Emotional Loyalty eBook

In the Feels: Unveiling the Intrinsic Value of Emotional Loyalty The Wise Marketer 2023

Welcome, Thank you for downloading this Strategy Brief from The Wise Marketer. We hope you find it valuable and that it adds value to your business.

Over the past year, we have set about identifying the topics that matter most to business-people interested in creating value from customer groups – that’s the outcome of what we refer to as Customer Loyalty. The Strategy Brief series represents a detailed survey and analysis of each of these topics.

By creating a permanent library of topical books representing industry best practices on important topics to the industry, you will have a resource that you can refer to on a regular basis and use as a training tool for your teams.

In each Strategy Brief, we sought out an expert partner to develop perspectives, insights and to illustrate examples of these concepts in practice. Kobie is our partner in this edition, which surveys the topic of Emotional Loyalty.

Stay. Loyal. Always.

Bill Hanifin Editor, The Wise Marketer

The Wise Marketer 2023

Contents

1

From Feelings To Fortunes

2

The Four Key Ways to Leverage Emotional Loyalty

3

Putting Emotional Loyalty Into Practice

The Wise Marketer 2023

From Feelings To Fortunes An Introduction to Emotional Loyalty And How It Can Boost Your Brand

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hat are you feeling right now? It’s a question that seems easy enough to answer… until you take the time to actually think about it. Emotions are such a rich, complex, and fluid facet of human nature that it can be surprisingly challenging to define things like “feelings.” But they have such a stronghold over the trajectory of our lives – in both the context of us as citizens of humanity and as creatures of commerce – that loyalty marketers can no longer afford to ignore them. That’s why it’s imperative for loyalty practitioners and innovative marketers eager to step ahead of the competition to harness emotions through purposeful, future-proofed strategy.

The amount of theory amassed around the topic of emotions spans far and wide, producing a notable body of academic literature and emerging areas of research. We see it as a fundamental component of an effective loyalty strategy that creates a

deeper, more meaningful connection between brand and customer. Determining emotional motivators is a critical step when peering beyond the transaction to organically and authentically understand customer behaviors.

Emotions are one of the true indicators of “Program Health,” an often-discussed concept that is typically scrutinized through a financial lens. But the other half of the equation is the “member” lens – probing beyond the transaction to discover the emotional undercurrents that drive true, long-lasting customer bonds. This lens requires data and insights, and fortunately, there are now models that can acquire these inputs reliably. The discussion around the “what,” “why,” and “how” when it comes to emotional loyalty marketing is comprehensive, and we will cover that landscape in this Strategy Brief.

Gauging a consumer’s intrinsic emotional loyalty reaches to the heart of the matter, both as an input by imbuing a profound understanding into the complex emotional undercurrents that shape customer loyalty as well as an outcome that leads to a better understanding of program performance, because if your program isn’t driving emotional loyalty with at least some of

its members, it’s not performing optimally.

As we progress through this topic, we will examine the details of a methodology that is rooted in academic research and enriched by proven results to empower marketers to tangibly score customers’ emotional motivators.

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Three key pillars of emotional loyalty are Status, Habit, and Reciprocity. Analyzed together, they provide a powerful compass for strategy development and program optimization. Each profile unfolds a unique view of members.

Here’s the bottom line: emotional loyalty matters – perhaps now more than ever before.

The numbers don’t lie: emotionally connected customers have the greatest opportunity for incremental spend.

• Status explores how individuals gain a heightened sense of self through their interaction with brands - “I feel better about myself based on the way I interact with this brand because it makes me feel special.”

• 79% of customers who boast high Status and Reciprocity scores say they’d spend at least 20% more with brands, compared with only 56% of customers with no discernible emotional loyalty.

• Habit delves into the ingrained brand preferences that guide customer behavior that are rooted in the comfort of the familiar“I made my decision on my preferred brand, and I am now mostly on autopilot.”

• Emotionally loyal customers deliver 3 times higher lifetime value and stick around 1.5 times longer than “satisfied” customers and are 1.4 times more likely to rate a brand as “10” in standard NPS metrics.

• Reciprocity uncovers the sentiment of mutual, relational exchanges that strengthen brand loyalty - “I feel there is a two-way relationship, and I owe it to the brand to stay loyal.”

The fact is emotionally loyal customers are simply better customers. And the best way for loyalty practitioners to unequivocally ensure their initiatives draw impact is to thoroughly understand, seamlessly integrate, and confidently measure all known aspects of emotional responses to marketing.

When these classifications are established, brands can impart a cohesive image of functional loyalty across all touchpoints. It is by understanding the “why” behind their customers’ behaviors – the emotional motivations for engagement – that brands can truly optimize programs and experiences, segmentation strategies, communications, reward options, and partnerships.

There’s a lot happening right now. In fact, our understanding of emotional loyalty is accentuated by a rapidly evolving consumer landscape, where swift changes call for dynamic tools.

“Here’s the bottom line: emotional loyalty matters – perhaps now more than ever before. The numbers don’t lie: emotionally connected customers have the greatest opportunity for incremental spend.”

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The Current State of Emotional Loyalty As emotional loyalty becomes more understood, the opportunities for productive customer-oriented strategies expands. What are some of the overarching factors that set the stage for specific tactics? As we see it, emotional loyalty is being driven by multiple elements, with the customer changing in four important ways: Emotional connection determines the benefits customers want.

