Next, we use statistical modeling to look at many customers and brands, comparing survey results about people’s emotional motivators with their purchase behavior and identifying buying spikes associated with specific motivators. This reveals which motivators generate the most-profitable customer behaviors in the category. We then quantify the current and potential value of motivators for a given brand and help identify strategies to leverage them.

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The model also allows us to compare the value of making strong emotional connections with scoring well on standard customer metrics such as satisfaction and brand differentiation, thus highlighting the potential gains from looking beyond traditional measures. We find that customers become more valuable at each step of a predictable “emotional connection pathway” as they transition from (1) being unconnected to (2) being highly satisfied to (3) perceiving brand differentiation to (4) being fully connected.

Although customers exhibit increasing connection at each step, their value increases dramatically when they reach the fourth step: Fully connected customers are 52% more valuable, on average, than those who are just highly satisfied. Their relative value is striking across various metrics, such as purchases and frequency of use.

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The pathway is an essential guide to where companies should invest—and it reveals that they often spend in the wrong places. Many companies focus on turning dissatisfied customers into satisfied ones to increase revenue and market share. However, our analysis shows that moving customers from highly satisfied to fully connected can have three times the return of moving them from unconnected to highly satisfied. Moreover, the highest yields have come from focusing on customers who are already fully connected to the category—from maximizing their value and attracting more of them to your brand.

Four insights from research are especially relevant to firms looking to build on emotional connection.
 

• Emotional motivators vary by category and brand. Of the 300-plus motivators we’ve identified, 25 significantly affect customer value across all the categories analyzed. Anywhere from five to 15, additional motivators are essential in any given group. For example, the sense that a home furnishings store “helps me be creative” inspires consumers to shop there more often. The wish to “feel revived and refreshed” drives loyalty to fast-food restaurants. Emotional motivators also vary within categories, depending on the desires of brands’ most valuable customers. Because brands differ in how well they align with their customers’ motivators, each may have a different starting point to strengthen emotional connections—and that point won’t necessarily relate to conventional measures of brand perception.

• Emotional motivators vary across customer segments. Recall the credit card designed with Millennials in mind. Our model uncovered desires to “protect the environment” and “be the person I want to be” as key motivators in the banking category for that age group. (Traditional industry motivators such as desires to “feel secure” and to “succeed in life” are more typical of older groups.) The bank crafted messaging and featured to connect to those sentiments, leading to its fastest-growing new credit card.

• Emotional motivators for a given brand or industry vary with a person’s position in the customer journey. In banking, the desire to “feel secure” is a critical motivator when attracting and retaining customers early on. When cross-selling products later, the wish to “succeed in life” becomes more critical. To maximize results, companies must align their emotional-connection strategies with their specific customer-engagement objectives—acquisition, retention, cross-selling, and so on.

• Emotional-connection-driven growth opportunities exist across the customer experience, not just in traditional brand positioning and advertising. For example, social media can significantly impact emotional connection. One condiment brand found that 60% of its social-network-affiliated customers (especially followers on Facebook, Twitter, and Pinterest)—versus 21% of all customers—were emotionally connected. It accelerated growth in months by increasing its focus on its social media network, developing its online customer community, and pointing customers to the website for recipes and promotions.

Putting Emotional Connections to Work

Let’s look at how an emotional-connection strategy paid off for a national fashion retailer. The company was struggling with common industry challenges. Although it had a well-known brand and a strong market presence, same-store sales stagnated, and promotional pricing was shrinking margins. So it focused on cost management, logistical efficiency, and streamlining the merchandise and store mix—with limited success. Over the past two years, we worked with the retailer on a four-part strategy to identify, understand, and quantify the value of the most emotionally connected customers. This exposed substantial, unexploited opportunities and allowed the retailer to better direct investments.

1. Target-connected customers – We set out to answer two fundamental questions: How valuable were the retailer’s fully connected customers, and could the company attract more of them? We used statistical techniques to measure the strength of customers’ emotional connections with the retailer and its competitors. The process began with surveys to discern how consumers related to significant motivators in the category and with analysis to see which motivators best predicted purchase behavior. We then modeled the financial impact of building emotional connections with customers at each step from unconnected to fully connected.

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Analysis showed that although fully connected customers constituted just 22% of customers in the category, they accounted for 37% of revenue, and spent, on average, twice as much annually ($400) as highly satisfied customers. Enhancing emotional connection could be a viable growth strategy if the retailer could attract fully connected customers from competitors, transform satisfied customers into fully connected ones, or both.

Further segmentation revealed a group of especially valuable customers. We labeled them Fashion Flourishers because apparel connects to their sincere desire for excitement, social acceptance, and self-expression. As a group, Flourishers are the most emotionally connected segment; half are already fully connected to the category. Comparing the ratios of various emotion-based segments’ spending to those segments’ size highlights remarkable differences in value: Flourishers have a ratio of 1.9—nearly twice the market average and more than nine times that of the least-connected group (whom we called Can’t Please Them, and whose ratio is just 0.2). Given the relatively fixed cost structure of retailing, acquiring and retaining Flourishers represented an opportunity to boost revenue and margins.

