Chip Conley, Maslow and the Psychology of Loyalty Marketing

A number of weeks ago I had the opportunity to attend the World of Business Innovation summit in New York. The quality of speakers was outstanding, but there was one presenter who really stood out for me.

Chip Conley, founder of Joie de Vivre hotels, shared a bit of his history and specifically how he developed the concepts for the various properties in what became one of the most successful boutique hotel chains.

As with many entrepreneurial stories, Chip rode the waves of early success as Silicon Valley went through the first dot-com boom; but it was in the downturn following the bust that he came to gain a deeper understanding of how to approach his business. It was this insight that caused me to step back and reflect on some key concepts from my book, “The Loyalty Leap.”

What Chip began to explore was core motivation theory and specifically the work of psychologist Abraham Maslow, what was commonly known as Maslow’s hierarchy. Chip boiled down the various levels in the theory to three broad categories that describe the journey we go through as human beings.

The first level speaks to our innate need to survive – the need to make sure that we are safe and tend to our physiological needs. The next level is a measure of how we are succeeding and is characterized by how we fit within our social groups, how we belong and the esteem we earn from our achievements. And finally, as we satisfy these demands, we approach the pinnacle of Maslow’s hierarchy – the point where we self-actualize and begin to shape and transform the world in which we live.

Chip’s insight was that this model could be applied to employees, customers and shareholders, not just the individual. If we thought about how a self-actualized relationship was developed in each instance, we could imagine the potential, for example, in how an employee would approach fulfilling the brand promise to the customer.

That got me to thinking. In loyalty programs I often talk about the three “R’s” of loyalty. The first “R,” rewards, refers to the tangible exchange of value between the program operator and the customer. The second “R” relates to recognition and the way a brand differentially treats its customers based on their value to the business. And finally, once the organization starts to leverage the customer information obtained from the program, it works on building a more relevant experience for the customer, often one that reflects personalized customer understanding. It is this third “R,” relevance, that helps the customer become emotionally loyal to a business or brand.

Reflecting on my three R’s, I realized that they mapped neatly with the simplified version of Maslow’s hierarchy that Chip had used for his presentation. The reward exchange, like Maslow’s first level, reflects the transactional loyalty that helps deliver upon customer expectation of fair price or value. In that way, it simply reinforces the ability of consumers to stretch their dollars while motivating them to achieve the full potential of gains available from this kind of program.

Recognition mapped neatly with the second level, where the organization establishes an understanding of where it stands relative to its peers or other shoppers. Achieving platinum status, for instance, gives the consumer a sense of accomplishment and can often create renewed commitment from the customer to the brand.

Finally, when working to deliver a relevant experience, we are actually aiming to fulfill the underlying needs – maybe even unrecognized needs – of the customer. It is this sense of shared purpose between a company and its customer that moves it to a point of a self-actualized experience; something that transforms the way the consumer sees the brand. Ultimately, it is this sense of shared purpose and experience that often inspires customers enough to become evangelists for the brand.

Imagine that. Psychology 101 meets loyalty marketing. Not that these two are that far apart given the connection to motivation theory, but it is amazing to me that more brands are not striving to use their customer information to build the kind of relevant experiences that could genuinely result in the type of spontaneous, emotional energy that ultimately defines a great brand experience.

Chip Conley, Maslow and the Psychology of Loyalty Marketing