• This stems from the premise that our emotions greatly influence our decision-making process, including our preferences on incentives and how brands deliver value. Take, for instance, a brand that promotes environmental sustainability.

Customers emotionally invested in this cause will be more inclined to value benefits such as eco-friendly packaging or the company’s commitment to offset carbon emissions. These benefits resonate because they align with personal values and create a deeper emotional connection with the brand.

Customers need much more than rewards to drive value.

• Rewards still have their place, but a program is no longer considered “complete” if rewards are the only driver in an engagement amplification strategy. Rather, programs now need to be holistic platforms that inspire organic emotional bonds through diverse activities and strategic touchpoints.

Customers cite value-creation as multi-dimensional, and programs today must deliver on all value-creating

variables to compete in the current climate. A great starting point is the “Value Trifecta.” The Value Trifecta is a blend of three psychological states related to one’s experience, recognition, and choice that wrap around rewards, ultimately elevating their basic utility into provocative, deeply emotional interactions.

Customer advocacy versus referral.

• In fact, the very nature of “advocacy” is determined by how customers take actions and/or drive action in others. Of course, this might sound like tried and true tactics such as word-of-mouth and referrals, but there’s a distinction between word-of-mouth referrals and true advocacy. WOM and referrals are typically transactional, with solicitation playing a big part in these forms of endorsement. But true advocacy is much deeper, arising from die-hard fandom and devout emotional loyalty.

The good news is that we’re now able to categorize customers and understand their propensity for true advocacy, which gives marketers the ability to intercept and modify feelings and emotions to create distinct forms of advocacy. For example, recent insight shows that when you overlay spend with advocacy, you can reach a whole new set of potential avenues to stimulate loyal behavior. These can be used to design programs where advocacy isn’t a mere indulgence, but rather a vital business competency.

A customer’s level of emotional connection determines both pain and forgiveness outcomes.

• It’s not something we like to talk about, but customers are often hurt by brands. What lies in the aftermath of a poor service interaction, a purchase gone wrong, or any other disappointing customer experience?

The research shows that customers with a higher expressed level of emotional connection with the brand hurt the most when disappointed by a brand.

However, these same highly emotionally connected customers demonstrate a greater willingness to forgive, especially if they are particularly motivated by the relational exchanges they have with the brand.

• These patterns are supported by recent research from Kobie, a company that has invested heavily in understanding the impact of Emotional Loyalty on customer behaviors. While differences vary with industry vertical (the challenge of retaining high-value and transaction-oriented customers is more acute in financial services than in other industries, for example), marketers are universally recognizing that a robust framework to create emotional connections enhances success indices like forgiveness and advocacy.

“The good news is that we’re now able to categorize customers and understand their propensity for true advocacy, which gives marketers the ability to intercept and modify feelings and emotions to create distinct forms of advocacy”

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Is This Behavioral Psychology?

The Future Starts Now

Emotional loyalty and behavioral psychology are intimately related. After all, one’s ability to integrate emotional loyalty largely depends on the ability to first understand it. This is an important nuance, because being able to understand customer psychologies didn’t begin with the latest body of work from Kobie – after all, the entire history of marketing and loyalty depends on at least a fundamental interpretation of psychology. From this vantage point, behavioral psychology is the toolkit that we have at our disposal to interpret customers’ mindsets and guide them along the path-to-purchase.

Maybe this story isn’t an all-too-unfamiliar one.

As with any scientific pursuit, using tactics that can understand and target customer emotions develops, evolves, and improves over time. As we journey further into the captivating realm of emotional loyalty, we’re beginning to unravel findings that stand poised to forever change the loyalty landscape. Many of these ideas are innovations, some revolutions, and they’re all transformational. When executed well, they can be used to tie deep emotional connection to the core of loyalty ecosystems.

Emotional loyalty is an extension of this, but it goes even deeper: transactional behaviors are one thing, but sorely lacking from past strategies was a true understanding of their motivation. In reality, nearly everything ties back to emotion in one way or another. We humans are not the purely rational beings we like to perceive ourselves as, especially

when it comes to purchasing decisions. Emotional responses to a product, brand, or experience can significantly outweigh logic or reason. For instance, the warmth we feel when we recall a favorite childhood brand, the thrill we experience when we buy a luxury item, or even the comfort we derive from sticking to our usual shopping habits – these are all the underpinnings of an emotional loyalty that can powerfully sway behaviors.

In the context of customer loyalty, these emotional factors are now so complex and intertwined that sophisticated solutions to unravel their presentation are required. With the help of behavioral psychology and frameworks built around its fundamental principles, marketers can tap into complex emotional undercurrents and use them to enhance their loyalty programs. By understanding what drives customers on a deeper, emotional level, they can design experiences that resonate with these feelings and engage emotionally loyal customers.

It starts with data; knowing what your members want and why they want it tees up reflective emotional interactions that emphatically resonate and inspire lasting connections. The data collected can be used to generate responsive decision making that any loyalty system can ingest and benefit from. The result? Loyalty application that aligns with current trends, motivates incremental value creation, and remains fixed upon a firm vision of the future.

Here’s what we’re seeing today: 1. The Paradox of Choice There’s a profound shift towards customer choice, and it’s been gaining momentum for some time.

Brands have evolved from dictating self-serving offers to enabling consumers to author their own experiences. This pivot towards a hyper-customercentric model has given rise to loyalty programs with more options than ever before.

