You know the facts. Increasing customer loyalty…
- yields big profits over the long haul
- creates raving fans that promote your products for free
- is cheaper than finding new customers
But the question remains. How can you increase customer loyalty online?
How Artificial Advancement Increases Customer Loyalty
Not long ago, in a major metropolitan area, two consumer researchers named Joseph Nunes and Xavier Drèz conducted a customer loyalty experiment at a local car wash.
On two consecutive Saturdays, they gave out a total of 300 customer loyalty cards. Half of those required 8 purchases to earn a free car wash. The other half required 10, but instead of requiring the full 10, the car wash gave 2 car wash head-start as a free bonus.
This means, in both scenarios, customers still needed to make 8 additional purchases before they could redeem a free car wash. The only difference was varying degrees of completeness. On one hand, customers were 0% complete, and on the other, they were 20% complete.
Now the question is, would this “artificial” progress increase customer loyalty?
During the next 9 months, 28 out of 150 people without a head-start earned a free car wash, but 51 out of 150 people with the head-start earned a free car wash. That’s an increase of 82%!
Artificial progress worked. This is big news for customer loyalty. If you give your customers a head-start on completing a loyalty program, they’re much more likely to continue to use your products and services.
Can Endowed Progress Increase Customer Loyalty Online?
Yes, but before we get into details, how do you define customer loyalty?
If you’re a blogger, customer loyalty is represented by how many people buy more than one of your information products. For example, if someone buys 4 of 4 of your products, I would consider that 100% customer loyalty.
However, if you’re a consultant or designer, customer loyalty is represented by how many people continuously use your services for their needs. For example, if I always use the same designer every time I need a blog design, that’s 100% loyalty.
Now let’s get down to business. How can endowed progress help increase customer loyalty online? Follow these three steps and you should have it working for your business in no time.
Step 1: Create A Goal
To take advantage of endowed progress, you need a goal for people to work towards. It could be a free hour of consulting, free ebook download, or a free ebook design. It doesn’t matter. You just need a valuable carrot at the end of the stick.
Step 2: Decide What Your Customers Must Do
What behavior do you want to reward? You could reward customers for each purchase they make. Or, maybe you could reward them for sending you referrals? Since you saw how you can reward purchases, here’s an example of how you can reward referrals:
Imagine you’re running a membership website. You recently released your affiliate program and you want your members to promote it. You come up with a contest to increase membership. Every person who refers 10 customers gets a free pass to a conference.
This is your chance to use endowed progress. Instead of asking them to refer 10 people, you can ask them to refer 12 people, but you’ll give them a 2 person head-start because it’s a brand-new promotion.
Step 3: Pitch the Head-Start as a Bonus
You can’t skip this step. Giving people a head-start without telling them why they got it will adversely affect the results. So how can you present it?
Personally, I think the best way is by offering it as a limited-time bonus. I like this route because you can use it when you just launch a new product or service. It will create hype and get people moving now instead of later.
Who Uses Endowed Progress to Increase Customer Loyalty?
Less than everyone. And that’s a problem.
One of my favorite quotes comes from Dan Pink’s Ted Speech. He said, “there’s a mismatch between what science knows and what business does.”
Well, endowed progress is one of those mismatches. Science proved that it increases customer loyalty, yet most businesses fail to use it.
How do you think you could implement endowed progress in your business? Leave a comment. Or, do you know of someone who uses it online? Share that too!
{ 10 comments… read them below or add one }
What about what Dan Pink says in Drive? He says that giving rewards could demotivate people once they achieve it. How would you avoid that?
Well, 8 sales is still a decent rate of return. Even if they used the card (or its online equivalent) and walked away that’s still a whole lot of lifetime customer value.
Or you could move them up to the bigger VIP-only card!
Well, I think what John is saying is, in Dan Pink’s new book Drive, they talk about how monetary rewards don’t work when dealing with creativity.
The thing is, this endowed progress doesn’t necessarily have to be a monetary reward. If you’re running a special bonus, people will try and complete it to earn it… but they won’t expect it.
G’day Derek,
Last tear I moved my 30 year old business from offline to online. For the last fifteen of those 30 years we operated only using a direct mail/telemarketing approach. It was totally built around what you call “endowed progress.” We offered a free 42 page Special Report as the inducement. It worked extraordinarily well. We’ll continue endowed progress online.
As a committed believer, may I add a couple of comments.
The inducement should have high perceived value to prospects and customers. Only their perception matters…….not yours.
If possible, it should be related to your expertise. You should only offer something that enables the customer to say ” I believe you” because they trust you judgement in that area.
Try to offer something that your competitors can’t offer. That’s a polite way of saying that you should avoid offering discounts. Discounts are common. And they create an expectation that customers can always haggle and get a cheaper price from you.
Remember that you’re establishing a long term relationship. It’s better to gift a valuable whatever to establish or reinforce your professional relationship than to use some tricky or cheapie tactic that may diminish your credibility.
May I conclude by saying that it’s good to see time-honoured and effective mail order techniques being promoted on the web.
Best Wishes
Leon Noone
Hey Leon, I couldn’t agree with you more. Thanks for stopping by. And yes, mail order stuff is what works
I think “creating a goal” is especially important! Love this post
super good and to the point!
Can’t go wrong there, eh?
Like I said via email great post Derek actually will be pointing to this post soon.
Wow!
The whole bit about the customer loyalty program was kind of a slap in the face for me.
I generally consider myself as being pretty much ahead of the curve when it comes to this sort of thing, but apparently I’ve been missing an extremely powerful yet easy to apply super ninja move.
I guess I’ll be knocking that out tomorrow.
Thanks for the slap.
Your welcome
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