#122: Loyalty Science Lab Insights

The Loyalty Science Lab is a unique and incredibly useful marketing research facility from Old Dominion University that researches the psychological aspects of loyalty programs.

Founded and directed by Yuping Liu-Thompkins, the Loyalty Science Lab collaborates with industry leaders to identify and research commercially important concepts that drive loyal customer behaviour.

The Loyalty Science Lab therefore combines academic rigour with practical insight, allowing Dr Liu-Thompkins to become a subject-matter expert on the design and effectiveness of loyalty programs as a tool for customer retention, cross-selling, and customer growth.

Dr Liu-Thompkins has published her research in top marketing and advertising journals, and today joins “Let’s Talk Loyalty” to share some of the exciting insights from her research that will prove fascinating to anyone running a loyalty program or initiative around the world.

Show Notes: 

1) Yuping Liu-Thompkins – Founder & Director of Loyalty Science Lab & Professor of Marketing, Old Dominion University

2) Loyalty Science Lab Articles: 

What Happens When People Get Closer to a Reward? https://bit.ly/3qMEL6E

How to Nudge People to Go Further in a Loyalty Program? https://bit.ly/3jH5osg

How to Gauge Loyalty Program Engagement – https://bit.ly/36a3yID

Your Business Needs a Loyalty Model – https://bit.ly/3hdzySf

Are Your Customers Really Loyal? https://bit.ly/3hAUtxx

3) Loyalty Science Lab on Medium

Audio Transcript


Welcome to “Let’s Talk Loyalty”, an industry podcast for loyalty marketing professionals. I’m your host, Paula Thomas, and if you work in loyalty marketing, join me every week to learn the latest ideas for loyalty specialists around the world. Hello and welcome to today’s episode of let’s talk loyalty, where I have the opportunity to talk to the founder and director of the loyalty science lab, a fascinating research facility based out of all dominion university in Norfolk, Virginia, Dr. Yu ping Lou Tompkins studies, the psychological effect of loyalty programs, and really is focused on intersecting between the worlds of academic loyalty research and practical loyalty applications.
So there are some extraordinary insights that you ping is concluding and learning and sharing with the world of loyalty professionals. So without further ado, I’m really excited to welcome you. Pig Lou Tompkins to let’s talk loyalty. Wonderful. So you ping, I am dying to hear with all of your work
With the loyalty science lab. Please tell me first and foremost, what is your favorite loyalty statistic? Paula, thank you for the question. I’m very happy to be here. I would say out of the many loyalty statistics out there for me is probably coming from bank loyalty is 2019 loyalty report. It’s based on consumer survey and ratings of different loyalty programs. And one of the fascinating statistics from the report is that when personalization is done well in the company, in the loyalty program, there is a 6.4 times lift in member satisfaction with the program.
Wow. I thought it was really fascinating because for the longest time we know that, you know, the value your loyalty program is in the data that it creates in the opportunity for personalization, it creates. And this kind of proves that point of that. You need to utilize your loyalty program data. Absolutely. Yeah. And, and you’re absolutely right. You being, it’s certainly not the first time that personalization has been mentioned on this show. In fact, I think there’s no show passes by without us mentioning it, but I definitely think it means very different things to different people. And I think you have an extraordinary perspective given that your, and doing so much work, you know, on the academic side, helping to educate and illuminates those of us who I suppose are practicing loyalty day in, day out.
So, so to you, you paying, what would you say can be done with personalization and where’s the biggest opportunity? Well, I think there’s a, I don’t know if I would say there’s one biggest opportunity, but there are many things that can be utilized based on where consumers are in the loyalty program and use that information to customize the communication with customers. I’m not even talking about something more complicated, like underlines in the basket and so forth. A lot of personalization can actually be started by just looking at some of the basic information of where consumers are, you know, loyalty program.
And so things such as, you know, which tier you are on that changes the way you look at things or how far you are from a reward that changes the way you’re going to react to the program, how you’re going to behave, or you know, how far you are from the next tier. So there’s a lot of the fundamental information. I think every loyalty program captures that can be easily turned around and be used to customize how you communicate with your customers. Well, and there’s a lot of psychology behind that too. Absolutely. And clearly it’s the psychological effects of loyalty programs that you specialize in. So it’ll be fascinating to get into all of that detail you’re paying and for listeners am, I would say, first of all, we recently connected properly.
I would say having connected previously, eh, but over your most recent research, which am I absolutely loved and I’ve been highlighting left right. And center on this amazing article, which really is a very accessible article about what happens when people get closer to a reward. So we’ll definitely get into talking about all of that, but even just before I do that, I wanted to acknowledge two people who are responsible for getting us here today, actually. And one is Mike our mutual friend in the loyalty academy. So it was Mike who was commenting on your work on LinkedIn. That really reminded me all of the amazing work you’re doing in the loyalty science lab.
And then also professor Peter fader from the Wharton school at the university of Pennsylvania. Cause I know you do a lot of work with him as well. Yeah. Wonderful. And we actually had interviewed him through the work with Lloyd designs. Brilliant, brilliant, great. So let’s just talk through, and as you’ve said, personalization is not, is not one simple thing, but I’m going to say what to me probably came out as the most shocking, but actually most obvious conclusion. And that, that really came through in this particular one was, it seems to be that the standardized monthly statement is not the most effective way to communicate to our members.
So I’d love you to talk us through exactly how you conclude at that and what your advice and recommendations are. Yeah, sure. So when it comes to, you know, we consider from a psychological perspective, when you give people the feedback or the statement that they, where they are in the loyalty program, you’re essentially offering them some kind of feedback. Yeah. Right. So, so where you are, how you have been doing and how far you need to go in order to get something wonderful. Yeah. And, and so, you know, our research, basically what we’re showing that, and this is also based on a big, pretty big literature on how people go after goals, right?
