  • Sports team
  • Brands/products
  • Co-workers/boss
  • Dogs’ loyalty to their owners (such as this touching story from Wikipedia about this Hachiko dog)

Interestingly, when specific brands or products were mentioned as objects of loyalty, mobile products such as cellphones and mobile providers were the most frequently referred-to product category. For instance, earlier today, there were a few retweets of the message by @Natemz below.

Loyalty Tweet

In this case, the tweet is actually a counter-loyalty message, where product features beat loyalty. But it still implies loyalty that some people used to have for BlackBerry before they switched to Android. Continue reading “Loyalty According to Tweeple”