January 8, 2019

Look, Touch, Feel(ings): The Psychology of the Consumer

Written By
Andrei Faji
With our recent consumer loyalty survey we learned that 83% of consumers feel that automatically receiving cash back for their purchases is the most effective reward for driving brand loyalty. We dive deeper to look at the psychological factors behind cash back and how it can be used to drive the ultimate customer experience.

Outdoor retail centers instead of malls, wine and beer while you shop, and the enjoyment of in-store cafes; the retail experience caters to the psychological wants, over the needs, of today’s shoppers. And with 82.5% of sales still occuring in-store, the consumer experience is top priority.

To understand how consumers are heavily influenced by feelings, whether a fashion find or a good deal, retailers are looking into rewards and loyalty programs to hook consumers looking for a feel-good win.

Following the data, our recent consumer loyalty report found that 87% of consumers are more likely to shop somewhere that rewards them. And while wine while you shop is incredible, consumers are most interested in the basics: cash. A reported 83% of consumers feel rewarded by getting cash back from retailers. So let’s dig deeper into the psychology behind consumer shopping behaviors and how rewards, like cash back, impact them.

1. The Psychology of Incentives

Marketers love a good framework so let’s start by diving into CHOICES, a McKinsey developed way to categorize common incentives, attempting to spur desired behaviors from consumers.

(Consulting firm McKinsey developed a framework, referred to as CHOICES, for categorizing common actions that attempt to spur particular behaviors from individuals in consumer settings.)

The framework lists a series of interesting finds about how consumers respond to choices:

Simply enough, McKinsey says immediate gratification helps spur a positive response from consumers and an overall positive brand experience that keeps customers coming back.

The key phrase is ‘immediate gratification’; this explains the ‘feel-good’ psychology behind an unexpected discount, an in-store gift, or automatic cash back. This is where points systems, punch cards, and mail-in rebates are lacking in customer delight. Putting the onus back on the consumer (such as mailing in a rebate or scanning their receipt) adding “work” to be done later takes away from the gratification of consumer rewards. Retailers must build a positive experience at the time of transaction.

2. The Psychological Victory of Automatic Rewards

To summarize a study published in the Journal of Consumer Research, participants' brains were scanned as they pretended to make buying decisions. What they found was, the idea of making a purchase stimulated an unpleasant experience. When it comes to money, people do not want to part with their hard earned cash. But the act of saving - either by getting cash back or by experiencing a significant savings on a product or service - brings buyers intense pleasure. The victory of a savings “win” makes everyone feel good, but savers feel the rush even more since it’s a relief from the discomfort of spending.

Creating that feel-good experience at the time of the transaction is key. It’s an immediate removal from the discomfort of parting with those hard earned dollars. Have you ever heard someone talk about saving an incredible amount of money, outside of the context of how much they actually spent? It feels good to feel like you’ve “won” even if the impetus was spending.

And consider this: a survey from Hawk Incentives found that 79% of consumers look for deals in loyalty and reward programs before making a purchase. Consumer experience begins long before they step into the store. So, securing a positive experience all the way through leads to our last point: instant gratification rewards, like automatic cash back, fulfills the complete positive experience by ensuring a strong finish. 

3. The Psychology of a Strong Finish 

In other behavioral research, McKinsey identified that days, weeks, and months after using a product or service, customers disproportionately recall the high and low points of their customer journeys, more than each individual aspect of it. So, how a brand sequences high points in relation to low points can materially change the perception of the service received. In particular, unpleasant endings have a strong negative impact, while pleasant endings improve the overall customer experience.

By replacing a low point at the end of a customer experience (parting with that hard earned dollar) with a high point, such as a “surprise and delight” tactic like automatic cash back, creates a positive bump in a customer’s overall experience. And keeps your brand in a positive place in the consumer’s mind.

Consumer Psychology and End-to-End Experience

Our consumer loyalty report found that 6 out of 10 Americans claim that merchants aren’t doing enough to value them. This opens up an incredible opportunity for brands to make a significant impact to the consumer experience.

As discussed, understanding how consumers are heavily influenced by feelings is crucial. To influence more of the end-to-end consumer experience, brands must prioritize positive impact touchpoints along the customer journey. The combination of consumer psychology and controllable touchpoints is where rewards and loyalty programs become a valuable asset. With a high amount of control and a strong analytical backing, rewards, like automatic cash back, balance subjective with objective to build a positive brand experience.

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