Explaining customer needs through the theory of Maslow is common practice. Marketers often apply the principles to attract new customers. However, if you fail to continue to do this once you have attracted a customer, your ability to retain her will be compromised.
In this article, the authors suggest an approach that takes into account the position of the client within the needs pyramid. After all, if you understand the initial need that has led to a buying decision, you can continue to apply this to retain your customers.
Maslow’s theory of needs – again?
Humans are predominantly driven by universal needs. The original motivational theory of Abraham Maslow (1943) arranged those needs in a pyramid, sometimes referred to as the pyramid of needs. According to the model, people will only strive for gratification of the higher needs in the pyramid after the lower ones have been fulfilled.
For this article, we use a three-layer, simplified version of the needs pyramid.
At the top of the pyramid, Maslow placed the need for self- actualization; the desire to develop your personal self and realize your full potential. The middle part of the pyramid describes the desire to belong somewhere and to be valued. The bottom part of the pyramid represents the basic physiological needs for survival: food, shelter, safety and security.
See also: How to Get Broader View of Customers
Maslow always remained critical toward his own model. But in this article, we assume Maslow sticks to his own theory and acts accordingly. We use a mortgage product in the narrative, but the argument applies to financial services products in general.
Level 1: Customers need safety and security
Suppose it is the day that a young Abraham Maslow leaves his parental house to start his adult life. Maslow is looking to buy a house to fulfill his basic needs for security and safety and requires a mortgage to do this. His demands are simple: basic, cheap and something he doesn’t have to worry about.
Most financial products will answer to these basic needs. Some insurance products are simply required by law. You’ll need a debit card for making payments, at least for now. Customers looking for these products to fulfill their basic needs receive a warm welcome. However, once a prospect has become an existing customer, the approach often changes.
For instance, after choosing a mortgage Maslow would like to be informed about the suitability in terms of risk and costs. It would be great to receive confirmations that his mortgage still fits his profile and that he has made the right choice, or if better alternatives are available.
Often, this doesn’t happen. Instead, Maslow is being approached with offers made by competing mortgage providers, arguing he could be better off elsewhere. And while Maslow’s current mortgage provider receives payments on time and assumes Maslow is a satisfied customer, Maslow has not been able to resist the temptation and switches to a competitor offering more security and safety, as soon as his contract allows him to do so.
So what could Maslow’s original provider have done differently? First, it should have acknowledged Maslow’s primary buying motivation. As a next step, it should have contacted Maslow periodically to evaluate his choice of product. Providing customers with a regular check on their product portfolio builds relevant customer contacts and ensures some control at the provider.
Level 2: Consumers want to belong and be valued
Maslow, who has advanced in his career and now is a doctor, is looking for a place that allows him to build a practice at home. He learns about a mortgage provider that specifically serves the medical community. A provider like that should be able to exactly serve his needs.
Many financial products can be connected to a specific field of expertise or area of interest. Customers benefit from the specialty expertise offered by their bank or insurer. This may be realized through targeting specific customer groups or customers sharing a common interest. These customers expect a close relationship with their financial services provider.
Often, existing customers do not receive the same treatment as prospects. Maslow would like to remain informed about developments that relate to his profession. And he would like to share his experiences and insights with his financial services provider and colleagues. Because he now belongs to a specific target group, Maslow receives regular marketing messages and newsletters. However, these are often generic, and Maslow lacks the opportunity to share his ideas and suggestions to improve services.
During the course of his mortgage, Maslow is actively approached by competing mortgage providers, arguing he could be better off elsewhere. They may offer more expertise, additional services and other customer engagement activities. Maslow may not resist the continuous temptation and decides to switch to a competitor offering more of the services he is looking for.
So what could Maslow’s original provider have done differently? Again: Acknowledge Maslow’s primary motivation for buying in the first place. If his financial services provider had realized why Maslow had chosen it, the provider could have engaged him through activities and programs aligned to his interests and needs, e.g., by giving Maslow the opportunity to provide feedback and tips, and by actually recognizing his contributions. Companies like Tesla provide an amazing customer experience by acknowledging customers’ contributions to a new software release.
Level 3: Customers strive toward self-actualization
As a doctor, Maslow treats a set of patients suffering from post-traumatic stress disorder. Being confronted daily with the struggles of his clients, he finds it increasingly difficult to stop thinking about global politics and the causes of his patients’ condition. This afternoon, he has a meeting about a new mortgage. It would make him feel a lot better if his financial services provider demonstrates social responsibility and awareness.
Connecting financial services to social themes, lifestyle or trends may not be that difficult. Nobody cherishes a mortgage, savings account or insurance policy, but these are means to an end: the pleasure of owning your own home, to realize dreams or to take care of your loved ones. Managing the carbon footprint and supporting fair trade while avoiding child labor are increasingly the themes to reach younger generations. Only a small part of financial services providers embrace these themes.
See also: 5 Technologies That Connect to Customers
As an engaged customer, Maslow hopes to hear how his bank or insurer is contributing to making the world a better place. He expects a regular confirmation that he has made the right choice and is very much prepared to pay extra or settle for less service as long as his bank supports his ideals.
Many financial service providers apply Maslow’s theory to seduce customers. Campaigns and commercials cleverly play on human needs. However, as soon as a customer has become part of a back-office system, the urge to leverage these data disappears. This is partly understandable, as many organizations lack a focused customer-retention approach. However, we believe significant steps can be made in customer retention by applying Maslow’s theory.
As a first step, you need to define your pyramid. What are the needs that make up the layers in your customer pyramid? There might be a link to a specific distribution channel. Leveraging all data from the customer on-boarding process is an obvious approach.
Next step is to assess in which layer a customer resides. All customer interactions provide valuable data. Next to questionnaires, interviews and feedback, actions and responses are a tell-tale.
Once a Maslow profile has been determined, the individual customer contact approach can be selected. This step should involve some level of experimenting.
By analyzing all customer contacts, financial service providers will gain valuable insights. An active customer may be involved in product development or asked to become an ambassador. For less active customers, it is important to periodically get in touch and re-assess their product choice.
The motivational needs theory of Maslow is not undisputed. The thought that individuals only strive for higher needs once the basics have been fulfilled, has not been tested by Maslow. To his great disappointment, his theory has been used widely while nobody ever has had the urge to thoroughly analyze or test this.
However, we do have this ambition. Will the Maslow approach add value in the area of customer retention? Is it possible to better understand customer needs through this approach?
Is it possible to create a formula based on customer contact data predicting in which level a customer resides in the needs pyramid?
Marketers are convinced of the relevance of the theory in analyzing initial buying decisions. Applying the same principles to customer retention doesn’t seem like a particularly big step. We therefore are confident that this approach may provide value for retention programs. We are interested to discuss the potential of this model with you in more detail and would love to hear from you!
For this article, Onno Bloemers has joined forces with Leon Veenhuijzen, associate partner at Improven.