Everyone has habits.
Habits form 40% of the actions we take [1] every day. You go to the same supermarket for your weekly grocery shopping every Sunday. You always pick up the same shampoo among others from the rack. You always take the same route to work each morning.
Having a habit is effortless. You don't usually go through a deep thinking process before you perform a habit. In ancient times, habits are the key to survival. They enabled us to escape dangers in the wild. They helped us to make decisions before intensive thinking came in and took up the time for us to respond [2].
Habit = Cue + Routine + Reward
Even though performing a habit doesn't require much thinking, we don't just randomly have a habit for no reason. The Power of Habits [3] decodes a habit into 3 steps: cue, routine and reward.
Cue: The trigger that prompts your habit. It can be the time, location, people around you, or a combination of different factors.
Routine: The action triggered by the cue, which could be physical, mental or emotional.
Reward: The incentive of our routine, which provides positive reinforcement and helps our brains to determine whether this habit loop is worth remembering for the future.
Take the grocery shopping example: You go to the same grocery store for your weekly grocery shopping every Sunday afternoon because the cashier in that shop always gives kind compliments that make you feel good about yourself.
You see that your watch shows that it's 3 pm on a Sunday - this is your cue. You leave home and travel to the grocery store and begin shopping - this is your routine. During checkout, you are complimented by the cashier and you feel the happiness that comes with it - this is your reward.
The reward, the nice and warm feeling of being flattered, will motivate you to shop at the same store again next week. Week after week, this loop of cue, routine and reward will gradually develop into a habit - you keep going to the same supermarket for your weekly grocery shopping without making a conscious choice.
Provide the right cues and rewards to keep customers in the habit loop
From a business perspective, customers' habits can also become a useful tactic for selling a product. To build a habit-forming product, the first thing is to make sure your products provide the same reward customers long for. Only by understanding your customers' cues, routines and rewards can you develop a product that incorporates into customers' habits.
P&G launched an odour eliminator called Febreze in 1996. In the beginning, the sales weren't performing as well as expected. Researchers at P&G studied the problem and found out that most people craved a fresh smell after cleaning up. Febreze was scentless at that time. It removed odour, but it didn't add anything to it. P&G then added a fresh scent to Febreze's formula, even though it wasn't required for the product's function.
With an additional fresh scent, Febreze provided the reward consumers desire after cleaning up. Each time finishing cleaning the house, customers sought the fresh scent and formed the habit of using Febreze. Febreze rose from the bottom of the sales chart and became one of the company's most successful products.
Match customers with the right cues and rewards
Everyone has different habits. Even for the same routine, the cues and rewards driving the behaviour could be different. Some people head to the gym first thing in the morning to stay healthy. Some others work out in the evenings to lose weight.
Same for your customers. They have different purchase behaviours and preferences towards the rewards, say, some are more discount-driven and would be attracted by the word "sale" while some are less price-sensitive; some like to explore new products while some have a love of novelty while some love to stick with one single brand.
Let's say you are a marketer trying to acquire some new customers for your brand. You have a banner ad designed to give away a 10%-off discount to new customers. How would you know who are the audiences that have the most potential to click on the banner ad and actually convert into customers?
Audience Selection: Select customers who are likely to respond to your cues and rewards
Audience Selection with Propensity Modelling can help you identify customers who are the most likely to respond to your cues and rewards. You can precisely target your "golden" customers to improve the cost-effectiveness of your marketing activities.
To start off, AI and machine learning will help identify the characteristics of your existing high-value customers. What are the gender, age-range and marital status of your best customers? Do they usually buy only when there's a discount? What product categories do they usually buy the most?
These qualities and traits of your best customers can be transformed into customer attributes, which will help the model to pinpoint lookalike customers with high potential to have a positive response to your marketing activities. Now that you know which audience will best respond to your banner ad with a 10%-off discount, you can place the ad on the sites where they most often appear and expect positive results!
Understand customer habits and behaviour to maximise marketing performance
Customers' habits shape not only how they shop and use your products, but also how they react to your marketing activities. In addition to customers craving the reward your product provides, you also want customers to have a positive reaction to your marketing efforts.
Propensity Modelling provides a scientific and systematic approach for locating high-value potential customers and help you better target them. By leveraging audience selection with propensity modelling, instead of mass targeting, you can now activate customers with relevant marketing content to maximise marketing performance.
[1] Society for Personality and Social Psychology. How we form habits, change existing ones. ScienceDaily, 2014.
[2] Kahneman, Daniel. Thinking, fast and slow. Macmillan, 2011.
[3] Duhigg, Charles. The power of habit: Why we do what we do in life and business. Random House, 2012.
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