So if you think about rewards or the next tier go as a goal that you are going to words as you move towards that goal, there is actually going to be change in mentality in how you approach that situation. So for example, we actually had done a field test with, with a retailer in Europe. And one of the things that we have tested was basically looking at whether we give you a feedback based on, you know, information about forwarding, looking information. So in other words, we tell you how far you still have to go. And then in another condition, we basically mailed people information that tells them how far they have come.
So since the start of the year, you know where you are, how many points you have made. So kind of like one is kind of forward-looking the other one is backward looking. And we recognize that, you know, through the campaign, we see distinct responses from consumers based on whether they’re getting the backward information with forwarding information. So as one example, you know, the backward information is more helpful as people have accumulated more tears in their program. So in other words, that backward looking kind of information was more helpful for people who are in the higher tier already versus the people who are in the lower tier in the program, they are responded better to kind of like the more forward looking information.
So, so that’s just one example of how that psychology of how you customize that information really kind of creates a difference in how motivated people might be in, you know, getting to the next point or the getting to the next milestone in a loyalty program. Okay. So it seems to be from having read, you know, lots of your articles today, and obviously we’ll be making sure that listeners have access to all of them, but I know what you illustrated actually really nicely is this area, which is the smallest area. I think you’ve called it the small area hypothesis. So for example, looking forward to where is the finish line? Like, how close am I to getting my rewards is extremely exciting for members who are in that position and bought as distinct from that people who are just getting started looking back and telling them they’ve made great progress is very reassuring.
Yep. So the small area hypothesis was actually from a paper that was published in journal of consumer research, one of the top tier consumer psychology journals. And so the basic idea over there is that as a human tendency, as we move from one to another. So if you think about a starting point to a destination, you know, the way we like to focus our attention and what helps us the most is basically the smaller area of whatever, wherever you don’t see in the journey. So if you look back to the starting point, you see a smaller area compare with what’s in front of you, that you want to focus on that. And versus for people who are really getting close to the finish line, your attention is probably all the way to that finishing line where you know how far you are, and that creates more of a motivating effect for you as a customer.
So, so it definitely makes a difference. So which basically kind of makes the middle point to be a somewhat of a switching point of your attention. Right? So, so if you think about customizing that communication, the loyalty program really is, you know, when you think about it, this is a very simple thing that I think you can create that for the customer very easily as whether are you stealing in the first half of moving towards your goal? Are we in the second half of waving towards your goal? And obviously the communication between those two would be different? Absolutely. Yeah. And then as I said, I saw this conclusion that, you know, there are so many of us that are literally sending monthly statements, you know, making sure to keep our, our members as up-to-date all very well-intentioned.
But by applying this, I suppose, overlay of, as you said, the mentality of, you know, where is that customer? How are they feeling? You know, are they just getting started and kind of going, oh my God, I’ll never get there or do they actually go, oh my God, this is getting exciting. There’s something happening. Yeah, definitely the, as, as we get closer, you know, this is the, this is, so-called the point pressure effect as well where the, the, the base foundation for that research, believe it or not is actually based on rats, how recipe. So coming from the, from the 1960s and basically observing RAs, moving towards a piece of cheese and recognizing that they started run faster as they get closer to the cheese, obviously, probably because they smelled the cheese or just felt more motivated by it.
And, and there was some academic research dying in this area, basically looking at, you know, does this replicate essentially in a, in a human kind of behavior. And so it finds that it does that to, as, as we move towards a something that we’re going after, when we get closer to it, we get more excited, we get more motivated and we’re just gonna be doing whatever we can in order to get to what we wanted to get. Absolutely close the deal, get the rewards, you know, you’ve come this far. You definitely, you’re not going to let it go at that stage. Definitely. And I like that term, the points pressure effect you ping em, and you particularly quoted again in this article, which is on medium.com.
So for everyone listening, these are highly accessible articles. And what I loved actually is that you’re really doing is, you know, for example, with a coffee program and also this carwash, and I do an awful lot of writing and reading and researching actually in the convenience and, and gas, actually a sector as well. You ping. So I’m just going to actually read out a couple of quotes that I highlighted today because I thought it was absolutely fascinating. So the first one on the coffee side was from Columbia university and it was a simple, like a buy 10 get one. And what I highlighted was when a card first started, the average time between purchases was about 3.3 days, but that actually went down the more stumps, the word earned on the card by the end, the customer is only wasted 2.6 days between purchases, which you measure just a 20% purchase acceleration, super exciting.
Yeah, that’s, that’s really more than visible a change in behavior that you can see in, in what they saw here. And this is actually observed behavior in that actual coffee shop. It wasn’t even something that’s contrived in the lab setting. And, and you may, may or may not see that in the real world. This is actually real-world behavior of how much difference it makes God. You must be constantly fascinated. You paying. I can imagine going into work every day, wondering what a strange human people are gonna start doing. Super exciting. I can see why you chose to, to, to research in this field. Can I talk about the other one as well as you ping, maybe you’ll even talk through it or, or I can, but the, the carwash loyalty program and the difference between where customers were given, you know, just buy 10 and get one free.
