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Why belief and incentives assist customers make higher model decisions

November
3, 2020

9 min read

The opinions expressed by the entrepreneur's contributors are their own.

Trust and loyalty rewards have supported US consumer spending for decades. Trust makes it easy to do business with a brand, while a loyalty program rewards customers for their return. Such programs stabilize the demand and supply chains and increase revenues in the long term. Smart companies know how to motivate their customers and get them on the door with freebies, a business they can't ignore, or other smart marketing ideas. However, once that customer is in business, they can sell them the more expensive items.

According to a 2017 Accenture study, members of the loyalty program experience year-over-year incremental revenue growth of 12 to 18 percent compared to non-members. However, the pandemic has resulted in major changes in the types of incentives customers are looking for. In these troubled times, business owners want to know how trust and incentives help consumers choose brands.

People trust recommendations from family and friends

Earning trust online is more important than ever as the pandemic and work-from-home (WFH) situation are forcing consumers to embark on a digital migration. According to a McKinsey poll from July 2020, 34 percent of respondents made purchases on Instagram based on influencer recommendations. And 55 percent of consumers said they would reach out to brands they trust during the lockdown.

When it comes to family and friends, the numbers are convincing: 93 percent say they trust the brand recommendations from family and friends, while only 38 percent trust information from advertisers, according to a survey by Kantar Media from 2020.

Companies need to redesign e-commerce processes, marketing strategies and partnerships to increase customer confidence in purchases and shopping trips. Ecommerce and retail are experiencing a big shift, but there's also a shift in enterprise software distribution.

Related: Would you like more recommendations? Here are the best ways to earn them

Blockchain company UTU, which means “humanity” in Swahili, believes the way to get there is to build trust-based infrastructure on the web. This means providing APIs, oracles and SDKs with which trust signals can be dynamically evaluated and presented descriptively.

I recently spoke to Jason Eisen, CEO of UTU, who says that such an infrastructure would make it difficult for companies, sellers, advertisers, and unethical parties to manipulate product references, ratings, and reviews. Your technology is valuable in situations where services are digitally researched and obtained. Fake reviews and rankings have become ubiquitous online, leading customers to choose subpar products and services. So deception and concealment are rewarded. Unfortunately, there are fraudsters, so companies need to be proactive and build their infrastructure taking into account possible gaps.

Last year, 82 percent of consumers read a misleading review, according to a 2019 study by marketing firm BrightLocal. In the UK, fake reviews may impact $ 29.3 billion in annual customer spend.

"A trust infrastructure needs to be decentralized and can be used as an incentive for building trust and good results," says Eisen. “In e-commerce, trust leads to smooth transactions. Unfortunately, people's data and personal information is being captured, their privacy violated and reputation sold to bidders. As a result, the current approach to digital trust is wrongly designed, poorly implemented, and often abused and manipulated. "

Loyalty programs need to adapt to consumer preferences

Loyalty programs are important mechanisms by which customers can choose brands. Modern loyalty incentives were popularized by US airlines with frequent flyer miles in the 1980s. Since then, various iterations have pervaded highly competitive, consumer-centric industries – particularly credit cards, financial services, retail, hotels, entertainment, electronic goods, and groceries. Businesses give perks, points, discounts, and free goods in exchange for repeat purchases by customers, which in turn increases business value.

With the growing popularity of non-sovereign digital coins, as well as smartphones, companies are increasingly turning to cryptocurrencies to reward tech-savvy customers for their loyalty. For example, Hong Kong-based Powerchain is launching a blockchain-based exchange of loyalty points that will allow merchants worldwide to offer a more valuable format for loyalty rewards.

I spoke to Michael Mathias, the company's CEO and founder of GreenPower, who says that blockchain-based rewards can significantly add value and reduce the inefficiency of traditional points. "Blockchain-integrated loyalty points improve trust and ensure security," he says. "The loyalty points on our blockchain-based platform represent a superior format of customer reward that never expires, is never restricted and can be exchanged for other forms of value, including till."