However, this resource availability is a doubleedged sword. A notable study, conducted within

the grocery store aisles, provides a compelling illustration of this paradox. Shoppers confronted with a myriad of 24 jam varieties were more likely to sample a flavor compared to those offered just six. Yet, when it came to making a purchase, those presented with fewer options proved to be more decisive. This research underlines a crucial insight – while a broad palette of choices can be appealing, an overabundance can lead to decision paralysis.

Today’s consumers want more than just a passive relationship with their favored brands; they want a seat at the decision-making table. How do brands strike the right balance? How do they empower consumers without overwhelming them? The answer lies in leveraging first-party data to create a loyalty program underpinned by a clear, attractive value proposition. By pushing the boundaries of data collection, analysis, and insight extraction, brands can deliver offers and recommendations that align with individual consumer preferences – a critical aspect considering that 91% of consumers are more likely to engage with brands that tailor their approach to be personally relevant to them.

An optimally balanced program design can offer a more powerful tool for fostering lasting, emotional connections.

2. Experiential Loyalty Experiential loyalty is an intriguing facet of the loyalty landscape that is inextricably linked to the concept of choice. At its core, experiential loyalty pivots on providing enriched, meaningful experiences that resonate deeply with customers, driving emotional engagement and long-term loyalty.

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The common scenario pictured for “experiential loyalty” leans towards grand gestures related to exclusivity – backstage passes, first-class upgrades, celebrity encounters. While such experiences indeed foster emotional loyalty, it’s essential to recognize that a fundamental, welldesigned customer experience on a microscopic scale can be just as powerful, if not more so. After all, it’s not about the glamor, but the alignment of the experience with unique emotional responses that vary from person to person. If this formula can be mastered, opportunity is easy to maximize.

Similarly, the concept of “experience” isn’t just confined to physical touchpoints or in-person environments. The new thinking is that a wellrounded, channel-agnostic customer experience that satisfies the 3-dimensional emotional loyalty of a customer is worth the extra investment. While in-person interactions will always be important decision-making influences, the digital routing of the customer journey cannot be understated in today’s interconnected world.

complete various tasks with “stamps” that can be redeemed for benefits and experiences.

Cinemas like AMC have also explored this domain, providing NFTs to “Stubs” members who purchased tickets and attended certain movie releases within a specific time frame. Generally speaking, as a new digital format that is in the early stages of adoption, NFTs in loyalty programs are an area of ongoing innovation and growth.

It’s important to note that the use of NFTs remains nascent and exploratory for many. As this trend continues to develop, it will be interesting to observe how loyalty programs leverage NFTs to enhance customer engagement and retention.

In the next section of this Strategy Brief, we’ll uncover four ways that take emotional loyalty theories and put them into practice. This step-by-step process will help you manage rigorous details and concepts while elucidating their practicality.

3. NFTs

References:

Non-Fungible Tokens (NFTs) have emerged as a fascinating component in the emotional loyalty landscape. Employing blockchain technology (e,g, cryptocurrencies like Ethereum), NFTs represent unique, irreplaceable digital items, marking the ownership of specific works and forming a unique liquid economy.

https://thewisemarketer.com/kobie-marketingpreviews-2022-consumer-research-findings/

Brands are harnessing the power of NFTs. Nike, for instance, ties NFTs to real-life products, such as sneakers. Meanwhile, Starbucks is one of the first companies testing NFTs within a loyalty program.

Its beta program, Odyssey, rewards customers who

https://kobie.com/the-best-loyalty-conferences-arebeachside-kobie-hosts-6th-annual-onpoint-conference/

https://newsroom.accenture.com/news/majority-ofconsumers-buying-from-companies-that-take-a-standon-issues-they-care-about-and-ditching-those-thatdont-accenture-study-finds.htm

“Non-Fungible Tokens (NFTs) have emerged as a fascinating component in the emotional loyalty landscape.”

https://kobie.com/the-paradox-of-choice-in-todaysloyalty-programs/ The Wise Marketer 2023

The Four Key Ways to Leverage Emotional Loyalty How to Turn Principles and Trends into Actions and Results

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he first chapter of this ebook provided background and context needed to properly understand emotional loyalty. If you’re still unsure about anything, we encourage you to review chapter 1 or reach out and chat with us. After all, strategies rooted in this emotional understanding are future-proofed when executed in-line with your brand’s values and customer promise.

The idea of emotional loyalty leads us to a number of questions. How do you go about implementing those strategies? What steps should brands take to properly action on emotional loyalty in ways that are meaningful to your bottom line? And how do you measure the impacts to verify whether your strategy is aligned to your brand goals and backed by sound decision making?

Here’s what you should know: the traditional incentives and metrics that once defined loyalty program creation are no longer independently sufficient. A better approach enables brands to make

pointed decisions that naturally improve customer experiences, with the help of effective segmentation strategies, optimized communications, expanded rewards options, and partnership strategies.

Tapping into emotional loyalty is about recognizing that loyalty is not a one-dimensional construct; it’s a multifaceted phenomenon that encompasses a spectrum of connections, with transactional motivations just a ground-floor aspect of program design. By embracing this complexity and executing on models that simplify the understanding of emotional loyalty, brands can create programs that resonate on a much, much deeper level.