And in one case they were given two washes already stumped on the cards, but the, in the other case, they just had to buy eight and get one free. So the conditions were similar, but the results were dramatically different with those two situations. Yeah. So this is the, one of the things that relates to relates to managing a loyalty program. So, so in this case, I think the, the experiment was designed a very smart way. So basically in both cases, people needs to do eight car washes in order to get a free carwash, right? So it’s a, it’s a very simple program by this many, get this many free. But the difference is that in one situation, the company actually tells you that you get a, you buy 10, get one free, right?
And so, so it sounds like it’s actually a harder program. However, they give you two already for free. So in other words, when you start with that 10 stamp card, you started with two stamps already. You just need to get eight more versus in the other situation where people can just, you know, you get an eight stamp card and you need to earn all of the eight stamps and they have found what we call this in the, in the 10 card situation, give you two cards for free, essentially called indoubt progress. So you didn’t really make a real progress, but I’m giving you some kind of false sense of progress at the beginning. And so even though, yeah, it’s, it’s a, it’s a great time.
I think it’s a, it’s a great way to describe what’s actually happening here. And so what they found in that experiment was the, even though, you know, when you think about the ones that are, you know, given the information about you need 10 stamps in order to get one carwash, you know, a lot of people, when you first think of that, you will think of that as demanding more from the customers, right? So, so on the surface, people might think that actually mans war, but because you gave them two already and they are closer to the end point that, you know, somebody was starting fresh from like a new car. And they found that people were the customers who got that buy 10, get one free.
But with two to start with actually had a shorter what they call inter wash time. So how much time you actually wait between, you know, one car wash to the next it’s actually shorter about almost three days shorter than those who are given that fresh card with no indoubt progress, but you get a, you need to earn a free wash using, you know, doing eight washes. Oh, goodness. I mean, that is, I mean, statistically extraordinary to me, I mean, as you said, a full sense of progress, everything else is the same, but to have, you know, 2.9 days shorter on average between every single wash. I mean, that’s just extraordinary insight for somebody who’s, you know, literally trying to get people in obviously as quickly and as regularly as possible.
Yeah, definitely the, so, so I think there’s a lot to utilize really based on this, based on this, you know, we can consider it to be reward distance psychology or progress psychology, and I will mention another, another one related to this distance. Psychology too, is also the consumer mindset of the way they think. And academic research have basically for actually, for years now, not necessarily in the loyalty program setting, but in other settings too, we’re looking at, you know, your distance to a pretty good event actually changes how you think. And it doesn’t really comes as this price basically, as you are further away from something you are looking more at the big picture, right?
So you’re looking at how, how, how great you are moving, you know, towards something or you’re thinking about if you’re eventually gonna get there. So what research has shown is that at the beginning of when you’re about to move towards a reward, you know, you are kind of more concerned with if you’re gonna get the reward, right? So, so at the beginning, as you start to, you know, to your carwash or do your coffee shop card, you’re going to think, am I going to get that free carwash? Or am I going to get that free coffee? But as you move closer, you start to thinking more concrete terms like you were thinking about the more specific logistic of it. And that’s when you start asking like the question of when something is going to happen.
So instead of just, if, because, you know, by the, by that point, you kind of know where you are in a program. And so you’re more focused on the wins. So if, if the company or the program comes with a communication message, gives you a concrete idea of that, it creates a really motivating effect for sure. Sure. Yeah. Yeah. You’re absolutely right. I mean, I think the, if question is so huge at the beginning, and I’m sure you’re doing plenty of research in this particular area, but even when I think about the, the ask that we have, you know, when we’re asking people to give us all of this data that we talk about or asking them to invest their time in signing up to something with a promise and a value proposition, which obviously has been very well thought through and very well tested.
But I think there’s, there’s a gap in trust, I guess maybe at the beginning, as you said, it’s, you know, am I going to get a reward? Like, am I going to understand this program? Is it going to be worth, you know, swiping every time and all of the behaviors required in order to get there versus this idea of okay, it’s working. So, you know, when’s it going to happen? That’s a really big distinction. Yeah. There’s a really a big dyskinesia in the way that you, you think about the ease and versus the win, you know, think whether you’re looking at the bigger picture or the, the, you know, the more concrete information. And we have found in our own research that, you know, that, that, that focus on the big picture versus the more concrete information also makes a difference in terms of how companies should communicate with you as well.
So for example, when we are looking at, when people are further away, actually more rational, cognitive kind of information in the communication message actually works better. So I emphasized to you the points you’re making emphasize to you, you know, the, how you can get there and, you know, just a lot of informational purposes, but then as you get closer, you know, you’re looking at the more concrete pictures research has also shown that people get more emotional, they get more excited, but also other kind of mixed emotion that comes into place as well. So at this point in time, when you are communicating with the member, you know, adding more of that emotional message into the process, you know, getting you excited, or, you know, just talking about a relaxing benefit of things would also create a significant difference as well as people get closer to the reward.
