Building an Emotional Connection Creates Value in Financial Services

As any executive at a financial services firm knows, organic growth is hard to come by. The underlying fundamentals in most developed markets just aren’t favorable.

Growth in population and household incomes in most markets is low. Millennials are taking their banking, borrowing and investing needs to digital alternatives, and investment firms are seeing the end of the Baby Boomers’ asset accumulation years. Outcomes tell the story – The top four U.S. banks’ consumer businesses grew revenue by 0.2% in 2015 and 0.7% in 2016.

Every year, financial services firms invest billions of dollars in marketing and customer experience improvements that do not produce significant results. Products and services are commoditized and innovations are short-lived. Cross-sell ratios are stagnant, and aggressive sales tactics and quotas are no longer a viable strategy. Institutions have no choice but to attract more customers and serve more of their needs. But how?

The key to differential growth is connecting with clients at an emotional level. Appealing to customers’ deepest emotions is far from a new idea – but big data and technology now allow what was once marketing art to become business science. To do so, customers’ emotions must be objectively defined, measured and modeled to predict the most profitable behaviors.

Banks Get Personal in Their Marketing

Banks know more about their customers than ever, and increasingly are trying to get more use out of that information.

The results can be convenient, or just creepy.

Banks can look at customers’ debit-card and credit-card transactions, online-bill payments and account activity to see what they’re buying, who they’re working for and other information. Now, from the largest Wall Street behemoths to small community lenders, the banks are looking to use that data in new ways, investing in more-advanced technology to better target prospective customers and sell more services to existing ones.

From Promotion to Emotion: Driving Profitable Growth In CPG

While CPG firms have historically set the benchmark for other industries in understanding customer needs, delivering consumer benefits, and building powerful brands, they are not connecting at an emotional level nearly as well as they could. As a result, revenue and profit growth have become increasingly elusive.

Across a wide range of industries, customers whom we term Emotionally Connected generate anywhere from 30 to 100 percent greater annual value (and even higher lifetime value) than those customers who “merely” perceive functional benefits or high brand differentiation. After 10 years of work defining and measuring the effects of Emotional Connection, analyzing over one billion data points on more than 1.5 million consumers, we’ve discovered that Emotionally Connected customers consistently concentrate their purchases, pay higher prices, and stay loyal longer.

Most CPG companies are leaving money on the table by failing to maximize and monetize their Emotional Connection with consumers in a precise and predictable way. For example, while 66 percent of consumers of Coca-Cola rate it a “good brand” (8 or higher on a scale of 1-10), only 24 percent of Coke’s consumers are Emotionally Connected. This “Emotional Connection Score” is equally modest for other well-perceived brands such as Budweiser (27 percent) and Dove (29 percent). The same pattern is true with well-liked non-CPG brands: Nike’s Emotional Connection Score is 30 percent; Starbucks’ is 26 percent.

This isn’t surprising because Emotional Connection isn’t easy to achieve. Traditional approaches to consumer insight lack the ability to define precisely the emotions that truly matter, measure their impact on behavior, and predict their financial value. Organizations lack the predictive metrics necessary to focus customer-facing investments toward these key emotions. And digital competition and seas of customer data increase the challenge (as well as the opportunity) of reaching consumers with the right messages at the right time.

As a result, what we often see is a vicious circle. CPG companies attempt to differentiate their brands by concentrating on functional benefits and key claims such as “better taste,” “healthier options,” or “the cleanest clean.” While the products and messages they then introduce may have an emotional aura and generate a temporary bump in sales and price realization, that’s usually followed by competitive imitation and promotional pricing that return sales and profitability to the status quo (or worse).

Combining emotional and behavioral big data and predictive analytics, leading-edge CPG companies have developed Emotional Connection-based strategies to focus their brands on the underlying emotional needs, values, and motivations of the most profitable consumers in their categories. They understand that Emotional Connection is not about them; it’s about how they gratify what consumers are seeking in their own daily lives. These are often unspoken, deep-seated emotional motivators such as an individual’s desire to “stand out from the crowd,” “have confidence in the future,” “enjoy a sense of well-being,” or “enhance my social standing.”

Companies that increase Emotional Connection by even as little as three to five percentage points reap huge financial benefits because of the impact of Emotional Connection on customer value. For a leading household cleaner, for example, Emotionally Connected customers purchase nearly twice as much annually than customers who merely perceive functional and brand differentiation. For a major condiments brand, this ratio is 1.7:1. And for a venerable OTC pain medication, Emotionally Connected customers are almost twice as willing to pay a higher price.

CPG companies that gain advantage via Emotional Connection typically follow four key steps:

First, they quantify and model the value of building their brand’s Emotional Connection.
Second, they identify the precise emotions that drive the most profitable customer (and prospect) behaviors, developing an “Emotional Connection Lens” through which their brand investments can be focused directly on the critical emotional drivers of customer value (such as purchase, price realization, loyalty, or advocacy).
Third, they test and implement changes with the highest potential to impact Emotional Connection (from brand positioning, message design, and media selection to on-line targeting and interaction, product development, and channel strategies).
Fourth, they monitor Emotional Connection over time to ensure that all customer-facing functions are generating the highest returns from their investments.

These four steps replace the vicious circle of functional benefits and price promotion with a virtuous circle that builds continuous competitive advantage, driving higher Emotional Connection and financial results.

