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CRM in an Era of Habit Disruption

Posted on May 7, 2020May 7, 2020

The Covid-19 pandemic has disrupted people’s daily routines. Want to grab that favorite cup of coffee down the street? Sorry, the coffee shop is closed. Spaghetti and meatball night? Too bad, the local store ran out of ground beef. Client meeting at the office? Nope, Zoom meeting with surprise appearance of adorable kids or pets is the way to go now.

In these and many other areas of life, the well-rehearsed habits people had from the “old” days are suddenly thrust into the spotlight of their consciousness. As a result, old habits are breaking, and in their place new habits sprout. These transformations in habits have significant consequences for business. Some brands are being left behind from broken old habits, while others are discovering opportunities among the new habits. Overall, businesses that understand this habit transformation process about their customers will be better prepared to transition through the pandemic and beyond.

This article looks into psychology research to shed light on the habit transformation process and discusses how customer relationship management should respond to such disruptions.

Turn Loyalty into Habit and Habit into Loyalty

Posted on September 12, 2018

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”

How to Build Customer Habits Through Customer Relationship Management Part 3

Posted on May 23, 2018July 12, 2018

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 Loyalty	Habit
*What drives behavior?*	Belief about product superiority and/or emotional connection	The presence of contextual cues (e.g., eat cookie -> want milk)
*Awareness*	Conscious decision	Automatic process with no clear decision-making process
*Purchase pattern*	Erratic as need arises	Consistent in terms of time, location, and context (see more below)
*Reaction to competitive offerings*	Aware of competitive offerings but relatively resistant due to loyalty	Blind to competitive offerings
*Deal breakers*	Dissatisfaction, 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”