Yeah. I never thought about that psychological opportunity to increase the excitement levels, you know, because I think we’re always trying to be excited about the offers and the coupons and the program and whatever, but, you know, purely around the excitement is building because you’re making more progress. It’s a very important piece of communication. Yeah, definitely. And, and funny thing is that I think that, you know, the, one of the publisher research studies actually show that not only do I get excited, like when I get to the reward, but there’s also a visible difference. Let’s say you have earned enough points for, you know, for you to get a free flight and you redeem the reward, but you are not having really phoned the reward yet.
So even during that time period, it creates a visible lift in your behavior because you had a antici, you have this anticipation of you’re going to get something for free, or you’re going to get something good. And that changes your behavior during the process of doing that as well. Wow. Yeah. Well, that’s a very good case in point of just redeemed for an upgrade on an upcoming flight you’re paying. So like cycling levels are super high, so let’s hope, very nice hope it happens. And I know we drummed jumped straight into this article. You ping literally so that people can get a sense of the kind of work that you do, but I should probably actually ask you to take a step back and tell us about the loyalty science lab. How was it created, you know, what are your objectives and how are you going about coming up with these kinds of insights for us?
Sure. I think that, you know, the, the loyalty science lab was kind of created, I would say probably for two purposes on one side of things, you know, I have been doing loyalty research probably for the last about 20 years or so. And there are many other researchers who are doing the same kinds of things as well, but because a lot of the academic research has been published in academic journals that usually targets our academic audience. So a lot of that research it’s actually kind of buried in within these journals, a lot of great insights, like the things that we just talked about, and it wasn’t really getting to the loyalty practice as a really should.
And I know that, you know, as a researcher myself, we putting a lot of our heart and effort into this kind of work. And so one, one purpose of really starting the loyalty science lab is to say, you know, there’s all this wonderful loyalty research we understand about consumer psychology, how people do in loyalty program or how they become loyal to a company in general. And, and you know, more practitioners need to see that. So that’s kind of like a big driver of what we’re doing over here. And you mentioned about medium. So we try to write about both our own research, as well as other people’s published research in the loyalty area, so that a loyalty practitioner can go pass all the completed math stuff, you know, study design, all of that, and to really get to the meat of the insight of what’s generated in these kinds of research.
Yeah. So that’s kind of like one piece of that and the other component to it too. It’s also created more opportunities for practice and academics to kind of work together because frankly, academic research, I think there is a great amount thirst for being able to run field experiments with real, to be able to get, reach real customers, you know, beyond just a lab experiment and so forth. And so we kind of create that collaborative opportunity for academic researchers have the curiosity, having a question, wanted to ask, you know, having a hypothesis they want to test. And then, you know, real-world load the practitioners.
You know, they have all this data, they have the ability to be able to test some things really very easily. And so it’s a great partnership to be able to work together. And, and the ultimate goal is really to just advance the low D field. Right. So we better understand why people are loyal to things, how loyalty program works, how what makes people loyal to a brand and so forth. Yeah. So, so that’s kinda like the, you know, sort of the, I would say the overarching goal of, you know, what loyalty science lab wants to read. Wonderful. Yeah. And just as a point, actually, as you said, medium.com is, is super accessible. All of the articles that we’re going to share with listeners are, are brilliantly written with a very actionable insights and I’m going to yeah, no, they really are you paying, do you write all of those articles yourself for medium?
Pretty much. Yeah. The, all of the articles that I have written them so far. Wonderful. And I’m going to read some titles of them again, just to, to wet the appetites, let’s say of the, of the listeners. So we’ve already talked a little bit, for example, about what happens when people get closer to a reward. So we’ve talked to and discussed that in some detail, then there’s one you’ve written called how to nudge people to go further in a loyalty program. So I love the idea, we all love positive nudging and some incredible insights. We’ll talk about, you know, how important that is, and obviously in the right direction. And you talk about how to gauge loyalty program engagement and one that I really loved actually, when your business needs a loyalty model.
And I remember when we spoke the last time you ping and you really made a very good point, which I’d never taught about even as a loyalty practitioner, that so many businesses write their business plans and develop their business models, really exclusively focused on acquiring customers. And it’s almost like retaining them is a complete afterthought that it might be like, I don’t know, six months a year or a couple of years into running the business before anybody starts to think, oh, what’s our loyalty strategy. Yeah, definitely. And, and that’s, you know, common, if you think about an entrepreneur, just starting a business, you know, probably he’s going to be really worried about if I open my shop or are people going to come or if I make this product available online where people buy it.
And so typically what they’re looking for a focused on whether it’s a new product or a completely new business, is that go-to market strategy, right? How do I get to the market? How do I get people to know about me and get people to buy from me? But I think that, you know, a really well thought out business model to really think from the beginning of it is, is more than just that element of, of will people buy from me. But also what if somebody buys from you what happens then? Right. And, and I think that, you know, from the article that we talk about the different business loyalty models, is that depending on how you’re trying to appeal to your customers and try to retain them, keeping them as loyal customer, it really would affect some of the strategies that you, you kind of follow.
So, you know, one example of a loyalty model we have, there is more of an ecosystem based model. So it’s more than just you yourself, right? So you are Eagle Alliance with other brands or other business or a part of a platform in order to retain customers. So it’s kind, kinda like the, the, the, not necessarily the wisdom of the crowd, but more of the, the network kind of effect, to be able to retain customer, making it more difficult for people to switch. And, you know, maybe during the pandemic, this is not as big of a thing anymore, but if you think about the traditional shopping mall context, you know, the, each of the shop over there, it kind of creates a pool for the customer and creating, why do people keep on coming back because of all of these different shops that is available in the shopping mall context that keeps people coming back.