A frozen snacks brand whose sales and market share were in long-term decline had been relying on heavy couponing which was eroding profit margins. New product introductions weren’t making an impact. Big data-based analytics helped them discover the value of Emotionally Connected consumers versus those who were just “highly satisfied” with the product and perceived strong brand differentiation. Those Emotionally Connected consumers comprised 22 percent of their customer base, but purchased 2.4 times as much annually, spent 1.7 times as much every time they bought (due in part to higher price realizations), and were 6.4 times more likely to purchase the brand even if a competitor’s was on sale.

The brand team’s focus on the primary emotional benefit of “helping Moms keep their kids happy” drove consideration, which was already high for their and competitors’ brands. But after Emotional Connection analysis, the team found that what actually drove purchase frequency, loyalty, and price realization were surprising emotional factors such as “reward myself” and “perform at a higher level” that didn’t come through in conventional research. Those successful emotional factors were about the Moms, not the kids.

Based on these precise and actionable insights, the brand reconfigured its messaging, reduced promotional activity, and invested in the touch points that the analytics said would generate higher Emotional Connection, such as the mobile app and consumer-generated website content. As a result, across its entire customer base, their Emotional Connection Score rose to 29 percent, surpassing the leading competitor. Overall household penetration grew from 12 to 15 percent, the average price per purchase increased 39 percent, and the click-through rate more than doubled – all of which drove a 21 percent increase in sales.
This example illustrates the power of focusing big data and predictive analytics on the fundamental goal of all CPG companies: to generate an Emotional Connection with consumers. In an increasingly challenging and competitive marketplace, leading-edge CPG firms are leveraging Emotional Connection to revitalize lifetime customer value and organic revenue and profit growth.

Alan Zorfas is the Co-Founder and Chief Intelligence Officer of Motista, a predictive consumer intelligence firm. Daniel Leemon is a Senior Executive Advisor to Motista.

Why Ads Make Us Feel the Way We Do

Advertising is a curious mix of fact and emotion. But while facts are easy to come by and measure, marketers have always struggled to measure the emotion customers feel for their products. While an advertisement that presents a list of facts about why a given product is superior will often fall flat, what works is an advertisement that leaves people feeling good about themselves.

Beer companies can tell us about the quality of the mountain water used in the brewing process or adherence to Bavarian standards, but when it comes down to it, what matters more is that we are part of a group that loves to sing and dance on cruise ships with exotic passengers. We are the life of the party. We are the most interesting men in the world. We don’t just like a particular brand of beer, we have an emotional connection to it.

Investing In Emotional Bonds To Find The Missing Multiplier

As consumers, we all feel the impact of the emotional bonds we have with certain brands.

We tell stories about them. We defend them with our friends. We forgive them when they get things wrong. In fact, we’re often reluctant to think they actually did get things wrong, preferring to blame someone else we’re less bonded to (e.g. our mobile network, rather than our phone brand) or simply forget that anything happened.

The same is true if we are a business customer. Among many different statements about B2B brands tested in research, the one most strongly correlated with recommendation — above statements about price, product quality, innovation, and so on — is “I enjoy doing business with them.” We’ve found this consistently in B2B sectors from hi-technology to commodity chemicals.

An Emotional Connection Matters More than Customer Satisfaction

In the search for profitable organic growth, more and more companies are making major investments in optimizing the end-to-end customer experience – every aspect of how customers interact with the company’s brand, products, promotions, and service offerings, on and offline. But most companies lack a strategic objective that spans the customer journey, can be understood and operationalized across the enterprise, and, most importantly, actually increases customer value. Without a clear, measurable, value-creating goal, companies risk expending huge amounts of human and capital resources without delivering any real financial return.

Emotional Connection: A Predictive Metric for CFOs

A top-10 financial institution is using emotional connection to unlock cross-sell opportunities. A leading food brand is using emotional connection to drive purchases and capture market share. And an enterprise technology firm is using emotional connection to counter “white box” competition and support higher price points.

In each of these examples, CFOs are playing key roles in leading their enterprises to focus on emotional connection as the key performance indicator to drive growth and prioritize customer-facing investments for bottom line contribution.

Talking With: Motista CEO Scott Magids on Capitalizing on Customer Emotion

Motista CEO Scott Magids was recently interviewed by Retail Customer Experience on efficient methods for capitalizing on customer emotion.

To fully capitalize on a customer’s emotions, Magids argues, retailers must first understand the consumer’s motivations using data and predictive intelligence. “While many executives in retail instinctively ‘get’ the value of emotional connection with customers, the vast majority of retailers have not operationalized customer emotion as a growth strategy. Activating customer emotion is a fantastic opportunity for retailers across categories,” Magids told RCE’s Judy Mottl.

“Studying over 200,000 retail consumers, we have found emotion is typically the strongest driver of behavior for all life stages. That being said, different types of emotions motivate consumers at different stages of their lives, and within different categories of retail. It’s critical for retailers to understand the precise emotions motivating millennials – as well as Gen X, boomers and other generations – in their particular categories,” he continued.

Read the full story from Retail Customer Experience

In consumer industries, including retail, packaged goods, financial services, consumer electronics, hospitality, healthcare and technology, growing an emotional connection with customers is driving 30%-100% gains in customer value, and is the key input to accelerating revenue profitably.

To achieve meaningful growth, the C-suite must go beyond traditional tactics, adopt emotional metrics as a growth strategy, and translate the emotional connection factor into measurable action that drives customer value and sustainable competitive differentiation.