At 440 Industries we like to pursue an approach to business which allows us to reflect on both the quantitative and qualitative aspects of management in the creative industries. We are firm believers of the importance of keeping our feet on the ground and making sensible data-based decisions but at the same time, business is not only in the numbers.
Looking at the tech sector, in the past few years, companies have stopped hiring only developers and started hiring more individuals with a background in the social sciences. This is indicative of a new approach to business management which is more centred on the individual, and the understanding of hisher habits and issues.
Experiential branding is the new buzzword, referring to the idea that people do not spend money on things anymore, as much as they invest in their life. As we’ve discussed in other posts like How to Hook Your Clients By Creating Addictive Brands, in order to avoid head-to-head competition you need to bypass the traditional marketing game, where companies are competing for visibility. You should instead focus on understanding your customer and developing products (both physical and digital) capable of becoming part of hisher routine.
In this post, we’re addressing some of the newest trends in brand management by looking at the ways in which fashion firms, are not only developing a brand, they are forming our habits.
As discussed in the popular book: How to Design a Bespoke Brand Experience we are going to see why building a habit is more important than branding and how we can create shopping experiences that prove to become addictive to your customers.
Here’s a breakdown of the post’s content:
- Why habits are important and how they impact your bottom line
- New pricing strategies based on habit-building
- It’s all about seeding the right triggers
1. Why habits are important and how they impact your bottom line
There is an essential metric which explains the success of Zara and other fast fashion companies in comparison to other fashion brands. If a customer visits a slow fashion store once or twice a month, in the case of a fast-fashion retailer, a customer can visit a store up to 12 times per month on average.
Zara and the other brands of the Inditex group have developed a business model capable of replenishing shelves every six weeks in order to make sure that each time a customer visits their shop, there are strong chances that heshe will find something new or unexpected.
More visits mean more chances of conversion. This is true in digital marketing, as much as in physical retail. Once a customer has acquired the habit to visit a show (in this case due to what we technically call a variable reward) hishers customer lifetime value (or CLV) will increase. This means that a company is able to extrapolate a higher volume of profit from each customer. In order to maximise the number of times a customer visits a store, one of the most common tactics is to ignite a sense of contingency which lures you to go back again and again. In many cases, fast fashion firms achieve this sense of urgency by creating artificially-limited series, by creating store clearances and the like.
More visits mean a higher chance of achieving of experiential branding. Moreover, as a customer has a higher number of experiences of connection to the brand, it is more likely to become ad advocate for the brand itself. This is the result of a brand’s ability to foster an emotional connection, or better yet a surprise-effect capable of attaching to the shopping experience emotional feedback which will make the experience more memorable and meaningful.
How do companies do this? Well, in a variety of ways but in most cases through discounts.
A client visiting Zara in this sense will be exposed to such low prices that as a result, customers will build an emotional connection to the store because of two reasons.
- Shopping will be memorable. A client will remember a shopping experience because the low prices and the sense of the bargain will attach to the purchase an emotional component which will make the experience stand the test of time.
- Shopping will be meaningful. A client will remember that one time in which she was able to get Christmas gifts for all her friends will a little more than 50 euros.
Given that habit-building increases the chances of monetisation for your firm, don’t you think it would be appropriate to question your pricing strategy? Are you sure that the way you profit from your clients maximises their chances of building a habit?
In the following section, we’ll see how many firms radically changed their pricing strategies in order to enhance the habit-building potential of their products.
2. New pricing strategies based on habit-building
In this case, the examples that are able to better indicate the challenges in habit building come from the gaming industry. If we look at the sheer degree of competition of the mobile gaming industry we are quick to realise that it’s an over-inflated market. In this market, companies cannot expect users to pay for a game right away, as paying will become more natural only once the users will have developed a sufficient degree of familiarity with the product.
This is why the app market has developed its own pricing model, called Freemium. In a Freemium model, users can download an app for free, test it, use it and insert it in their routines. Once an app has become a habit, then the window of opportunity to monetise the user opens, by allowing users to speed up the game and make in-app purchases.
This is counterintuitive but it’s a brilliant truth. Users are happy to pay for something even after months they have used it for free. This is of course, as long as they see value in it.
