It is no revelation that customers are spending less! What might surprise you is that, even in this economic crisis,
Most customers scrimp to splurge!
They scrimp by cutting back or bargain hunt to conserve money on commodities, items that don’t lead to emotionally meaningful outcomes. Scrimping on these types of products lets them splurge on items they do find emotionally meaningful and still balance the budget.
Scrimping and splurging are two different mindsets that are adopted by the same customer. Whether your customers scrimp or splurge will have a dramatic impact on your bottom line.
The difference between scrimping and splurging is the level of emotional engagement. If an individual does not perceive any difference between product A and product B, in terms of the emotional outcome, they can mindlessly treat them both as undifferentiated commodities. Think about your customers. If they focus on price and convenience, they are signally that they don’t want to spend much money, time or mental effort on your offering or listening to your persuasion. On the other hand, if they act like the committed Starbucks customer who drives by other coffee houses to stand in line to pay full price and even a premium for their favorite espresso beverage, they are engaged and getting emotional gratification.
This doesn’t just apply to pleasures like a “latte.” It happens with shoes (Zappos), cellular phones (iPhone) food (Whole Foods), clothing (Patagonia) and … (you add to the list).
Okay, what does this have to do with Social Media and a pay-off?
Over 70% of people now participate in social media and a very high percentage get engaged in order to make purchase decisions. People engage online to make decisions about cars, travel and even groceries and utilities. But here is the rub. They do so mainly through various forms of customer-to-customer conversations. Why? People trust peers, people like themselves, much more than they trust businesses. Also, peers talk about outcomes not things.
This creates both a challenge and an opportunity!
The challenge is that most participants in business sponsored social media initiatives are relatively passive. The opportunity is to dramatically increasing the level of customer engagement—to get more customers to scrimp elsewhere so they can splurge with your company.
There are three primary hurdles to making this shift:
- Earning sufficient trust to get customers tentatively engaged. You have to attract them to a hopeful proposition, hopeful in two ways: (1) that the outcome will be meaningful to them; and, (2) that your role in fostering the outcomes is genuinely helpful.
- Eliminating triggers or signals that put the customer into a closed minded “Scrimping” mindset. Fifty percent off signs will do this, but so will many other more subtle actions. But it is not just a matter of eliminating signals. When people are anxious or stressed they become closed minded and less trusting. Since stress and anxiety tend to last, the can carry over from one situation to another. This means that a customer might bring emotional baggage into their interactions with your company. You need to know how to defuse these negative emotions before getting down to business.
- Tentative engagement is not enough to build high levels of trust, desire and demand. This type of relationship takes a deliberate and systematic process based on customer psycho-economics.
If you would like to learn more about customer psycho-economics, I invited you to download our paper Customer Psycho-economics in a Down Economy.
If you are interested in a case study approach to seeing how this psycho-economic framework applies to social media, you might want to check out my upcoming Social Media Academy online course,
Building Customer Relationships and Advocacy with Social Media.