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Economics isn’t just about numbers. It’s about humans, behaviors, decisions, and emotions.
While writing my book Leading the Starbucks Way, I took a deep dive into a branch of economics referred to as “behavioral economics.” Research in this sub-category reveals how emotion profoundly impacts consumer decisions and how emotionality plays a pivotal role in determining brand loyalty and success.
Historically, consumer decision-making was viewed as rational – meaning purchases were traditionally seen as logical and linked to the functionality of items or services purchased. However, the pioneering works of psychologists Daniel Kahneman and Amos Tversky in the late 1970s and early 1980s shifted this perspective. These researchers introduced the significant influence of emotional factors on decision-making – by exploring variables like how information is framed or presented.
Diving into Emotional Decision Making
Over the decades, research has expanded on Kahneman and Tversky’s groundbreaking work to show how emotions significantly influence behaviors like:
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Purchase patterns
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Customer loyalty
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Employee engagement, and
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Brand evangelism
Here’s a sample of that research:
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Brand-Emotion Connection: Leonard Berry, in a piece for the Academy of Marketing Science journal, emphasized that legendary brands are evocative. He stated, “Great brands transcend specific product features and benefits and penetrate people’s emotions.” Essentially, consumers inhabit an emotional world, and their feelings drive their choices.
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Trust and Emotional Attachment: When studying the casino industry, Jun Jian Sui and Seyhmus Baloglu in the Journal of Hospitality & Tourism Research found that trust and emotional attachment had a significant impact on behavioral outcomes such as the proportion of visits, word-of-mouth referrals, and time spent in casinos.
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Brand Love: According to Australian researchers at Deakin University, brand love is a passionate emotional attachment that a satisfied customer has for a specific brand. This attachment often leads to increased customer loyalty. That loyalty, in turn, provides protection from competition, ensures repeat purchases, and fosters positive word-of-mouth. Importantly, retaining loyal consumers is much more cost-effective than acquiring new ones.
Key Behavioral Economic Takeaways for You
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Embrace Emotional Branding: Understand and leverage the emotional components of your product or service. It’s not just about what your product does but how it makes your customers feel.
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Foster Trust: Ensure that every interaction a customer has with your brand strengthens their trust. This will translate to deeper loyalty and repeat business.
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Evaluate Emotional Feedback: Beyond standard metrics, gauge the emotional reaction of your customers. Are they passionate about your brand? If not, seek ways to deepen that emotional connection.
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Nurture Authentic Relationships: Emphasize genuine, heart-felt interactions at every level of your business. From customer service to the way you market, prioritize authentic connections over transactions.
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Reflect on Your Brand’s Emotional Footprint: Continuously introspect and analyze. Are you merely a functional choice for your customers, or do you occupy a special place in their hearts?
Thanks to decades of behavioral economic research and observations of customer behavior, it’s evident that sustainable business success depends upon a brand’s ability to resonate deeply with consumers on an emotional level.
Given the realities of behavioral economics, it’s essential to ask:
Do your products and services touch the heart as much as they serve a need?