So, so it’s really at the beginning, not only do you need to think about this, why people should buy from me, but also why they should keep buying from me. Right. And that really would influence how you position yourself, how you communicate with your customers and a variety of different business strategies will be coming from the, what we call it. Loyalty. Yeah, absolutely. And, and I mean, it definitely is an emerging field, I think much more on the academic side, you ping. And as you know, I’ve done episodes on the whole model of customer based corporate valuation, which again, by professor fader and also Dan McCarthy are doing lots of work around, you know, is a company being truly valued based on, you know, the repeat purchase.
So the longevity of that business, essentially at way beyond, I suppose, the simple definitions of customer lifetime value that I think we’ve all done, but not done in sufficient detail. And, but I think you’re really starting to capture a lot more. And I, I know you’re very passionate as well. You painting about the difference between, I think what you call true loyalty and habitual loyalty. So I’d love you to explain, you know, how do we understand the difference between them and, and maybe measure them? Yeah, definitely. So this is actually a great research topic that I’m very passionate about. And so when you, when you think about how in the practice world, typically we identify a loyal customer.
We typically look at, if they keep on coming back, if they keep on buying or how much they actually spend. Right? So, so when you look at it from that perspective, you know, there might be a group of your customers that are really loyal. However, you know, what our research basically trying to get at it is that why customer is loyal to you actually matters. And so we specifically identify two types of drivers of that kind of loyal behavior. One type is that what we call true loyalty in the sense of that they really love you. They buy your product because they really like you. And they, they just wouldn’t switch to anybody else because they think you’re the best, right? So that’s what we consider a true loyalty.
Probably I would say the dream of many companies, you know, wanting to get there and then the, you know, but the reality of, you know, the, the world is that you can’t possibly be loving that many brands, you know, there, there is this fatigue of, you know, how many brands that you can truly be, be that loyal to. And so, you know, a lot of other situation is, you know, I used the brand, it works fine. I feel good enough about it. Let me just keep on buying it. And so over the course of time, you’re basically just repeating that behavior, whether that’s, you know, going to the grocery store in the cereal aisle, you just grabbed that box. You’ve always had, you know, the, you don’t even really think about how much you like the brand or not.
It’s just a matter of, you know, a habitual thing that you do. Yeah.
Okay. And I
Think that, you know, so there’s, you know, you can see a lot of the similar kind of loyal behavior, you know, from the two different types of drivers. So if you look at both of these two customers, right, they are both not gonna switch very easily, right. They also both have pretty high frequency of purchase. They tend to buy your brands all the time. And, and so there’s a lot of similarities in how they actually act in front of you. But if you really looking to the psychological side of things, you can actually identify some important differences in between what they’re actually doing in this. We actually have article actually about this as well.
And the basic point is that habitual customers or the psychology of habit is very different from doing things because you really wanted to right. Habitual customers or the psychology of habit is really based on automatic process. Right? I’ll give you a very easy example. Let’s say you go, you know, come back home, right? You sit down on the couch, you flip the remote control, turn on your TV and you watch your TV. So let’s say, that’s, that’s a habit. You do. You don’t really, you don’t really have to make a decision to actually do that. It’s pretty much, you know, something that’s fairly automatically you do. And so when you see that in people’s purchase behavior, there is actually a little bit different if you look really much more detail.
So one of the things that, you know, the, that characterize the habitual behavior, one is size high frequency, and which is also applies to many of the two loyal customers as well. But the other important thing is this stability of their behavior. So in other words, the true loyal customers, they probably will. You, whether they are in this location, in that location, whoever they’re with, you know, they love you, you know, it, without question, and versus a habitual customers, they tend to have a set of these behavioral routines that are very tight into specific things to specific time to the people they’re with, to, to the location where they are.
And so if you look at their behavior there, they have a lot more stability when it comes to is going to behavior. So if you look at, for example, let’s say you have multiple stores and you see where they buy from. It tends to be very consistently from certain locations. And if you look at the time when they actually buy, you know, grocery purchase, for example, they always come on Sunday afternoon, you know, to make a purchase and things like that. So you have see much more regularity or stability in some of these characteristics of their behavior compare with these true loyal customers. Okay. So do you think that any loyalty program manager given the, you know, millions of priorities, as you know, obviously everybody’s juggling and, you know, as you said, the data is always there, do you think it’s, it is important enough and accessible enough to be able to pull out that data?
Let’s say I’m a grocery store, for example, you know, do you think it’s important for me to understand, you know, the loyalty driver it’s, it’s just a habit or these people are genuinely, truly feeling loyal to me. Like, is that something that you would genuinely be saying we should be focusing our time and effort on? Yeah, definitely. The, I, I think that, you know, the data, like you said is already there and we have developer actually a system for being able to measure, identify people’s habits, strength, and create a score at the individual customer level. And one of the, one of the findings does this important of not just out of academic curiosity, you know, why we need to know these different drivers, but we have also done some field testing where we look at how these different loyal customers actually respond differently to marketing campaigns.