A detailed profile of Flourishers underscored their attractiveness and exposed ways for the retailer to target them. Customers in this segment:

• Have a high lifetime value, spending an average of $468 a year in the category versus $235 for other customers.

 

• Shop more often and advocate more: Fully 46% of Flourishers shop key fashion categories at least monthly, versus 21% of all shoppers. Flourishers are 1.4 times as likely as other customers to recommend retailers to their friends and family members.

 

• Are less price-sensitive: They are 2.3 times as likely as other customers to say they are “willing to pay more for the best fashion products,” 1.7 times less likely to make fashion purchase decisions solely based on price, and 1.3 times less likely to shop for the lowest prices.

 

• Are predominantly female and younger, more ethnically diverse, and more likely to live in urban centers than other customers.

 

• Are more digitally engaged than other segments: They are 2.3 times as likely to research a fashion retailer online, 2.9 times as likely to shop for fashion products through their mobile devices, and 3.7 times as likely to follow a retailer on social media.

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The retailer created a blueprint for pursuing the most valuable customer opportunities based on these and other insights. By applying the category segmentation scheme to the more than 25 million people in its customer database, it determined its Flourishers' financial value and behaviors, confirming that they spent substantially more than other customers and had the highest lifetime value and the lowest attrition and price sensitivity of any segment. It estimated that moving satisfied Flourishers up the pathway to full emotional connection could increase annual sales by 3% to 5% and that luring Flourishers away from competitors could increase revenue by 5% to 8%. Because members of this group spend more per capita than other customers and turn over less often, the analysis also predicted improvements in operating margins and returns on capital.

2. Quantify key motivators – Next, by analyzing tens of thousands of Flourishers across the category, we quantified the impact of more than 40 motivators on the group’s purchasing, spending, loyalty, and advocacy. We identified the most critical category motivators that bore the most robust relationship to purchases and assessed the retailer’s competitive position in each. The financial analysis and modeling showed that further investments to strengthen the customer experience around the desires to “feel a sense of belonging,” “feel a sense of thrill,” and “feel a sense of freedom”—the motivators driving category purchase behavior and for which the retailer already had the most influential position—were likely to yield the highest ROI. Those motivators, therefore, became the focus of specific customer-experience investments.

3. Optimize investments across functions – Companies must look beyond the marketing department to maximize opportunities from emotional connection. The retailer examined every function and customer touchpoint to find ways to enhance high-ROI emotional motivators. This brought four major investment areas into focus: stores, online and omnichannel experiences, merchandising, and message targeting.

Stores – To estimate which of the retailer’s more than 700 stores had the most Flourisher customers, we scored each one according to the presence of this segment in the store’s trading area. We found that high-scoring stores generated up to 25% more revenue than others. Their same-store sales grew twice as quickly, and their operating profit was 30% greater. Their profit margins were enhanced by 10% higher inventory turns and—consistent with expectations—by lower coupon usage. (Flourishers don’t just say they’re willing to pay more—they do pay more).

​These analytics changed the retailer’s store location strategy. We mapped the concentrations of Flourishers in all U.S. markets and submarkets and the segment’s propensities to shop at more than 150 other retailers. The company’s real estate team now uses a predictive model to identify sites near Flourishers and other retailers, they frequent.

The change is paying off. New stores in trading areas with high concentrations of Flourishers have first-year sales that are 20% higher than historical averages, leading to faster break-even times and higher returns on capital. Further analysis has revealed opportunities to open hundreds of stores catering to underserved Flourisher populations. To free up money for new stores, the retailer is closing ones in low-Flourisher areas.
Emotional-connection analytics have also allowed the retailer to understand which aspects of the in-store shopping experience are most important to Flourishers. Because those qualities often aren’t recognized by customers, they had not informed store design. Flourishers say it’s essential that sales associates are easy to find, that clearance item are easy to locate, and that stores have free Wi-Fi. However, the analysis showed those aren’t the features driving their visits and purchases.

Mind the (Emotional Connection) Gap.
​The “emotional connection score” (ECS) of a brand measures the share of fully connected customers. A gap between a brand’s ECS and the share of customers who consider it a “good brand” signals an opportunity to transform satisfied customers into fully connected—and more valuable—ones. Gaps between a brand’s ECS and competitors indicate opportunities to seize (or maintain) advantage by attending to emotional connections.

Based on its modeling, the retailer predicted that the option to purchase online and pick up in-store—something that few customers say is important and that was available only on a limited basis—would be a key driver of emotional connection (it speaks to Flourishers’ desire to “feel a sense of freedom”). It tested targeted communication and in-store promotion of the option and saw a material lift in sales; it has now committed capital to a nationwide rollout of the capability. Similarly, the retailer predicted that seeing imagery in-store of “people like you” would drive emotional connection and purchasing among Flourishers (although they say this factor is unimportant). As a test, it expanded its presence on photo-sharing social media sites and encouraged customers to submit selfies showing their favorite outfits and styles. Selfie slide shows are (with subjects’ permission) displayed on large screens in test stores, thus addressing Flourishers’ desire to “feel a sense of belonging.” Research indicates that the segment has responded to this motivator and increased purchase intent.
The retailer is now designing and testing store experiences to leverage nearly a dozen other emotional connection drivers.

