Adam Smith, the grandfather of capitalist economic thought, believed that the nature of the marketplace naturally guides consumers to seek the best product at the best price. As Smith wrote, an item’s “real price …is the toil and trouble of acquiring it.” Using these traditional economic theories, traditional business plans aim to provide a product of comparable quality for a lower manufacturing cost, thereby enjoying a higher profit margin. However, as manufacturing costs have dropped and consumer spending has skyrocketed in the last few decades, consumers no longer depend solely on price and quality to dictate what they buy. In today’s market, consumers are usually more engaged by emotional motivation than rational drivers.
Customer engagement is the key to unlocking long-term customer loyalty. Without an emotional
Adam Smith
connection, consumers are willing to quit a company as soon as a competitor offers a lower price. PeopleMetrics has found that engaged employees provide exceptional purchasing experiences, resulting in more engaged customers. Engaged customers are defined by the following characteristics:
• They will go out of their way to do business with your organization.
• They are loyal to your brand and/or organization.
• They recommend your organization to their friends.
• They are passionate about your organization.
Adam Smith’s ideas haven’t vanished entirely from the marketplace. Engaged customers don’t totally forget about the rational side of purchasing decisions. They still ask questions like “What do I get, and for what price?” However, emotional questions also inform their purchasing decisions. They may not be aware of their subconscious need for an emotionally fulfilling purchasing experience, but their answer to “How does the product/service make me feel?” will still drive their behavior.
Once a company has a good product at a reasonable price, they can see significant growth by focusing on providing an engaging customer experience. The basics of business—good products and good prices—are like antes or entry fees. Once those fees have been paid, customer engagement should be prioritized.
In other words, how customers feel matters. If you can make your customers feel valued and engaged during the purchase, they will return to your booth in the marketplace time after time—even if you don’t have the lowest price.
Image of Adam Smith from Marco.
~Kate Feather, Executive VP
PeopleMetrics
Tags: Adam Smith, customer engagement, customer loyalty, Emotional drivers, marketplace