Competitive Advantage: Forget Loyalty and Focus on Habit

Man holding customers

Loyalty is a beautiful thing. It’s always nice to know you can depend on someone to be there for you, take your side, and—if you’re a business—buy your product or use your service. But unlike your personal relationships, achieving customer loyalty takes more than just an agreeable personality and consistent reliability. In order to keep customers coming back—and attract new ones—you must remain relevant, superior, and visible: in other words, you must maintain a competitive advantage.

But if the industry upsets and magnates of years past have taught us anything, it’s that staying competitive does not guarantee loyalty. So should we be rethinking the way we attract loyalty—or reconsidering the importance of loyalty in the first place? Well, based on the modern behavioral research presented by retired CEO of Procter & Gamble A.G. Lafley, and professor at the University of Toronto Rotman School of Management Roger L. Martin, it seems we should consider focusing on the factor that truly drives what we’ve been calling loyalty: habit.

Consumers Don’t Always Make Rational Decisions

Let’s start with a typical company’s approach to establishing a competitive edge. Most would focus on their positioning, picking a target audience, and getting them to repeat their purchase by matching the value proposition to their needs. But that kind of shopper marketing makes an important assumption: that consumers are making rational, value-based decisions. Lafley and Martin argue that this goes against all that we’ve learned from behavioral psychology in recent years: which tells us that yes, we do make choices based on past experience—but it’s the easiest and most satisfying choices that influence us the most. You know when you make a decision that just “feels right”? Psychologists would say this means your decision process was fluent. This processing fluency is the product of a repeated experience, one that has become familiar and easy to identify. It’s one of the reasons a leading brand or product is chosen most often: it’s the most prominent and recognizable, and thus it’s the simplest choice to make.

Instead, They Repeat Convenient Habits

So if the easiest experiences are the ones we want to replicate, it makes sense that those are the products we’ll buy again and again. And every time you buy the same product, it gains an edge over the ones you didn’t. The gap widens with every purchase, creating not only a cumulative advantage for the brand, but also a habit for the consumer.

Now, none of this is to say there’s no such thing as brand loyalty, or that no consumer makes pragmatic buying decisions: your value proposition must still trump those of your competitors in order to appeal to the same customers. But in order to capitalize on that advantage, Lafley and Martin recommend that brands strive to turn their proposition into a habit instead of a choice. Companies can build upon their competitive advantage by continuing to make their product or service an increasingly instinctual, familiar, and comfortable choice for the customer.

So How Do You Turn Choices into Habits?

Now we have a new goal: to make choosing your product not only desirable, but habitual. As anyone who’s tried developing a personal habit would probably agree, the process can be a lengthy one, with a few relapses and distractions before the pattern really sticks. Fostering a consumer habit takes a similar strategy, beginning with establishing a presence, and continuing with product and messaging iterations that build familiarity. Thankfully, the combined expertise of Lafley and and Martin have resulted in a few handy tips for establishing and building a cumulative competitive advantage.

1. Gain popularity early on. This one’s kind of a no-brainer: gaining an advantage early on makes any brand harder to beat. Leveraging market research to understand the perfect fit for your product in your target audience’s life will help you gain traction early on.

2. Design for habit. Keep your end-goal in mind and in reach by designing your service for consistent, automatic use. Think of Facebook’s habit-forming design: checking for updates is all but compulsory for millions of people. A few guidelines include keeping product design consistent and user-friendly; using distinctive, easy-to-notice colors; and crafting an easy fit into your target’s environment and lifestyle.

3. Innovate within your brand. Be careful to introduce new features or changes in a way that builds upon—rather than rejects—the cumulative advantage of your brand. For example, “improved” is more appealing to customers than “brand new,” though advertisers may think differently.

4. Keep communication simple. Though we can all appreciate a clever or artful marketing campaign, the truth is that in most cases, consumers aren’t paying enough attention. Be sure to incorporate some System 1 thinking into your communications strategy and leverage the reactive, emotional instincts of your customers.

Though innovation and newness have their time and place, understanding the role of the subconscious mind in decision-making will help you shape a value proposition that is easy, comfortable, and readily turned into habit. For an example of how gauging customers’ behaviors surrounding craft beer helped reveal telling habits surrounding purchasing and consumption to inform product marketing, check out the quick quantitative report below.

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