This chapter explores what’s possible and explains how it works. We’ll break things down intuitively and provide salient steps to organize your thinking around emotional loyalty and help you drive results.

There are four sequential steps to help guide eager marketers through this process:

Step 1: Do the Digging Measure The Emotional Loyalty of Your Program Members Through Primary Research How can you create change if you don’t have a baseline to operate against? An authentic understanding of current emotional connections between your brand and your customers needs to be carefully evaluated before new strategies and tactics can be considered.

By locking in this baseline through primary research, brands can identify the key emotional drivers that resonate with customers. Whether

it’s the allure of exclusive benefits, the habitual connections forged through consistent positive experiences, or the mutually beneficial relationships nurtured through personalized engagements, assessing these emotional connections accurately in the beginning is pivotal.

Our thought partner in this brief, Kobie Marketing, has created an assessment and evaluation methodology aptly named Kobie’s Emotional Loyalty Scoring® (ELS) tool for just this purpose.

It represents a multi-faceted approach to understanding the intricate dynamics that shape a customer’s emotional loyalty.

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The foundational baseline established in this process yields: Strategic Alignment: Strategic Alignment ensures that your new loyalty strategy, or modification of an existing one, makes design choices unassailable for all of the stakeholders in the C-Suite, especially the CMO, CTO, and CFO. Achieving alignment at this level provides confidence that initiatives are supportive of brand promises, appealing to customers and able to be adequately rationalized internally.

Personalization and Segmentation: By understanding emotional loyalty drivers, brands can create more targeted and personalized campaigns, segmenting customers based on their unique emotional connections and preferences.

The overarching focus of these research questions is to gain insights into the “why” behind customer behavior. It’s not just about what customers do, but understanding why they do what they do. These insights allow brands to tailor their strategies to resonate with their customers on a more personal and impactful level.

Leveraging an Expert Research Partner

Continuous Improvement: These baselines are not static points, but rather are dynamic references that allow for continuous monitoring and optimization. They enable brands to adapt and evolve their strategies in response to the perennial dance of customer change.

Since primary research has become more accessible, it’s worth discussing the value in leveraging a 3rd party research expert. Working with a credible external partner holds tremendous merit. A research partner will program and field the survey with expertise in survey design, data collection, and analysis. Plus, they bring objectivity and specialized skills to the table. They can help interpret the raw data, debug and error-proof procedures and translate the data into actionable insights. These valuable stakeholders ensure that surveys reach the right audiences, and that the data collected is accurate and relevant, substantiated by third party credibility. When the customer experience is at risk, why leave your research to chance?

It All Starts With The Brief

Get The Data Talking

A research brief is a concise document that outlines the objectives, methodology, and scope of a research project. Kobie supplies clients with a research brief that includes their proprietary Emotional Loyalty Scoring® (ELS) questions.

These questions are designed to tap into those

Passing the raw data back to analysis teams and scoring it is where the real magic happens. The right partner works with you to analyze the data to identify patterns. As patterns turn into profiles, so do recognizable archetypes that point to a plan for success.

Communications: This guides the development of communication strategies that speak directly to the emotional core of customers, enhancing engagement and fostering long-term relationships.

“The overarching focus of these research questions is to gain insights into the “why” behind customer behavior. It’s not just about what customers do, but understanding why they do them.”

three key emotional loyalty drivers – Habit, Status, and Reciprocity – that influence critical attitudes and their corresponding actions.

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Segmentation is more essential than ever as today’s customers are eminently diverse, increasingly intricate, and far pickier in their choices than ever before. The traditional methods of grouping customers by age, gender, or purchasing behavior fall short in capturing the complex emotional componentry that drives loyalty.

Because of its complexity, data analysis can be precariously cumbersome and endlessly rigorous.

Without the right partner, it can be difficult and time consuming to identify intricate patterns, but doing so is necessary to yield analytical subtleties.

Even with advancements in AI and Machine Learning, interpreting data through a loyalty lens is a strong example of where human expertise is necessary.

Step 2. Profile Your Members Determine Your Key Segments & Score the Raw Data Kobie’s ELS is rooted in its methodology, which is itself is grounded in published academic research. It is this scientifically sound approach, alongside more than 30 years of loyalty expertise, that gives brands confidence when analyzing raw data. With sound data interpretation as the bedrock for learning established in step 1, you can create meaningful customer profiles that forecast profound value over a vast web of interconnected loyalty channels. This methodology goes beyond mere assumptions and provides a structured framework for understanding emotional drivers.

And at the heart of it all is “status,” “habit,” and “reciprocity.”

Translating The Scoring: Three Key Emotional Profiles Status: Customers in this profile are driven to be emotionally loyal when they feel special and elevated when connecting with their preferred brands. It is the brand’s exclusive recognition of them and the resulting rewards that make them feel valued and unique.

Habit: This profile reflects customers who make decisions that revolve around familiarity, and they have developed routines that bring them comfort in their brand interactions. Habit customers tend to outwardly reject the unfamiliar and require more attention when navigating changes to your brands, products, or programs.

Reciprocity: This profile represents customers who enjoy a two-way relationship with the brand (whether perceived or genuine). They appreciate conscious personalization and derive a sense of loyalty and obligation to the brand from these constructs. These customers are rooted in the belief that the brand has done something for them, and they owe it back in return.

Broad Drivers and Profile Combinations These fundamental profiles are just the beginning.

