The holiday shopping season is a massive opportunity for retail brands to engage loyal customers and attract new ones, so how can retailers use it to create a habit of loyalty?
Given this year’s strong economic outlook, holiday shoppers are expected to increase their spending over last year. The 2018 shopping season is looking good for retailers.
Brick-and-mortar sales will grow 1.4 percent and online growth is expected to reach 14 percent, according to Forrester Analytics: Online Holiday Retail Sales Forecast, 2018 (U.S.). The NRF 2018 Holiday spending survey reports that consumers will spend 4.1 percent more than last year.
For retailers, this additional spend means greater opportunity to gain new first-time purchasers. Keep in mind that the beginning of what might be a lasting, loyal relationship starts with that first purchase.
The extra sales you make during the holidays to first-time buyers is the time to nurture the relationship to inspire a habit of loyalty.
So, what can retailers do to gain their share?
Increase Year-round Engagement with Loyalty-Forming Habits
Placing the customer at the center of their respective strategies and tapping into consumer psychology can illuminate the path to enhanced engagement and lasting loyalty.
Nir Eyal’s book, Hooked, provides us a great framework based in consumer psychology to think about building habits of loyalty. In his book he states that the factors needed to form a habit are Trigger, Action, Variable Rewards, and Investment.
Let’s look at each of these factors and how they can be applied to retail.
Find The Right Trigger
The trigger is an internal or external cue that presents a call to action.
Eyal uses an example of an alarm clock. When it goes off at the programmed time, it triggers you to perform the action of waking up.
In retail, large advertising budgets present consumers with a trigger to buy. But let’s not forget there are other powerful external triggers that must be earned and not bought.
Some examples include a positive news story about your company’s hot new toy or a recommendation from one friend to another.
An internal trigger may also inspire action. In his book, Eyal describes this type of trigger as the brass ring because it manifests automatically in the mind of the consumer.
In many cases, emotions drive internal triggers. Brands that seek to gain true loyalty from their consumers must tap into their emotions, so their actions become automatic.
Inspire Action
To inspire action, a user must have the ability and motivation to act. The example used in Hooked to describe these two requirements is your ringing cell phone.
The ring is the trigger. You want to answer the phone, however, it is buried deep in your purse and you missed the call.
In this case you did not have the ability to act because you could not physically get to your phone. Consider another scenario used in the book to describe motivation. Perhaps, the phone is ringing, and it is in your hand.
You have the triggered call to action and the ability; however, you believe the caller is a telemarketer and therefore your lack of motivation influenced you to ignore the call.
One very important thing that retailers can do over the holiday season is to ensure their investment in advertising triggers results in a customer’s ability to act.
It sounds basic, but this is the time to make sure your systems are running at optimal performance. Your highest volume season is not the time to discover software bugs in your POS or low stocks on popular items.
Load test your ecommerce, true up your inventory, and train the store staff. Do everything you can to get in front of any hiccups that would impede a customer’s ability to purchase from you.
Make purchasing as simple as possible by removing steps. Online this can be achieved by the ability to log-in with social networks or saving credit card details to expedite checkout.
A retail example is having an associate for an apparel retailer start a dressing room for a customer. Extended store hours and offering click-and-collect services are also helpful to improve a customer’s ability to purchase.
To ensure that customers are motivated to purchase from you requires a balance of emotional and promotional strategies.
Capture emotions of your customers by inspiring them. Consider that social media was the #1 choice when asked where respondents went online to get inspiration for purchases. Retailers are focusing on digital as a source of inspiration with tactics such as blogs, social media, wish lists, and registries.
Coordinate in-store and digital experiences and encourage shoppers to engage in both channels. Combining this inspiration with incentives can be an effective way to turn a gift buyer into a customer.
Some examples include gift with purchase, sampler, a high value coupon, or a gift card bonus.
Balance Variable Rewards with Emotional and Promotional Strategies
The third factor in building a habit is to introduce variable rewards.
In the Hook model, a reward at its basic form is effectively solving the problem caused by the trigger. Research cited in the book, however, shows that what draws us to act is not the sensation we receive from the reward itself, but the need to alleviate the craving for that reward.
Some types of rewards that motivate include the need to feel accepted and appreciated, the need to acquire physical objects, and the need to gain a sense of internal competency.
Of course, delivering on the promise of the initial transaction to ensure you fulfill the need of your consumer is critical. If you advertise the latest Nike sneakers, ensure the customer can buy them to fulfill that need to acquire them.
You may also consider layering on an additional rewards system. Where possible, personalize rewards and promotions. Only by understanding what truly matters to users can a brand correctly match the right reward to their intended behavior.
Make Customers Want to Invest
Investment is the last factor of creating a habit.
This phase comes after receiving a reward, when users are primed to reciprocate. They make investments of stored value in anticipation of future rewards. The more a user invests time and effort into a product or service, the more they value it.
As humans, we irrationally value our efforts and seek to be consistent with our past behaviors. These little bits of work are just enough to get the customer to engage and load the next trigger and begin the hook cycle over again.
What kind of small investments can retailers use?
Personalization is one way. When customers customize their preferences in their online accounts, they have invested in the retailer’s service so that future communications and promotions will be tailored to their wants and needs.
In return, brand marketers must use that data to deliver on this expectation. Another investment is reputation. If customers write positive reviews of your products or services, they have invested social capital.
A retailer can trigger another reward, personalized to this instance. Advancing to a higher status tier in the rewards program for writing reviews is one way to reward this behavior.
Create a Habit of Loyalty with Your Customers This Holiday Season
So, there you have it. Trigger, Action, Variable Rewards, and Investment are the four factors needed to create a Hook Cycle. If you want to create a habit of loyalty with your customers, think about ways you can infuse some of these concepts into your promotional and loyalty strategies.
This is vitally important during the upcoming holiday season where you’ll have the opportunity to reach more customers than any other time of year. If you keep the customer at the center of your strategy and cater to their innate behaviors and emotions, you’ll be building a recipe for long-term, sustainable success!
Kelley Gargano
Kelley was our Senior Director of Product Management. Working with a team of incredibly smart people, she oversaw product research & development as well as member engagement & retention.