This approach allows seeing the reasoning behind ‘clearance’ promotions and aggressive marketing tactics to get customers inside the door. Even if you are giving away a product or selling with little-to-no-margin, you’re still tampering with your customer’s habits and first-to-mind solution when it comes to solving a problem. The marketing approach designed to pair a need with a solution is explored in depth by the Jobs to Be Done Theory, which is discussed in more depth in this article.
This, however, may open an additional issue. What if our product or service fits into a problem that is not particularly painful? In this case, in fact, it’s less likely that our customers will be open to drag something new into their lives, simply to overcome a minor inconvenience.
Sure, this is a problem, but it should not scare us away. By finding niches where there are not established habits we are likely to find services and products which are likely to have a market. Even if our solution may not be addressing an essential human need, if we are able to create a habit, you’ll be able to create pain by absence. Once you have created a habit, it will be likely that your users or customers will notice the small, yet significant betterment their lives perceive by using your products. This way we can stop always looking for those macro-issues which require 10 years and millions of euros to solve, and instead appreciate more the small details which deliver a distinctive quality of service.
3. It’s all about seeding the right triggers
It’s all about the triggers. Triggers are those factors which are able to ignite action in our customers.
There are many ways in which this can be done, but we can simplify the matter by diving them into two categories: the ones you pay for and the one you don’t pay for.
The paid triggers are paid promotional efforts and advertising. In this case, you are ‘interrupting’ your audience and hopefully making them react by doing something measurable. This can be signing up to a newsletter, or exploiting a time-sensitive promotion.
This approach works as long as you pay for it. So, unless you have a structured and profitable business supporting you, spending money on advertising is not necessarily the way to go. We recommend spending money on ads, only once you can actually gain a return from it, and this happens when you have at least created a sizeable following.
The alternative is working to get your name out there, by reaching out and establishing yourself in your industry because you are actually doing something helpful. In fashion, a lot of companies can tap into new emotional triggers thanks to the opportunities provided by fashion sustainability. In this sense, becoming a proactive brand, interested in helping the environment is a way to develop a PR strategy which is going to help you out for much longer than any campaign ever can. PR is about not owning the information that relates to your company, but focusing on developing initiatives that can really impact your industry.
As we’ve seen in other posts like How to Hook Your Fashion Clients By Creating Addictive Brands companies like Patagonia have created fully-fledged initiatives to alter consumer behaviour by seeding the idea that broken and teared-down clothing is beautiful, and should be repaired and cherished for the story it tells. This is simple, effective and good for the community. So much better than advertising.
According to Jobs to Be Done Theory, in order to identify and establish triggers we need to explore the reasons to buy. These reasons to buy are highly dependent on the internal motivation of the customer and what is the goal he or she is pursuing through the product. In this sense, a product is only a gateway to a relationship and not the end of the relationship. With incredible far-sightedness and dedication to his fans, Trent Reznor adopted a relationship-based marketing strategy in his artistic career and revolutionised the music industry. As shown in the video, he focused on the internal motivation to buy, or Reason to Buy and on his own effort, as an artist to create an emotional connection with his audience and connecting with his fans, on a non-economic level.
By doing this Trent Reznor, also showed the music industry that the price of music has nothing to do with a fan’s willingness to buy, but caring about your fans is essential, and at the time few labels actually cared about their following as much as he did.
This example, taken from the music industry, also wishes to demonstrate how these principles can apply to any industry, as they are not based on analytics by on fundamental human behaviours. Let’s wrap things up in the next paragraph.
As we’ve seen in this post, habits are the new branding. If branding has everything to do with building a pool of positive connotations and reinforcements to a company, habit building is even more powerful as it allows to reach the daily lives of our customers. In fashion retail, being able to alter some of our customer’s behaviours in shopping is essential to deliver a distinctive retail experience and draw upon the experiential elements that are at the heart of luxury and high-end fashion.
These principles can be effectively put into practice both in physical and digital retail by putting ourselves more in the shoes of our customers and building an emotional attachment from the ground up, by optimising service, by solving practical problems and by avoiding useless inconveniences.
Moreover, by creating variable rewards we are speeding up the customer’s shopping cycle, and increasing conversions and lifetime value.
All in all, it’s necessary to blend this behavioural and emotional approach with data-driven decision making in order to draw from the vast amounts of information available, but eventually choose the strategy which centres our operations onto the customer.