Behavioral Science and the Loyalty Experience

The lack of understanding that brands have in terms of the human mind, and how it applies to their ongoing loyalty efforts, is concerning in today’s market.

Evan Snively, Loyalty Strategist, sat down with Loyalty360 to discuss behavioral science, and its impact on customer loyalty. For the full interview, click here.

At 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, that 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 like 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 lack of loyalty in some people based on their own behavior or is the brand at fault? Or is this a little bit of both?

It is a bit of both. Brands can definitely 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 that individual consumer’s 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. We call them “The Detached”. The other 97% of the population we split into two groups – “The Transients” (68%) and “The 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 which nurtures and empowers Resolutes, while also capturing meaningful attention and spend from the Transient Loyalists.

For the full interview and more information on where we believe loyalty is heading in the next 5-10 years, check it out here.