It’s really about how they work in concert with one another; and as discussed, increasing customer complexity makes it difficult to distill data down to one dimension. The truth is, customers can exhibit combinations of profiles, leaving even more complexity up for interpretation.

Kobie’s 2022 Consumer Loyalty Research has tapped into these integrated undercurrents,

uncovering data points from more than 13,000 consumers to help brands across industries understand patterns and get more value out of their loyalty efforts.

Here’s an example of what the research found: the majority of Financial Institution (FI) members are driven by combinations of status and habit.

For status-habit members, there was also a pattern that they are some of the least willing to forgive after a poor customer experience. If you’re a banking brand aiming to build trust and foster emotional connections with your customers,

focusing strategies on how to best prevent friction points will help mitigate the risks and costs associated with losing customers who are difficult to gain back. This is an example of a combined AELS profile that helps to guide areas of focus for loyalty initiatives.

Another noteworthy pattern is that status-reciprocity combinations represent highly engaged “champion” advocates. Imagine you’re a retail brand with a loyalty program that offers personalized rewards and experiences. By focusing on status-reciprocity leaning members, you can tap into a segment that The Wise Marketer 2023

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not only feels special but also desires a more personal and intimate connection with your brand.

These are the customers who are likely to share their positive experiences with friends and family, write glowing online reviews, and actively promote your products or services. A status-reciprocity member might respond favorably to an exclusive invitation for a special event, a personalized discount on their favorite product line, or a unique opportunity to collaborate with the brand in some way, or all of the above. These tailored experiences resonate deeply with this segment, fostering a sense of mutual respect and understanding. The result is a loyal customer who feels seen and appreciated, translating into increased advocacy and, ultimately, higher lifetime value for the brand.

Savers, Spenders, and Stashers In addition to the ELS profiles and combinations thereof that help brands interpret their consumer preferences, the research also reveals additional insights that can be layered with ELS for further understanding. For example, we found patterns in how members use rewards, with 51% being “savers”, 22% “spenders”, and 27% “stashers”. This insight into redemption behavior further enriches the derivation of emotional loyalty tactics, allowing brands to engage with customers in ways that resonate with their specific preferences.

“The insights into how FI members spend their rewards show a stunning variety of customer behavior and preferences.”

For example, savers, who make up the majority of members, prefer to keep their rewards and exchange them for a larger reward or put their points towards a very specific item or experience.

This group may be motivated by long-term goals and may appreciate loyalty programs that offer tiered rewards or exclusive access to high-value items.

Better understanding of this behavior allows brands to create tailored experiences that cater to the savers’ desire for accumulation and achievement.

On the other hand, spenders, who redeem rewards as soon as they’re earned, may be driven by instant gratification and the joy of immediate loyalty participation. Brands can engage this segment by offering frequent, smaller rewards which can be redeemed quickly. This approach aligns with the spenders’ desire for value proximity and can foster a sense of continuous engagement and satisfaction.

Then there are stashers, who make up approximately 27% of members; an interesting group that enjoys earning rewards but doesn’t have a specific use planned for them. These attitudes may reflect a sense of security or pleasure in accumulating points, even without a clear goal. Brands can engage stashers by offering flexible redemption options and encouraging exploration of different ways to earn and use their rewards.

Finally, the research demonstrates that customers most value choice, along with cash back and earn/reward type benefits. An impressive 73% are eager to engage now and looking to actively redeem. This highlights the importance of offering diverse and appealing reward options that cater to different preferences and behaviors.

The insights into how members spend their rewards show a stunning variety of customer behavior and preferences. By recognizing many overlapping indices, brands across industries can create more targeted and resonant programs.

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Step 3. Strategize and Prioritize Better Program Design With Your ELS Profiles Now, it’s time to act. Every great loyalty program is defined by the uncanny ability to plug-in the right tactics to the right audience at the right time.

Aligning tangible program features with your ELS Segments is where the theoretical understanding of emotional loyalty transforms into sensible, actionable strategies. After sifting through valuable insights in the research accumulation and segmentation stages, the challenge now is to translate this knowledge into strategic program designs that resonate with your target audience based on their ELS profile make-up. The path to success has its obstacles: in a landscape where resources are often limited and the stakes are high, a strategic methodology is essential. Let’s discuss the art and science of strategizing loyalty schema and mapping program design elements.

Customer Experience Design With ELS Kobie looks at your customer base in totality so you can leverage insights that coordinate combinations of status, habit, or reciprocity that drive your business. This way, you can create a program that resonates with your customers’ preferences and expectations.

This strategic alignment not only enhances the customer experience, but also optimizes resource allocation, ensuring that your program design is both effective and efficient in fostering emotional connections and driving business

value. For instance, say your base of members overwhelmingly over-indexes on Reciprocity in combination with Habit. You should invest in strategies, tactics, and programmatic elements that tap into those emotional loyalty motivators as they will have the greatest impact on driving deeper loyalty and engagement.

There are a great deal of possible strategies and tactics that can form via this process, but here are some examples to get you started: Habit-driven customers appreciate streamlined processes and familiar touchpoints that reinforce their routines.

Practical Example: A subscription service that automatically renews, providing consistent access to favorite products or content, can appeal to habit-driven customers. Regular updates or reminders that align with their established routines can further enhance their loyalty. And to get them engaging even deeper, make sure future interactions are relationshiprelevant and acknowledge existing habits.

