On a basic level, the human brain is wired to take shortcuts. Those shortcuts help us navigate the various situations daily life presents. In the loyalty industry, one of the most common consumer shortcuts we encounter is a decision-making tendency known as confirmation bias. This occurs when a person actively seeks out information that confirms his/her existing beliefs instead of undergoing a neutral search for facts.
The result of confirmation bias is that consumers make irrational decisions because they weigh the information they want to see more heavily. In terms of acquisition, confirmation bias can work in a company’s favor when new customers already hold a positive view and expectation of the brand. Confirmation bias will influence those new customers to pay more attention to aspects of the brand experience that align to their preconceptions.
It is also good news for brands that already have an established relationship with a consumer as customers will continue to look at the brand experience through a lens that reinforces their past behavior (no one likes to admit they were wrong, right?). Of course, the flip side of this reveals why breaking existing consumer habits can be very difficult – all the more reason to focus significant marketing resources on your existing loyal customers.
On an individual basis, is loyalty based on a person’s own behavior? Is the brand responsible?? Or is it a little bit of both?
It is a bit of both. Brands can set themselves up for success by delivering on their core value prop and creating a great customer experience. But at the end of the day, it’s the consumer who has the final say. Every consumer, whether purposefully or not, has a sense of their “personal brand.” When you’re talking with your co-workers, and you say, “Ah, that’s classic Joe,” what you really mean is, “Joe is acting on-brand for himself.” Loyalty is often a question of whether your brand maps to an individual consumer’s personal brand.
Loyalty is often a question of whether your brand maps to an individual consumer’s personal brand.
For some people, their “personal brand” is a pragmatic, rational deal-seeker. For this persona, it would go against their own ideology to be brand loyal – they want the best deal, wherever they can find it. Luckily for loyalty marketers, only 3% of people self-identify as part of this “Not Loyal to Brands at All” segment. At Maritz we call them “The Detached.” The other 97% of the population we split into two groups – “Transients” (68%) and “Resolutes” (29%).
Transients claim, “I’m somewhat loyal but could be convinced to buy a competitor’s brand.” This group is more likely to be driven by price and constantly re-evaluate their purchasing decisions through the Psychology of Relativity (comparing a choice to what else is around) and Social Proof (what is everyone else doing?). Resolutes, on the other hand, state “I’m very loyal, and I only buy my favorite brands.” This segment is more likely to create an emotional bond with a brand by identifying with the company’s purpose and values.
A good loyalty strategy will create an environment that nurtures and empowers Resolutes, while also capturing meaningful attention and spend from the Transient Loyalists.
With emotion-based loyalty continuing to trend upward, while data collection continues to get better, what is Maritz hearing from brands/clients about finding the right balance between the two?
At Maritz, we champion the notion that “People are rational and emotional, but mostly emotional.” This is simply an endearing reminder that humans do not always act logically. Yet the common approach to data and analytics tends to lean more toward rational assumptions about human behavior. This bias misses the fact that emotions and data are not mutually exclusive.
Data collection can be a tool that not only tracks behaviors but also helps us understand our emotional drivers in a deeper way, opening our eyes to the hidden motivation behind human actions. For instance, in a recent project with HSBC, our AI algorithm uncovered a surprising link, something no human would have been able to identify, between consumers who use public transportation and a strong inclination to redeem points in the travel category. Because of that data insight, we were then able to create an emotionally driven, travel-centric campaign for these members, which was very well received. That’s the trick – finding ways that data can help you pull the right emotional levers to nudge behavior in the desired direction.
That’s the trick – finding ways that data can help you pull the right emotional levers to nudge behavior in the desired direction.
Does Maritz view a lack of loyalty among younger generations as a future concern for long-term loyalty programs?
I wouldn’t say that younger generations are any less loyal than previous generations, they are just differently loyal. In fact, Maritz research has found that younger generations actually have a higher propensity for loyalty than their older counterparts and are more likely to be Resolutes in their consumption behavior. This stems from their tendency to create deeper personal connections with the select brands that they do choose to engage with. The tricky part is capturing their attention so that the relationship can begin to take root.
Millennials and Gen Z have both grown up as natives in a world of instant information, so they expect to find the answers to their questions within seconds of searching. If they can’t find what they are looking for, they move on – and quickly. Businesses think of this short attention span as a flaw of the younger generations and take it as a sign that they are fickle consumers, but the reality is these younger consumers view the online experience as an extension of a brand’s quality – in the same way a customer might view an in-store employee. An inability to execute seamlessly in online spaces is seen as a shortfall of the company itself and an indicator that the consumer will continue to have a bad experience beyond the transaction. So, while it is true that their expectations may cause them to disengage faster, when they find the right fit, Millenials and Gen Z tend to be more loyal long-term.
What will be the new norm in terms of customer loyalty within the next five to 10 years?
There are three developing norms that I believe will shape the next 10 years in the loyalty space.
- The expectation of experience. Consumers now know how much data companies collect about them and are okay with it, as long as that information is being used to create a personalized brand experience without being abused. Cookie-cutter emails and generic rewards programs will not be enough to hold interest. Brands need to invest in creating an evolving relationship with their customers, an experience. That overall Loyalty Experience (or LX) is now what consumers expect.
- Shifting access points. How (and where) consumers have meaningful interactions with brands is going to be drastically different in 10 years. The in-home experience is currently being shaped by the emergence of VPAs and unprecedented delivery timelines pushing the limits of instant gratification. The most exciting evolution will be with regards to how we interact with mobile devices. Cellular devices will undergo a fundamental shift to a more integrated experience. If cars can reach true autonomy in 10+ years, what new devices and platforms will emerge to engage people during their newfound free time on road journeys? The possibilities are very interesting.
- Scale of consumption. For those in the developed world, the emergence of e-commerce over the past 20 years has made it possible to purchase nearly any good imaginable with a few clicks of a button. However, the marvel of the newly possible has begun to wear off, and the upside of economic growth is being met with harder hitting evidence of unsustainable environmental impact from waste and pollution. I think in the next five to 10 years, major forces, be they regulators, advocacy groups, or even brands themselves, will emerge in a meaningful way, pushing back against the insatiable consumption of goods. That’s not to say that this trend will alter everyone’s purchasing habits, but a much broader segment of people will become more deliberate with their choices than they are today -- and for those who choose to use less, the things they do purchase will become more meaningful. Consumers will shift from the age of impulse into the age of impact. Brands who can successfully align with customers of this mindset will form much stronger relationships with their consumers.
A version of this interview originally appeared on Loyalty360.