Is behavioural science a key to luxury loyalty?

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By: Wise Marketer Staff |

Posted on November 20, 2008

Is behavioural science a key to luxury loyalty?

Although the luxury car market has historically been considered 'recession proof', the current economic crisis has sent many makers' sales plummeting, with Mercedes Benz, BMW and Lexus all reporting losses in September and October 2008, according to MicroMass Communications.

With the ongoing credit crunch, many car manufacturers are being forced to rethink some of the old rules of automotive marketing. In a climate where competition is keen and advertising budgets are under pressure, auto makers are being advised to target those customers who have not yet decided whether to stay or defect from the luxury brand they already drive.

"In a declining market, retaining customers is more efficient, more intimate and more cost-effective than any effort to lure new buyers," explained Alyson Connor, vice president of behavioural planning and analytics for MicroMass Communications, a firm which specialises in applying behavioural science to relationship marketing. "Loyalty is the name of the game. Every point increase in loyalty is potentially worth millions in revenue for high-end manufacturers."

In order to help companies compete on what MicroMass calls the "loyalty battleground" - that is, fighting to retain the undecided buyer in a grim financial environment - the agency created a methodology that identifies current luxury car owners as either Defectors, Loyalists or Undecideds. The new approach also determines which marketing messages are most likely to motivate specific customers to remain loyal.

According to Connor, luxury car owners have traditionally formed attachments with their cars - a bond that's often compared to a marriage. MicroMass has been able to mine the insights from a behavioural science model for human relationships, and then apply them to the luxury auto market. The results showed that the company could predict which customers were likely to remain loyal to a brand, which were most likely to defect, and which were undecided.

"Throwing marketing dollars at those who've already made up their minds is a waste, especially when most are tightening their belts," said Cameron McNaughton, principal of TreeFarm Partners, a marketing consultancy that advises luxury automotive companies. "According to our research, this group encompasses 63% of all current owners and leasers. We call them the 'fence-sitters', and they can be a highly lucrative market. However, motivating them is the key factor in getting them to buy or lease a new car."

According to research conducted by MicroMass, the undecided group is diverse. The agency identified five behavioural segments among luxury car buyers, each responding to a different combination of motivators. The segments range from the Status Seeker (who sees the car as an emblem of success) to the Confident Pragmatist (who, sitting at the other end of the spectrum, tends to ignore what others think and focuses on quality, safety and customer service).

"These two are polar opposites," Connor said. "Along with the other segments, they respond to different motivators and reflect different ownership experiences. For marketing messages to succeed, they must be tailored to the individual motivators of behaviour. If you are delivering a message that fits one of these segments, then you are bound to turn off customers in another segment. In other words, there's no longer any such thing as a 'one size fits all' marketing message."

The key is to go deeper than demographics and psychographics and get to the core of each individual buyer. Behavioural science tells us that if you understand a customer's mindset then you can predict what will motivate that person to act in a specific way. In this case, the car manufacturer simply needs to learn which 'buttons' to push for each consumer segment in order to generate ongoing brand loyalty.

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