Slow and steady is going to win the race when it comes to long-term growth with your Habit-driven customer.

Status-driven customers seek overt displays of recognition, wanting to feel special and have others know it.

Practical Example: Offering exclusive access to VIP events, personalized badges on user profiles, or special status tiers within a loyalty program can cater to status-driven customers. These overt recognitions validate their status and provide a sense of prestige and differentiation.

Reciprocity-driven customers value personal, almost intimate connections, appreciating gestures that feel genuine and tailored to them.

Practical Example: Sending personalized thank-you notes, offering customized recommendations based on past purchases, or providing exclusive offers on special occasions like birthdays can resonate with reciprocity-driven customers. These gestures create a sense of personal connection and show that the brand recognizes and values customers as individuals.

Communications Optimization ELS segments can guide the optimization of your marketing communications too, ensuring that your messaging resonates and is on-brand: Habit-driven Communications can reinforce routines and provide familiar cues.

Example: A fitness app might send daily workout reminders at the same time each day, reinforcing the user’s exercise routine and providing a familiar nudge to stay on track.

Status-driven Communications can highlight exclusivity and recognition, appealing to those who love overt displays of status.

Example: A luxury car brand could send personalized invitations to exclusive launch events, highlighting the customer’s VIP status and offering a unique experience that sets them apart.

Reciprocity-driven Communications can emphasize personal connections and genuine engagement, resonating with those who value intimacy and authenticity.

Example: A bookstore chain might send personalized reading recommendations based on past purchases, along with a handwritten thank-you note, emphasizing a genuine connection and appreciation for the customer’s loyalty.

This is just a sampling of potential strategies.

Keep in mind that whatever strategy you employ, the objectives should always align with your brand’s desired outcomes. From leveraging ELS profiles to design a loyalty experience to using those profiles to communicate with your target audiences in ways that build deeper emotional loyalty and drive engagement, the ultimate measure of success should be based in program health as it applies to both the member and financial lens.

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4. The Data Will Set You Free: Use ELS as a Method to Measure Continuous Program Health

While transactional data reflects buying and spending behavior, and behavioral data reflects customer engagement across channels and touchpoints, emotional data is the key to tying everything together into a comprehensive view.

So far, we’ve talked a lot about ELS as an input to the design of a loyalty experience or the creation of a communications plan. But it can also be used as an output as a means to assess whether your loyalty strategy is driving deeper emotional loyalty with members. These scoring processes represent a paradigm shift in understanding and measuring the true emotional health of loyalty programs in addition to your program’s financial health. Now that the hard work is done and your tactical arsenal is up and running, it’s time to make sure the engine stays tuned. Kobie considers these questions through two distinct lenses: the Financial Lens and the Member Lens.

We believe this approach – looking at program health with both a financial and customer viewpoint – creates better customer engagement in the long run as it points to the mission critical strategies that need to be implemented to continually improve and evolve your loyalty strategy in market. Using ELS as a way to gauge the emotional loyalty of your program members enables you to know whether you’ve sufficiently succeeded in building that deeper connection.

With plans to measure program health at various intervals in your program’s lifecycle, you can ensure that your pursuit of program excellence is deliberate, constant, and continuous.

Financial Lens:

The final section of this Strategy Brief provides market examples of how these nuanced strategies can be put into play by brands. We’ll share two case studies that illustrate how to incorporate emotional loyalty into your customer loyalty planning and share the results of applying an emotional loyalty lens to your business.

In the pursuit of understanding and optimizing loyalty programs, brands must recognize that financial metrics alone cannot be the sole gauge for program health. While the Financial Lens is always necessary, it’s not comprehensively sufficient.

Member Lens: The Financial perspective must be complemented by the Member Lens to provide a truly holistic perspective that takes transactional, behavioral and emotional data into account. Kobie refers to this as “Triple Play Data,” an approach that enables continuous improvement and creates engagement that matters for consumers.

References: https://assets.kpmg.com/content/dam/kpmg/ be/pdf/Markets/is-it-time-to-rethink-your-loyaltyprogram.pdf Kobie Research_Retail.pdf Kobie Research_FI Insights.pdf

“In the pursuit of understanding and optimizing loyalty programs, brands must recognize that financial metrics alone cannot be the sole gauge for program health.”

The Wise Marketer 2023

Putting Emotional Loyalty Into Practice Theory Is Put To The Test In These Class-Leading Examples

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e’ve learned about the basic building blocks that set emotional loyalty apart from other paradigms and how to leverage it to gather insights for loyalty strategy design. We’ve also discovered how the right implementation of these building blocks within reliable frameworks can yield results quickly, measurably, and repeatedly. But as the old saying goes, the proof is in the pudding.

Understanding exactly how innovative brands put emotional loyalty into action makes it easier to visualize how success can be secured for your own strategies, programs, and platforms.

Case Study 1: Emotional Loyalty Evolves Entertainment The film industry is built around emotions.

The product, after all, is designed to make people laugh, cry, scream, or just plain feel. But what happens when an entire industry gets interrupted and suddenly, customers are prevented from doing the things they love like going to see a movie? This is exactly what happened courtesy of COVID-19.

When the pandemic hit, the movie theatre industry, like many other industries, found themselves in uncharted territory. One leading movie theatre brand found the silver lining in the pandemic storm and, using emotional loyalty as a foundation, was able to ensure their best customers would stay engaged or re-engage once COVID-19 was in the rear-view mirror.

