Psychology behind loyalty

The psychology behind turning sales into lifelong loyalty

Research shows that between 20-70% of clients are lost within the first 3 months of onboarding. This staggering statistic applies to all businesses, no matter the size or industry. So what can companies do to retain their hard-won customers?

The answers are rooted in basic human psychology. We’ll take you through the principles of loyalty rewards and how they interact with the human brain to help you never lose a customer again…
 

The problem: most businesses spend their time and budgets on acquiring new customers and don’t pay attention to what happens after the customer is won. Remember: your customers’ journey with you doesn’t end when they make a purchase. In fact, it’s just the beginning...


CUSTOMER SERVICE VS CUSTOMER EXPERIENCE

Many companies fail to understand the difference between customer service and customer experience.

  • Customer service is something your company provides, such as advice on how to use a product. It works on a reactive basis, meaning that your customer service team usually only interacts with the customer if they get in contact to ask a question or raise an issue.
     
  • Customer experience, on the other hand, is what clients perceive when they interact with your brand and the emotions they feel during this time. This works on a proactive basis – it’s an environment that you can design ahead of time in order to create a desired response.
     

It’s imperative that businesses create a customer experience that exceeds expectations. In doing so, the brain associates positive neuron responses with your brand, which will lead clients to form an emotional attachment.
 

We’ve broken down the customer experience into 3 key phases:
 

1. ASSESSMENT

This is when someone is forming their initial opinion and expectations of you. During this phase you want to influence them to perceive a thoughtful, generous relationship with your company. You can do this by sending personalised gifts to prospective customers such as exclusive access or discounts. 
 

2. DECLARATION

The customer admits they have an issue and buying your product or service could fix it. This is where emotions in the brain are at an all-time high - they feel a mixture of excitement, hopefulness and productivity. Here, it’s important to recognise how your customer is feeling so you can prolong these positive emotions for as long as possible. 
 

3. AFFIRMATION

This last phase is characterised by an emotional ‘come down’ from the positive neurons that were firing in phase 2. The initial euphoria of the purchase is wearing off, and your customer’s brain can default to feelings of doubt, worry and confusion. This is an opportunity to ease your customer’s concerns and affirm that they've made the right choice by reminding them of the solution you’re going to provide. 

 

MOST LOYALTY PROGRAMS ARE BUILT AROUND REWARDS, SO WHY SHOULDN’T YOUR REFERRAL SYSTEM BE AS WELL?

After the 3rd phase, you can keep your customer’s positive neurons firing by giving them incentives to become a referral engine for your brand. By rewarding desired behaviours, your customer’s brain will associate an action with a benefit. For example, each time your customer refers a friend, they both receive an exclusive discount. Or if a customer shows off your product on social media, they can receive a free gift. This creates a “continuous rewards” process that gives customers positive reinforcement each and every time they engage with your business.

 

REMEMBER: don’t ask for referrals too early in the customer experience. Some companies are too eager and end up asking for a recommendation of products that their customer hasn’t even had time to try yet. This over-eagerness gives a bad message. Before you raise the prospect of referring other people, make sure your new customer feels special and appreciated. When you make them feel good, they might even recommend you without any incentive at all… 

 

THE BRAIN GAME

The human brain releases feel-good neurotransmitters such as dopamine when it engages in playful activities like video games. Dopamine is also released when people are rewarded. This proves how gamification can be an invaluable tool to tap into your customer’s psychology. The White Label Loyalty platform supports gamification features; you can enable tiers to encourage customers to unlock additional benefits, or take it to the next level with reward features such as badges and achievements.
 

Make sure you keep your customers motivated with progression tracking and attainable rewards
The human brain tends to work harder at something if it perceives it’s close to a goal. Take long distance runners for example, who feel a sudden rush of energy when they see the finish line ahead.
 

If your customer feels that your rewards program is too difficult to achieve, they will ultimately become disengaged. Data from HelloWorld reveals that 53% of surveyed consumers feel it takes too long to achieve a reward, leading them to abandon the loyalty program altogether. To prevent this, you can offer small rewards throughout your customer’s experience.

 

VIP REWARDS

Our brains developed survival techniques which attract us to high social statuses. This is why VIP loyalty programs work so well – they make people feel like they have some form of social credibility. If you create a rewards program with ‘elite’ tiers, you’re giving customers a sense of belonging and accomplishment when they reach VIP status. 

 

CONCLUSION

Do you have a strong grasp on what kind of customer experience your brand produces? Many companies lack a process to accurately measure the quality of a customer experience, leading them to uncertain conclusions and a serious lack of connection between consumer and brand; according to Bain & Company, 80% of surveyed companies claimed to deliver elite customer experience, but only 8% of customers agreed. 
 

It can be tricky to uncover precisely what aspects of your business are working from data alone. Our core platform uses AI to compare combinations of data points and find which factors are driving results. By forming a clear idea of how your customers think and what provides value to them, you can structure your loyalty program in a way that members are consistently psychologically-satisfied with their rewards experience.
 

Now that you know the psychology behind loyalty programs, it’s time to put your knowledge to use! Get in touch with us today to start building your loyalty platform. 

 

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Customer Loyalty
Customer Engagement
Loyalty Marketing
Customer Satisfaction

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Helen Walker

Helen Walker

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Creative & Content Marketing Executive

Helen is our Creative & Content Marketing Executive. She shares valuable information about the Future of Loyalty and will keep you up to date on the latest industry insights...