Top 10 Customer Engagement Trends of 2015—#7 Rational vs. Emotional Loyalty

Top 10 Customer Engagement Trends of 2015—#7 Rational vs. Emotional Loyalty
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Check out how the Top 10 customer engagement trends for 2015 are shaping up in this series. If you missed #6 last week, you can read it here

One of the most enlightening moments of my career came while I was a consultant many years ago. Working with one of the top children’s apparel retailers, we sought to answer the question: “Who are our loyal customers and what’s the value of their loyalty?” (Dating myself…) Without a robust database of identified transactions, we executed a pretty robust marketing research exercise—the heart of which were three simple questions:

  • Which retailer is the first you think of for (fill in the blank: school clothes, play clothes, special occasion clothes, etc.)?
  • How frequently do you shop there?
  • How much do you spend?

Completing the survey, consumers told us where they shopped second, third, etc., plus a bit more about themselves (attitudes, demographics, family structures).

The nominal output of this endeavor was a very powerful “share of loyalty by purchase occasion on a competitor-by-competitor basis.” The huge, life-changing, paradigm-shifting, a-ha moment was the following: “The lifetime value of a customer who thinks of you first is roughly 10 times the value of the customer who thinks of you second.”

Pause. Think that through. Ten times. Not fractionally better, not twice as important. Customers who have an automatic, emotional relationship with brands create the vast majority of value for brands.

Research on the brain—most notably the work by Nobel Lauriat Daniel Kahneman—emphasizes that humans function better and are inherently happier if they are relying upon their innate emotional responses rather than invoking a rational decision process.

But in the dozen or so years since we first broke this ground, many consumers—through the tools we’ve provided and the access to information those tools rely upon— have shifted much of their purchase decision towards rational trade-offs. According to Group M, 45% of all consumers will walk out of a store after doing a price comparison on their mobile phones in order to save just 2.5% on the same product.

So, it’s getting harder and harder to build and sustain emotional relationships with brands if you’re not Apple, Porsche or Lululemon—and it’s even a challenge for them. Honestly, there’s not a simple fix. The great recession, data-intensive shopping engines, and the commoditization of many industries shifted much of our decision-making to rational price comparisons.

With that said, here are things to consider:

  • Relevance in marketing matters. Engaging on a personalized basis has explicit, proven impact on sales.
  • Expand marketing and engagement beyond selling and offers. Engage in means that build relationships beyond just the product or service through events, valued content, and insider access.
  • Complicate price comparisons by introducing price trade-offs. Essentially, think about how a higher price (or at least a price that does not elicit an immediate search) is actually of higher perceived value when bundled with meaningful member or customer benefits.
  • Embrace the customer and his or her community. Maybe the most powerful emotional tie is the one that is created when customers connect their friends through their recommendations or advocacy.
  • Build trust at every opportunity through transparency and fast response. Nothing goes further than a trusted relationship in battling dissatisfaction.

Rational decision-making is powerful. Tools for rational discovery are more prevalent than ever. But 10X revenue surely implores us to seek a more emotional loyal path for customer relationships.