Data Takes The Stage Any approach must be rooted in hard facts.

These facts come from data. When this organization needed to transmit messages to their most valuable audiences, who these audiences are, how they think, and how they feel became a non-negotiable part of the equation.

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Act One: Decisions With a treasure trove of data now at their disposal, the brand embarked on an ambitious relaunch strategy centered on the theme of “nostalgia,” as a large portion of its membership were Habit-driven in some combination and longed for the way it was before the pandemic. It became apparent that this sentiment was a widespread feeling, and a longing for pre-pandemic times was almost palpable.

With this in mind, the brand decided to tap into these feelings, developing a method to attract customers back to the theatres by empathizing with their loss of the familiar and the expectations and anticipation they had for its return. The game plan was to provide a familiar and comforting experience that many were craving in a safe environment. The emotional loyalty supporting the strategic architecture of this plan was crucial, and the brand leveraged it effectively to rekindle the magic of the movies.

Traditionally, the brand relied on deploying a quarterly brand sentiment tracker, a tool designed to tap into the pulse of their audience’s feelings and perceptions about movie-going experiences.

Except during the pandemic, that audience was prevented from going to the movies all together.

So, the brand pivoted and began using that same study instance to gather new information about its program members, how they were feeling, whether they felt some measure of safety, where they were

getting their entertainment needs met, and of course, what drove their emotional loyalty to the brand. The cadence also increased from quarterly to weekly to maintain a more real-time pulse on sentiments.

This pivot wasn’t just about frequency; it was about depth and breadth of understanding. The data collected offered invaluable insights into ELS segment dynamics, serving as the foundation for the next step: strategic planning and decision-making.

First, acknowledging the financial strain on many, the brand paused membership fees while allowing members to continue accruing points, especially helpful for Habit members. This also tapped into those motivated by Reciprocity because the brand was giving them something in return beyond what was expected. This approach maintained engagement and maximized rewards, reinforcing the bond between the brand and its members.

Personalized promotions, acting as gentle

invitations, encouraged members to return to the theaters and re-experience the magic like they had before…only safely, with some new rules designed to make responsible movie-going possible.

The Reciprocity segment really responded well to the new safety features implemented to ensure a positive experience amidst the pandemic. The “you help me, I help you” emotional undercurrent of these members was acknowledged and appreciated, acting as a springboard into other channel strategies and a potential pathway into other ELS segments.

Additional tactics leveraged the interplay of behavioral psychology principles with members’ desires and emotional loyalty motivations. For example, the introduction of rewards like NFTs were designed to foster deep emotional connections with the brand, and top-tier members enjoyed exclusive perks like dedicated concession lines, helping to connect with customers whose emotional loyalty to the brand was more Status driven.

Finally, the brand consistently refreshed the program too, utilizing zero-and first-party data along with secondary research to constantly keep upgrades aloft. Recent additions to the program include a designation for retail investors and a co-branded credit card fully integrated into the existing loyalty program.

“Traditionally, the brand relied on deploying a quarterly brand sentiment tracker, a tool designed to tap into the pulse of their audience’s feelings and perceptions about movie-going experiences.”

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In the wake of implementing this multi-prong loyalty strategy, the theatre brand witnessed a remarkable uptick in customer engagement and satisfaction.

The results not only validate the strategic pivot but also showcase the brand’s adept understanding of its patrons’ expectations and preferences.

revenue per patron. This shift in member habits towards digital platforms was a clear indication of the program’s success in creating new habits and connecting with Habit motivated members. The program’s continual efforts to check in on customer feedback and sentiment through qualitative and quantitative research over the past several years have reinforced member satisfaction with the program.

A pivotal indicator of the program’s success was the 34% surge in patron spend in 2022 across all program tiers, a testament to the enhanced value patrons perceived and received. This increase in spend per member was consistent across all tiers, reflecting the program’s universal appeal and effectiveness.

The Net Promoter Score (NPS) echoed this sentiment, with all program tiers boasting positive scores, indicating patrons were not only satisfied but also willing to recommend the program to others.

Furthermore, an overwhelming 89% of respondents reported being either satisfied or extremely satisfied with the program’s ease of use and value. This high satisfaction rate was mirrored in open-ended responses collected in Q1 2023, where patrons vividly described how the program’s benefits actively influenced their movie-going decisions and experiences. The average weekly satisfaction score for guest feedback also soared to 90%, reflecting a broad-based increase in customer satisfaction.

The program’s ability to understand and action members’ emotional loyalty motivations drove impressive results, particularly in terms of member acquisition and engagement. New member visits increased almost four-fold, and the program experienced a 64% increase in new member growth. These new members also demonstrated higher frequency than previous cohorts, further expanding the brand’s customer base and indicating the program’s resonance with Habit motivated members.

By understanding and actioning members’ emotional loyalty motivations, the brand and program have not only realized positive results across a number of critical KPIs and member segments but have also forged stronger connections with members, ensuring the program’s continued success and relevance.

A Standing Ovation

“Kobie helped the client acquire robust data to identify these emotional loyalty drivers, and once distilled from surveys and studies, it was time to enact a plan.”