I’ll give you an example of a field test that we did was with a gas station, convenience store combo. And so with a lot of these businesses, the, the gas, you know, the gasoline part doesn’t really make a whole lot of money. So the more profitable products are typically in the store. Yeah. So a lot of these gas station, convenience store owners really wanted to bring customers inside the store. And so we feel test to various simple campaign where, you know, to, to get people to come inside the store, we basically offer free water. You know, if you buy a certain number of waters, we give you a free one, cause everybody can use more water. Right. And so, so these are customers who have never been a store before, right?
So, so they are always just the just gas customers. They come in, they get gas, they pretty much leave. And so we’re trying to see if we can change their behavior and bring them inside the store. And one interesting finding from that is that depending on your habit, like whether you have that exhibit, that stable behavior, when you come for the guests, that the different campaign messages would actually work differently. So specifically we test two different situations where in one, you buy a certain number of bottles of water, you get one for free. And so it doesn’t matter. You buy the whole one bunch at one time or you bite it over time.
The only requirements you buy, these many, you get one free. And in the other situation, we actually ask you to buy one each time when you come to the store. And, and as you get so many, the same number, right, get so many, you will be able to get water for free. So for the customer, the kind of the benefit is about the same, but we found that in the first situation where you just require them to buy water, it doesn’t matter how they buy it and so forth. We found the habitual customers, the people who have a stable behavior of buying guests, they didn’t respond as well to that campaign, not only during the promotional time, but also even afterwards, we actually ended up that particular campaign would ended up actually disrupt their habit.
And they don’t even come for guests as much anymore. And so the reason for that is because a lot of times habitual behavior I mentioned earlier is a very automatic process. The whole idea is you don’t think about it. And, but if you’re not careful, when you give a campaign or send customer a message or a promotion, whatever it is that you actually start to make them think a lot of some that thinking process actually breaks the habit. And so that’s why it’s actually important to identify these highly habitual customers because they truly think differently, or probably not think in the process. And sometimes interference less is actually more with a lot of these customers.
Wow. Yeah. That’s, that’s what I’m always fascinated by you paying, because I remember recommending to, you know, the, the telecoms PR program I worked on many years ago, I really always wanted to celebrate the anniversary. Like, you know, because literally the context was I started working for them and telecoms, as you know, is very ubiquitous, hard to differentiate. So building loyalty was a great strategy, but I remember telling a friend of mine, I was going to work for them. And she said, look, I’ve been, you know, 10 years a customer of that company. And they’ve never said, thank you. And it really stuck with me that she’d never been thanked. She’d never been acknowledged. And when I talked to the client about it, they were like, they were super scared about, I think what you’re talking about, this idea of disruption.
And I think PR again, probably because they were on annual contract, I suppose, format as well, which again, I suppose, is the epitome of habitual loyalty. There were said, if reach out and say, thank you for being a customer for another year, everybody will kind of go, oh, it must be time to change. I better go and negotiate. So with that, so I think, tell me, you know, that, yeah, go ahead. Sorry. Is that a real risk? Like, would you definitely be saying, you know, if it is a habitual customer, then let’s, let’s let them be habitual and let’s not interrupt their, their thinking or confuse them with too many offers and promotions. So I think that, you know, it also depends on the customer, right? So they’re our customers, we renew year after year because they really truly like you versus there are some customers who are doing this basically as a very inertia kind of thing, you know, totally, you know, complacent with, to too academic about this.
But there’s actually a little bit difference in this kind of what we call inaction kind of inertia based on your action that we just don’t want to do worry about more things. And therefore we just keep something going, because if I wanted to switch, that kind of creates more effort for me, that’s actually a little bit different from the pure based a habit where you automatically do something just because you have done it frequently enough in the past. And so I think that, you know, it really depends on that. Depends on going into the psychological driver and looking at their behavior and see what is really causing them to stay with you over time, right. To make that differentiation on the loyalty driver and you know, the ones that are truly love you, they wanted to get a thank you note and they want you to show gratitude towards them and so forth versus seeing some other cases, you know, probably will mess them up because of that habitual psychology.
Right. Goodness. What I’m just thinking, as you’re saying that you’re paying is I think we need actually a psychologist for every loyalty program, you know? So can you and your colleagues super busy? Well, yeah, I definitely do. Yeah. I mean, there’s more a believer and there’s more, you know, a psychologist and marketing researchers that have received their PhD and gone out to work in the field because there’s more need for testing these kinds of consumer psychology things, try to understand why they do things they do. Wow. Wow. I love to hear that actually, because I’ve often said, one of the reasons I started this show was I always felt like I just didn’t have the, you know, the education on the marketing side to really feel like I was, you know, fully leveraging my program properly and driving.
And so if there’s much more people, you know, who are much better trained than, you know, maybe my generation coming out, that’s very reassuring. Yeah, definitely. And we have, we have actually for the loyalty science lab, we have an awesome advisory board that are all seasoned professionals and, but two of them are also PSDs for working in the, in the practice field. So we have Charlotte blank was actually the chief behavior officer at Maurice. And so she’s, you know, have training in research and all of that. She’s directing a lot of the research projects over there. And then we also have Bonnie hall up who has a PhD in AI, artificial intelligence, you know, that also works in the loyalty customer and data field.
