Do you measure Net Promoter Score or customer loyalty? Are you tracking customer retention and engagement?
Each of these metrics attempts to answer the same fundamental
question: how happy people are being customers.
For all of the effort we spend measuring and monitoring these metrics, it’s worth considering the deeper question of human motivation. What makes people happy about spending money? When customers buy or renew, what does cognitive science tell us about making the purchase inherently satisfying?
That’s the subject of the book Happy Money: The Science of Happier Spending by Elizabeth Dunn and Michael Norton. Although not a marketing book, it presents valuable lessons for marketing both before and after the initial sale.
The book focuses primarily on personal spending choices, which too often work against our psychological interests. It posits five principles for spending money to maximize happiness, and backs up each with research:
- Buy experience
- Buy time
- Make spending on yourself a treat
- Pay now, consume later
- Invest in others
For a further description of the science behind each principle, read the book. I guarantee that you’ll discover something you didn’t realize. Plus, it’s well written and entertaining to read, thus reinforcing the “buy experience” directive for book purchases.
In the book Subscription Marketing, I define value nurturing as marketing practices focused on adding value to the experience of being a customer after the initial sale. In a subscription business, people remain with you if they think the experience of being customer is worth the expense of renewing.
Reading Happy Money, I thought about how marketers can take the principles of spending for happiness and flip them, to find a path to happy customers.
The Cognitive Science of Value Nurturing
Here are a few thoughts about using the science-backed precepts about spending and happiness to sustain long-term subscription-based businesses and recurring revenues.
Sell and nurture experience (Buy experience)
From a marketing perspective, if customers are going to buy an experience, you should promote and nurture the experience beyond the solution itself. No matter what you’re selling, the experience of being a customer is bigger than the service or product that people purchase.
For example, you may initially sign up for a subscription box based on what’s inside the box. Over time, your enjoyment comes from the entire process: anticipation, finding the box on the doorstep, opening the box, and sharing the contents with others. That experience will guide your decision to renew.
Similarly, you might choose a cloud-based software platform because it offers the functionality you need. You continue renewing and expanding your use of it because it saves you time, it’s fun to work with, or it connects you a community within the software.
Bill up front (Pay now, consume later)
The “Pay now, consume later” advice in the book runs counter to our “no money down” society. The authors offer a compelling psychological argument for paying up front. Once the mental pain of paying is behind us, we can focus on anticipating the results of our purchase or enjoying its results more fully. That’s the magic behind the all-inclusive resorts. You pay one large fee before you go, but enjoy the experience while you’re there.
In subscription-based businesses, customers balance the pain of paying with the value of the ongoing customer experience. When you bill monthly, people repeatedly face the pain of payment. If you bill quarterly or annually, the pain is less frequent, and people may enjoy the service more as a result. The book’s logic suggests that most people will be happier with their overall experience if they pay less frequently, and at the outset.
The standard free trial uses the exact opposite strategy (enjoy now, pay later), which adds to the challenge of converting trial users.
Align with customer values (Invest in others)
Cause-based marketing gives customers the chance to contribute and help others through a purchase. It aligns customer actions with their values, creating a strong relationship.
Dunn and Norton offer cautionary comments about cause-based marketing: it can “crowd out” direct giving to the organizations that benefit from your marketing, for example. From a psychological perspective, if a donation is lumped in with a purchase decision, the focus on personal desire (what you’re getting) can override the satisfaction of giving to others.
If you select a cause-based strategy, make it clear to customers that they are choosing their contribution, rather than being forced into it. Where possible show customers the impact of their actions.
Photo: Austin Schmid on Unsplash