Digital engagement saw a significant boost, with a 93% increase in digital spending and a rise in app

These are astounding metrics, especially considering the turbulent environment that preceded it. But by leveraging a strong understanding of the emotional loyalty of its members, the brand was able to create a bevy of strategies that harnessed that loyalty to drive laudable outcomes for the organization.

Case Study 2: The Winning Ticket Environmental variables motivate people differently. Throughout this ebook, we’ve explored how Status, Habit, and Reciprocity member segments all respond to program features in unique ways. The emotional drivers necessary to influence their decision making differ drastically in their shape and application.

Likewise, understanding how they react to market changes requires a calculated approach.

As a leading travel brand discovered, rapidly accumulating environmental factors were really putting a strain on their business. It wasn’t all just the pandemic; program costs were increasing and ROI was getting harder to demonstrate. They were also faced with a changing member base that was no longer geographically situated. What was required was a better understanding of their members and what drove them to be loyal so that the right loyalty strategy evolution could be planned.

Cresting The Horizon Sometimes emotional drivers are deterrents: they push people away from the brand, be it from the allure of competitive offerings or misalignment between the core product and the customer’s frame of mind. And other times, emotional drivers can create opportunities for attraction.

Kobie helped the client acquire robust data to identify these emotional loyalty drivers, and once distilled from surveys and studies, it was time to enact a plan.

The Way Forward Kobie’s team of data scientists and strategists integrated this new audience information into a new program design and compelling communication plan centered around capitalizing |on uncovered trends.

ELS was the way to categorize these trends by audience type and develop motivational tactics that drive the right actions in the right member segments. Kobie took the data and assessed how Status, Habit, and Reciprocity customers could be better reached. In fact, their in-house creative agency immersed themselves in the totality of the brand to construct a comprehensive loyalty strategy taking these three segments into account.

For this travel brand, the emotional nuances of Status, Habit, and Reciprocity members were addressed with compelling program updates.

Each segment was guided to discover new ways travel helped meet their emotional needs: The Wise Marketer 2023

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Status Segment The Status segment, comprising individuals who revel in recognition and exclusive privileges, are customers who seek a superior, differentiated experience.

To cater to these high-expectation travelers who also tended to be their best members, the brand maintained the criteria for distributing coveted perks like lounge passes, first-class upgrades, and companion passes. Understanding that the allure of exclusivity often lies in its careful, selective distribution, the brand launched new benefits meticulously designed for Statusmotivated members, strategically targeted to specific regions. Now, Status members could traverse different geographies freely, feeling special and valued at each point of their journey.

them could be a seamless step in their day.

Branded merchandise also helped drive greater enrollment and disseminate broad awareness.

Additionally, the brand plans to offer food and beverage credit coupons, enabling members to effortlessly purchase their meals and eliminating pre-boarding stresses, further streamlining their travel experience and allowing them to settle into their journey with ease and comfort.

Reciprocity Segment For Reciprocity members, the focus was on fostering genuine, mutual relationships with the brand. Reciprocity-motivated members are inclined to engage more deeply with the brand when they perceive a fair exchange of value; where their loyalty and commitment are acknowledged and rewarded.

For those customers motivated by Habit, the brand meticulously crafted an enrollment experience that was seamless and engaging.

Recognizing that the Habit segment represented the largest group during the sign-up phase, it was crucial to ensure that the entry into the program was as frictionless as possible. This meant simplifying the process and creating an experience that would seamlessly integrate into the customers’ existing routines and lifestyles.

To tap into this dynamic, the brand considered incentives that acknowledged and rewarded previously unrecognized members. The brand understood that these members sought a value exchange that felt personal and considerate of their unique needs and preferences. One innovative approach to this was the planning of a micro-redemption strategy: this strategy encouraged reciprocity-motivated members to engage more frequently with the brand. It also subtly nudged them to stretch their behaviors towards qualifying for the next rewards tier.

To entice and satisfy the Habit segment, the brand explored rewards specifically designed to showcase the convenience and comfort of the travel experience. Among these were, branded items that fit into their daily routines like reusable coffee cups or water bottles, helping embed the notion that traveling with

The brand is also experimenting with a variety of coupons, including perks like allowing an extra checked bag or bringing a pet on board. These gestures of flexibility and accommodation further underscored the brand’s commitment to providing reciprocal value that was both relevant and personal to each member.

Habit Segment

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Destination: Success This travel brand, with Kobie’s guidance, has successfully reimagined its loyalty program to offer unparalleled value to its members across all ELS segments. While the results of these efforts are still rolling in, the brand anticipates a positive reaction from members. And with planned increases in targeted regional offers, the brand can further optimize the level of personalization, allowing members to receive offers that are not only valuable but also highly relevant to their geographical context.

By viewing a loyalty program’s performance through both the member and financial lens, Kobie ensures that strategies are holistically oriented and sustainable in the long term. It starts with data, but it grows into so much more.

The interpretation and application of this data blends narrative craft and creative communications to bring program ideas to life. Through carefully articulated campaign messages, brands leveraging ELS segmentation can reach highly unique, evolving audiences with offers that resonate with their specific needs and preferences at any moment in time. As the realm of customer loyalty continues to become more complex, it’s an innovative, future-proofed approach. And it beckons loyalty marketers to adapt their own notions of immersive loyalty by rooting their strategies in emotional understanding. Will emotions continue to evolve subtleties that require different strategies as time marches on? Most assuredly so. But the fundamental emotional framework behind better loyalty isn’t going anywhere.

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