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!