Online and omnichannel experiences – Like individual store environments, online and omnichannel experiences can be optimized for emotional connection. To this end, the retailer quantified the impact of more than 100 omnichannel touchpoints on customers’ emotional connection and spending. These included mobile app browsing and purchasing, visits to the retailer’s social media pages, e-commerce site navigation, and in-store returns of merchandise bought online. Each touchpoint was scored according to its potential impact on emotional connection and spending. Statistical models then revealed the most potent combinations of touch points at each stage of the customer journey, allowing the retailer to hone its omnichannel strategy and prioritize investments. For example, Flourishers say that using a computer to shop online via an easy-to-use site is vital to purchase decisions. In reality, the ease and allure of the mobile site and the availability of services such as ApplePay have a far more significant impact on emotional connection and spending levels. The retailer is using such insights to design investments across e-commerce, mobile, and social media to build emotional connections with Flourishers. For instance, it developed multiple concepts for the navigational redesign and aesthetic reskin of its mobile app, tested how effectively each version enhanced feelings of “freedom,” “belonging,” and “thrill,” and drove purchases, and rolled out the best one.

Merchandising – From the broad category level to specific labels, merchandise selection can be optimized to drive emotional connection. The retailer now tracks the purchasing habits of Flourishers nationwide through point-of-sale data collected from hundreds of retailers by independent research companies. Applying the Flourisher segmentation to these POS databases has modeled the segment’s purchase behavior across more than 20 product categories and 100 labels and learned which of the approximately ten competitive retailers these consumers buy from. The resulting insights have exposed gaps in merchandise important to Flourishers, and the retailer is working with its manufacturers to rebalance its mix.

Message targeting – Having identified its Flourisher customers, the retailer can now send them personalized messages designed to resonate with the emotional motivators that drive behavior at each stage of the customer journey. For example, when Flourishers initially consider the retailer, “having fun” while shopping is paramount. At the point of purchase, “helps me feel creative” emerges as the key. Working from such insights, the retailer has developed a series of messages targeting Flourishers and timed according to their position in the journey: A rules engine sends out e-mails tailored to browsing, transacting, and servicing interactions. Response rates to this direct-marketing campaign are 40% to 210% higher than historical averages.

Media selection can also be finely tuned to boost emotional connection. We profiled the media consumption of Flourishers across 500 TV shows, 100 websites and social networks, 50 types of mobile apps, 80 print publications, and 20 types of radio programming. Working with its ad agency, the retailer is executing emotional-connection-based media plans. For example, knowing that Flourishers are enthusiastic users of Instagram, YouTube, and Twitter, it has scaled up its programs on these platforms, which has increased its marketing ROI.

4. Systematize, measure, and learn – Leveraging emotional connection does not require turning your business processes upside down; you can embed relevant strategies into existing work streams. This is most effectively done by making an emotional connection a key performance indicator and including it on the cross-functional senior-management dashboard.

The retailer developed a scorecard that gives the CEO and the executive team a single-page view of customers’ progression on the emotional connection pathway, along with the increase or decrease in connected customers of the company and its key competitors. The scorecard shows the correlation of customers’ emotional connection scores with lifetime value measures such as annual spending, churn, and tenure. It also shows how the business impacts of specific emotions are trending and how Flourishers engage with key in-store and omnichannel touchpoints that drive emotional connection. Also, the retailer includes emotional-connection metrics in its ongoing testing of media messages, store designs, and digital and mobile experiences. The results of these strategic and operational changes are startling. Same-store sales for stores serving Flourishers realized a growth of 3.5% over the past year, whereas annual same-store growth over the past five years has averaged just 1%. Inventory turns increased by more than 25%. Market share and customer advocacy also grew (the number of customers recommending the retailer is up 20% year-over-year), contributing to record-high customer lifetime values. Underlying all these gains is a 20% rise in the company’s emotional connection score—largely due to moving satisfied customers to full emotional connection.

The Management Imperative – Embracing an emotional-connection strategy across the organization requires deep customer insights, analytical capabilities, and a managerial commitment to align the organization with a new way of thinking. It’s vital that marketing not hoard the strategy as “its” domain (although the function can and should use the emotional connection to demonstrate the direct financial impact of its spending). Instead, marketing must partner with other functions, teaching and socializing emotional connection. The retailer we profiled now uses an emotional connection to drive alignment across the operations management team, the C-suite, and the boardroom. At the outset, the CEO identified emotional connection as a strategy to restore profitable growth. The CFO and the chief strategy officer then “sized the financial prize,” leading the heads of marketing, stores, customer experience, and merchandising to collaborate on an integrated strategy.
The advent of big data analytics brings clarity, discipline, and rigor to companies’ long-held desire to connect with the customer emotions that genuinely matter. Emotional connections no longer have to be a mystery—they can be a new source of competitive advantage and growth.

Source: ​Harvard Business Review.
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