And so, so I think there’s more and more of this kind of like the idea of loyalty science lab, more of the merging between, you know, what you used to consider it to be the nerdy stuff versus, you know, practical. There’s a lot of synergy actually between the two. Yeah. They’re starting to merge. I think you ping, you know, we’re all getting a bit nerd here as we, as we, as we get comfortable. Right. Absolutely. And proud of it. Totally, totally. And I know you’re a big fan of technology and in general, and again, I, I’m not sure exactly, you know, how that, how that comes through, but what, what would you say are the most relevant technologies may be that again, thinking about this audience of loyalty program owners, managers, and directors, what is it?
Is it AI, for example, you mentioned your advisory board there, you know, with that, with somebody with that field of expertise or, you know, I’m very passionate for example, about voice technology, which I know you are as well. So, so where would you say are some of the most exciting technologies for loyalty professionals? I would say definitely AI is the, the two things actually you mentioned, I would agree that both of them are going to have a predict significant impact in the future. So on the first one on the AI component, I think that right now there is a lot of progress that has already been made on how do we mind that data from customers and being able to create a duplicate profiles and being able to identify what is coming next for the customer and how do we market to them.
And, you know, one of my own research projects, we’re actually looking at the next generation of the AI and what we’re arguing is that, you know, just number crunching and to, to learn from the behavior is not quite enough, but the next generation of AI agents needs to be also more empathic in the sense of understanding customer really from their perspective and also have more emotional intelligence in the interaction process as well. So I think that’s going to be something and a lot of the underlying technology has already been developed or is in the process of becoming more mature. And so I think the, the future customer interaction that’s driven by AI will, I think will look very different from the way it is today.
You know, compare with the typical chat bot, give you a couple of options or even be able to do, you know, more natural language like, but it’s still very limited in the capacity. I think that’s going to change in the near future and the other, the other one is actually about voice shopping. So it’s, it’s interesting that you mentioned that because the we’re about to start a project at you’re specifically looking at this voice shopping, not just from a perspective, you know, it’s, it’s a different interface, but also because it’s a different interface that it drives people’s decision-making differently, right? So the, if you think about a person who’s shopping on the screen, looking at all these products, you know, it could be thousands of products doing filtering and all of this stuff.
There is the way your mind actually thinks in that process versus a spontaneous thing that happens through whether that’s Google home or Amazon Alexa, you know, D your, your approach or your, the way your brain would actually be processing information is different, you know, because he wants situation. You have that visual information in front of you. In the other case, it’s a completely audio information. And so there’s a lot of psychology actually behind us voice shopping process that will change how you as a customer make a decision. Wow. And I think, you know, on top of that, I would say that a lot of current thinking about this voice shopping process is also that it creates almost like an intermediary for your decision making process, because I mean, you know, face the reality when you’re asking Amazon Alexa to give you a couple of product options for something they can’t give you like a hundred different choices.
So, so the, the agent or the AI agent, that’s kind of in the background, driving this process is going to be kind of make a recommendations for you. So if you think about the future, decision-making, you know, it’s no longer just customer by itself companies or these device makers will create a lot of that make a lot of that decisions for you, or at least narrow down the options for you. And so it’s going to have significant implications if your company is not included as one of the recommendations, you probably don’t even have a chance to really be known by the customer, not to mention, be loyalty to absolutely. And I know it’s very early days you paying, like what you’re talking about.
There certainly hasn’t, here’s where, where I, you know, live and work and shop, I think certainly in the U S it’s much more advanced, but it certainly fascinates me and, and, and worries me. So I’m guessing that that’s probably what most of listeners will also be starting to think going, you know, how do we start to figure that out, even if it is quite far away. So as a general piece, you ping, how long will it be before you’re, you’re kicking off that research. Now you mentioned in terms of the, the voice specifically, how long before you would have conclusions, like, does it take months or years, or, or what’s the, the horizon for that? You know, that’s a, that’s a interesting question to ask because a lot of times I think I talk with practitioner academic research, a lot of times take much longer process.
I think it’s not just okay, because of that publication process, you know, you know, you need to go through a peer review and all of that before it gets published, it will probably be like a, at least a year or two, but it’s also because typically it comes out as more than just one project, right? It’s a, it’s a stream of research. So where we are right now is at the very beginning process, it where we’re, you know, writing up grant proposals, you know, to try to get some grants out that process. So I would say probably in a year, maybe some change that we will be able to, you know, have some preliminary results to show an off-course validated with further studies. Okay. Well, I mean, there’s no question you ping, I’m already putting you on my follow-up list for next year now to make sure we, we have a repeat performance yet.
Wonderful. The last piece I just wanted to ask you, then you ping M you mentioned when we spoke before and something, which I really like, which is about the popularity of males, you know, traditional, like the opposite of what we’ve just been talking about with our high-tech, you know, AI as solutions for loyalty, but you have seen, I think some, you know, just some feedback, I suppose, that traditional communications also seem to be resonating, and I’m not sure if that’s something that’s something you’ve studied statistically, for example, as, as part of your research or just your own sense of what’s coming through, whether it’s pandemic related or just in general, how people are feeling. Yeah. I think that, you know, I wouldn’t say I necessarily have, have my own research in this area, but one of the things that, the example I mentioned earlier, when we were talking about the field study, we did with the, with the retailer in Europe and in that particular situation, actually, most of their customers are actually not buying online.
