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Buyer motivation is the underlaying reason that drives everyday purchases. Fundamental to the success of any business is an understanding of such motivations. Only by understanding customer motives can companies tailor their sales & marketing efforts to better appeal to their target audience and thereby increase conversions.
Such motivations are influenced by a variety of factors: practical needs, emotional desires, social pressures, status or prestige, convenience and impulse. People’s motivations also change over time, so it is important for businesses in all industry sectors and of all sizes to stay attuned to their target audience’s evolving needs and desires.
This is why customer loyalty programs remain such an important marketing tool in gathering those customer insights needed to understand changing motivations. And, most importantly, through their use of an ongoing value exchange between the program operator and consumer, capture the associated customer consents required by law for these insights to be collected and actioned.
Historically, the value exchange between a loyalty program operator and consumer was predominately transactional. A ‘points mean prizes’ model of customer loyalty most prevalent within the airline, financial services and grocery sectors.
The rise of social media platforms, however, fundamentally changed this customer dynamic, where the ongoing value exchange becomes far more subtle, based now on providing ‘free’ access to social media content in return for receiving targeted messages and adverts.
The result has been a shift away from using incentives to influence purchase behaviour and a focus instead on customer profiling and the collection and use of empirical customer data to understand those motivations that drive our outcomes, not only in terms of buyer motivation, but across every aspect of our lives.
The phenomenal success of social-media companies, with economic models based on harvesting huge amounts of personal data to create detailed customer profiles, predictions and re-targeting, effectively removed any need to use any kind of incentive or promotion in order to maintain ongoing user activity.
Ever more sophisticated algorithms, based on access to all types of location, behavioural and purchase information have exponentially improved both the targeting of, and our responses to, advertising content.
Such levels of consumer profiling, and the harvesting of data needed to deliver such accuracy, has not gone unnoticed by government legislators whose response has been to introduce strict regulations focused on a need for explicit consumer consent in relation to the collection and use of personal data.
However, rather than inhibiting the evolution of new types of customer loyalty programs, these data privacy regulations have inspired a new generation of loyalty marking activity, centred, once again, around the use of ongoing incentives and promotions in an exchange of value between the program operator and consumers.
This time, there is a desire to move beyond the transactional constraints of previous loyalty programs and create those loyalty initiatives that combine exclusive member incentives or discounts, with detailed consumer insights to understand and ultimately predict buyer motivations.
Perhaps the best examples of the combined use of incentives and customer profiling is found in the UK grocery sector, where product offers are mapped against customer profiles and exclusive member discounts are used to incentivise ongoing customer consent.
The success of these types of loyalty program directly relate to their ability to match relevant and timely buying incentives over time with their different customer segments.
To make such loyalty program segmentation strategies effective, businesses must also now obtain those necessary consents to understand the customer needs, demographics, behaviour, and psychographic characteristics of their customers.
There are several ways to create an effective segmentation strategy using loyalty program insights. These include.
Needs-based: This involves dividing customers into groups based on what needs the product or service is fulfilling. For example, a business might segment customers based on their needs for convenience, value, or quality.
Demographic: Dividing customers into groups based on characteristics such as age, gender, income, education level, or geographic location.
Behavioural: Dividing customers into groups based on their behaviours, such as their purchase history, frequency or recency of purchases, or commitment to the brand.
Psychographic: Dividing customers into groups based on their attitudes, opinions, values, lifestyles, and personality traits.
A loyalty program, and the ongoing value exchange it creates with customers, still remains one of the most effective marketing tools businesses have with which to understand customers motivations over an extended time period.
Without loyalty program insights, businesses would continue to struggle in tailoring their marketing efforts to consistently appeal to their different customer segments.
There has therefore never been a better time to launch and operate a customer loyalty program, irrespective of business size or industry sector. To use the consent driven insight to achieve that crucial understanding of what motivates your customers to buy over their entire lifecycle.
This article was first published by Customer Strategy Network. Permission to use has been granted by the publisher.
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