However, 75 percent of consumers have changed their shopping behavior due to the pandemic. "Value, availability and quality or organic products were the main drivers for consumers trying a different brand," according to McKinsey's COVID-19 Global Consumer Sentiment survey.

The three main reasons now are value, availability, and convenience. Because of the recession, people want value purchases for essential items; Buy actually available products (due to disruptions in the supply chain); and choose companies that make shopping convenient, such as online ordering, roadside delivery, and in-store pickup.

People value freebies and freebies more than ever, but their primary focus is on essential services like restaurants, banks, gas stations, and medical services. One such essential service that sees challenges in terms of the emerging competition of aspiring entrepreneurs is banking. Because bank customers struggle to have enough cash in their checking and savings accounts to avoid the bank usage fees that apply when their balance falls below the threshold, decentralized banking services attract new customers with freebies, rewards, contests, and incentives .

Related: 4 Tips For Holding On To Customers During The Pandemic

In the past few months, the total value of locked assets within these protocols has increased tremendously and there is great interest from developers and the community. Another trend emerging from decentralized financial platforms is incentives: rewards for early adopters of a new product. This has proven to be a powerful way to drive the adoption of new crypto products and services.

"I suspect this trend will develop as projects try different types of rewards and see which are the most effective," said Scott Stuart, co-founder of the Harvest.io project. “As the world's first cross-chain money market, Harvest.io wants to offer its customers rewards in the form of HARD tokens, the platform's governance token, as an incentive for users to contribute their capital to the money market. HARD tokens are distributed to users in addition to the interest they receive on their principal. “This new kind of money market isn't just for the rich. There is no minimum account opening requirement, no minimum balance to maintain, and there is no vesting period.

Being a governance token is important to improve decentralization and ensure the application grows with new feature updates. Governance token incentives are now common practice in all decentralized money market applications available today. Active competition in the decentralized scope requires incentives that encourage user participation and promote liquidity.

With the recession and customer demands, businesses are forced to redesign loyalty programs and trips to meet consumer evolving priorities. This means customers get access to discounted consumables and redemptions can be made conveniently with limited opening hours and customer support.

FinTech companies offer users incentives to get them in the door. Another trend emerging in these uncertain times is an annual interest rate of 0 percent on loans. Banks see competition as their customers look elsewhere for the lowest APR available. In the past, an APR of 0 percent was unknown, but given the trends in the industry and how competitive it is, offering 0 percent APR loans can help customers choose the best option for them.

An example of such an incentive is cryptocurrency, where customers can instantly generate a loan using an app called Crypterium. No credit checks and no repayment period are required. Loans range from $ 50 to $ 5,000 at the lowest annual rate. The program serves customers much like a credit card. In contrast to the typical interest rates between 4.95, 5.9 and even 8 percent APR, the incentive of 0 percent APR is to acquire new customers who then want to use other services within the app.

"Given the economic climate, people are turning to Bitcoin or Ethereum to borrow faster than ever before," said Steve Parker, former Visa general manager and CEO at Crypterium. "Trust is a balancing act for blockchain-based incentives. Customers need more incentives to build their trust. The transparency of the technology is not enough. As an easy way to attract users and familiarize themselves with our service without taking a huge risk , we offer the unbeatable incentive of 0 percent interest rates. "

On the other hand, small businesses often compromise trust with incentives. If the customer's trust is expanded and the incentives are not as expected, the customer may feel cheated. For example, a credit card with paragraphs of fine print restrictions on the original catchphrase that catches the customer's attention. Small business owners must always be careful to strike the right balance between incentives and customers without compromising the integrity of the trust.

Trust is the key to business. Generally, when family and friends share a brand recommendation on social media, a user trusts that recommendation. Businesses can make their goods and services more familiar by incentivizing consumers for loyalty points and other perks. Customers who make repeat purchases will get used to it and make a brand a part of their daily life.

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