They are the typical traditional store shoppers. They like to go into the store and this was spied away before the pandemic. And so in that particular situation there, you know, th the company basically had very little email information from their customers and most of their customers don’t really respond very well with the emails anyway. So, so in that particular study, we actually did a typical what we call snail mail and send it to the customer and that’s, that has been effective. And that works for the company. And of course, you know, some of that probably is changing now because of the pandemic, but yeah, but I think there’s always a road there just because it’s the amount of competition, right?
If you have a thousand emails coming in in a day, of course exaggerating, but sometimes it does feel as close to that. He might inbox, versus if you get a couple of pieces of mail, you know, in a day, sometimes it gets your attention. I mean, we get here, we get like personalized coupons from Kroger, for example, you know, we retain that. We use that every single time when you go shop at Kroger. So it creates this, you know, has his own place. I think you’re right. I think we’ve come from having, you know, too much direct mail at home. And you know, now to perhaps too much digital, too much email. So I think we’re coming full circle. So to your point, actually at the very start of the conversation, you know, personalized.
So let’s, first of all, understand maybe what people do like and appreciate, and maybe communicate to them in the channel that they, that they enjoy. But I also think there’s like real value in mixing it up. I often find myself, like, if I, if somebody is not responding to me, like, I want, you know, maybe a guest on the show or something, you know, if they’re not responding to email, then I will pick up the phone. And it’s almost like that. There’s a, I dunno, a surprise element where people kind of go, oh, oh, you really want to talk to me? Okay, let’s do it. Yeah, definitely. And, and, you know, this is, this is where personalities you come seen. I think personalization is more, more than just like giving you the right message. But also one that I reach out to you and through what channel did I reach out to you?
It’s, it’s usually a complicated process. Everybody is different. And also for the same person at different points in the customer journey, their preference will be different as well. And so is he important to kind of understand that about what it is that your customer wants and where they want it to be reached and, and get to them at that point in time music to my ears, you ping really fascinating. There’s so much there. I feel like we could talk for hours, but in the interests of, you know, I suppose having plenty more shows to, to come back to together and I have two final questions. The last one actually is just to make sure people know where to find you, because as they said, there’s so much information and the loyalty science lab is publishing extraordinary articles that you’re writing.
But just before I ask you that, do you tend to invite or welcome, you know, ideas from, as you call, you know, the, the, I suppose the more commercial side of the world, like also as practitioners, is that something you welcome or do you already have enough kind of requests for support already with your own colleagues and, and, and clients and advisory board? Oh, no, definitely the, we, we always love to hear from practitioners, even outside of my advisory board, you know, I speak with practitioners all the time to kind of try to understand what their concerns are. And I also frequently get requests from, you know, from a practitioner who say, we’re trying to make a decision about this.
Do you have some, you know, research evidence to say one way or the other, that kind of thing. So, so I’ve definitely would love to hear from practitioners what your concern is. What do you want us to see that we write about that would be great feedback for us. And we have, as you already mentioned, we have a medium blog where we write about these kinds of research in more in-depth articles is loyalty science, left.medium.com. Okay. And besides that, we also have a LinkedIn page. If you’re on LinkedIn all the time, it’s a bit long of a link is a showcase page under our university. But if you just go to LinkedIn and search for loyalty science lab, you should be able to find the page there or go to my look for me and look it up on my profile.
There’s a link there too. Absolutely. Yeah. So what I will do is when I send out the email to all of my email subscribers, you ping, I will directly include all of the articles and I’ll just do short links to them. And because I don’t normally have all of the links, but I think this is really so relevant in order to make sure people get to the right destination. And so for you personally then is, is LinkedIn the best place for people to reach out if they do want to connect with you? Yeah. To connect with me. So I would say my LinkedIn page, my, and the loyalty science lab, LinkedIn page would be, would be great places to start because everything we post on medium is also posted on LinkedIn as well. So they can get a link pretty easily do go over there.
Wonderful. And I’ll also, if anybody is listening and wants to reach out to me in order to get to you paying for any reason, obviously I’ll just connect you directly. So we’ll make sure that we have all access. Yeah. Yeah. I would love to hear from your audience, cause I I’ve been a fan of your show for a while and I think you discuss some of the really important topics in loyalty, loyalties. Wonderful, wonderful job. Oh, that’s super nice. Wow. I’m so excited. Okay. Well, listen on that note, as I said, I’m, I’m really inspired by all of the work you’re doing super grateful to have you add today and hope to bring you back again, many times in the future. So you ping Lu Thompkins, professor of marketing and director of the loyalty science lab at old dominion university. Thank you so much from
Let’s talk Lizzie. Thank you, Paula. Very
This show is sponsored by “The Wise Marketer”, the world’s most popular source of loyalty marketing news, insights and research. The Wise Marketer also offers loyalty marketing training, both online and in workshops around the world through its Loyalty Academy, which has already certified over 150 executives in 18 countries as Certified Loyalty Marketing Professionals.
51m 53s
0 Thanks so much for listening to this episode of “Let’s Talk Loyalty”. If you’d like me to send you the latest show each week, simply sign up for the show newsletter on Let’s Talk Loyalty.com and I’ll send you the latest episode to your inbox every Thursday, or just head to your favourite podcast platform, find “Let’s Talk Loyalty” and subscribe. Now, of course I’d love your feedback and reviews and thanks again for supporting the show.