Say you’re a healthcare provider trying to encourage patients to engage with their fitness app. Or you’re a content provider facing market disruption from a new subscription streaming service.
You could be a fast-expanding chain serving responsibly sourced health shakes trying to unseat the Starbucks app on your customers’ phones.
Or you could be a bank working to drive down costs by expanding self-service digital banking.
In each case, the challenge is nurturing adoption of something new, which often involves breaking away from a comfortable, existing habit. Many marketers might assume that a loyalty program wouldn’t have anything to do with that process. Yet loyalty programs have played a major role in changing consumer behavior in the past, as seen in airline online booking and mobile payment in coffee shops.
Why do these ancient examples still matter? Because many current adoption efforts are stalled – even mobile payment appears to have peaked at 30 percent in 2016 and fallen back to 23 percent in 2018.1 Many of the same mistakes are still being made. It’s important to understand why technology adoption has failed in the past in order to increase value in the future, a concept we discussed in depth at the 2019 Kobie OnPoint conference.
Let’s look at those examples through the lens of Kobie’s Emotional Loyalty Scoring™, a system grounded in academic research on consumer behavior, and draw lessons for future technology adoption.
The Story of Airline Online Booking Adoption: Online flight booking had been limping along, frustrating airline marketers. Why were frequent flyers still calling to book flights instead of warming to this convenient service? The airlines knew they could save a bundle in travel agent fees and call center expenses if they could convince consumers to move their transactions online. Online booking, at least at United Airlines, was being marketed to all customers after completing a trip booked with the airline’s reservations. The advertisement was sent as an email from United. Very few clicked the booking link. The service didn’t take off until United featured the link in a Mileage Plus email positioned as, “a special service for United’s most loyal flyers.” The click-through rate was far higher than all previous emails – enough to swamp servers that had never had their capacity tested. There was also a token mileage bonus: Customers had to take 20 trips before they could earn even the lowest reward. Most carriers found that as soon as their frequent flyers adopted online booking, other travelers adopted the service as well, allowing United to eliminate the bonus.
The Story of Starbucks Mobile App Adoption: Mobile payment had been an option for at least a year but customers weren’t using it. It frustrated the company because mobile payment showed promise of reducing line wait and the expense of handling either cash or credit. Then, Starbucks introduced a version of their mobile app where each time you paid with the app you could bounce the Starbucks Rewards Stars you’d earned in a virtual cup on your phone. College students were showing their friends. Marketers would pull out their phones in meetings to show each other, saying, “We have to do something like this.” Enrollment in this new version of Starbucks Rewards skyrocketed – their previous reward program had languished just as mobile payment had. When the two were put together, Starbucks started a growth curve that continued for 25 straight quarters. More people now use the Starbucks mobile app for mobile payment than both Apple Pay and Google Pay2.
What do these two classic case studies have in common? Technology introduced purely as added convenience from the brand didn’t change habits. Technology introduced within the context of their loyalty program did. But why? Is the difference still relevant?
Emotional Loyalty Scoring is based on behavioral research showing emotional loyalty to a brand tends to be based on at least one of three motivations:
- HABIT: I often find myself on autopilot buying what I’ve bought before.
- STATUS: I feel more valued than other customers.
- RECIPROCITY: I feel grateful for treatment I’ve received. It’s about the relationship.
Kobie’s own research3 shows that regardless of generational and gender differences, Habit-motivated customers are slower to adopt technology-based innovations such as mobile payment or interacting with a digital assistant. These innovations disrupt the familiar and comfortable buying routine that makes consumers happy and loyal to a brand, even when it doesn’t have the lowest prices. But the research also shows that Habit- motivated customers who are also motivated by Status or Reciprocity are more likely to adopt new processes such as digital self-service.
That suggests the airlines and Starbucks found a way to do the things that satisfy customers motivated by Status and Reciprocity. What could those be?
Motivated by Status: The tactics to satisfy members motivated by Status are usually easy to spot. United Mileage Plus Premiers were offered a service to “meet their needs as very frequent travelers.” Perhaps that made them feel more valued than the general flying public. In a similar way, only Starbucks Gold members could earn points towards free drinks and bounce those cute stars in that virtual cup at the time. Perhaps that made them feel like part of a special early adopter crowd who had unlocked a new world they could show off to others. The fact that the original virtual cup image from before 2015 still shows up in today’s news articles speaks to its ongoing resonance for the brand.
Motivated by Reciprocity: Reciprocity is about having a sense of relationship. In each case study, the brand failed to connect when they promoted the new technology as something for all customers. Instead, the brands connected when they reached out and told a story within the context of loyalty membership. Is it any surprise that membership feels more like a relationship than simply receiving a general email? Another more recent example is how Amazon introduced their streaming services within the context of Prime membership, driving both Prime membership and streaming adoption even though Amazon was not the first mover of streaming content.
To sum up, here’s how a loyalty program can nurture adoption of something new:
- Ensure customers motivated by Status feel that:
- The innovation was created for their special needs as one individual in a valued set of customers
- Using the innovation reinforces their uniqueness – they can feel better about themselves by mastering this new thing
- Appeal to customers motivated by Reciprocity by telling the story of the new innovation in the context of their relationship with your brand – a relationship built on their loyalty membership
While these tactics may still not be enough to jolly some purely Habit-motivated customers through their initial discomfort with encountering something unfamiliar, there are times when these tactics have changed an entire industry. The underlying consumer motivations for why it happened are the same today – have you checked your newest Amazon Prime benefits recently? Probably.
Read more about our Emotional Loyalty Scoring tool here.
1 “Mobile Payments: Getting Past the Speed Bump” Mercator Advisory Group, (January 3, 2019) https://www.paymentsjournal.com/mobile-payments-getting-past-speed-bump/
2 “Starbucks App Leads Mobile Payment Competitors” eMarketer.com Editors, (May 21, 2018) https://www.emarketer.com/content/starbucks-app-leads-mobile-payment-competitors
3 “Creating Human Connections in the Midst of Technological Change” Kate Hogenson, Sarah Queller and Rhonda Ekstrand. (February 2019). Research conducted in February 2019 with 1,200 loyalty program members across industries, age 18 to 75