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The “Dopamine Effect”: The Psychology Behind Personalized Marketing

By Elsa Klein

Personalization is driving more customer engagement and better retention rates. To make the most of this growing demand for personalized experiences, brands should start by understanding the psychology that underlines every purchase, interaction, and decision.

Here’s what you need to know about marketing psychology – and how you can use it to increase sales and create better services for your customers.

The power of personalized marketing psychology

Staying ahead in today’s growing hospitality industry has never been more difficult. The face of customer engagement is changing rapidly, and to meet customer expectations, brands must combine personalized offerings with marketing automation.

Why personalize?

Personalization is one of the best ways that businesses can improve their customer experience and increase repeat purchasing rates. In fact, 49 percent of customers say they will become loyal to a brand after a personalized shopping experience.

Curating personal experiences is essential to meeting customer demands. Research shows that 71 percent of consumers expect and prefer personalized experiences when dealing with companies – and will be frustrated when this doesn’t happen.

Personalization not only helps improve the image of a hospitality business, but it also actively drives performance. Brands who invest in personalization can expect a 40 percent boost in revenue compared to competing brands who stay the course.

Why do consumers crave personalized campaigns?

It all comes down to what psychologists call “The Dopamine Effect”.

Dopamine is the “feel good” neurotransmitter released in the brain when a person expects a reward. Any pleasurable activity – whether it’s shopping, eating delicious food, or receiving praise – can cause a rush of dopamine.

Dopamine often acts in a cycle that starts with motivation, then moves on to satisfaction, and finally ends with reinforcement (or wanting to experience the pleasurable experience again).

If you think of a time when you really wanted a piece of chocolate. That’s dopamine releasing its initial phase – motivation. If you then ate the chocolate, you probably felt a sense of satisfaction. Now, let’s say you thought that there was chocolate in your cupboard, but, in fact, there wasn’t. That small disappointment would actually lower your dopamine levels and dampen your mood. Instead of reaching that satisfaction phase, you would actually experience stronger chocolate craving cravings and have a more intense feeling of motivation to find and purchase chocolate.

This is how dopamine can play a huge part in human decision making. An enjoyable experience triggers a rush of dopamine, in what we call “purchase pleasure.” However, an experience that disappoints can be detrimental to a person’s mood, and affect their future perception of a particular brand, item, or experience.

“What this means for companies, is that curating an enjoyable, satisfying experience is essential if they want to keep customers engaged and coming back for more,” according to TASK President of North America, John Laporte. “Identifying and targeting the personal needs of individual customers makes the purchasing experience more meaningful to the customer.”

Research in Frontiers of Psychology shows that customers who make a purchase that directly meets their personal goals experience higher rates of pleasure. When you put the Dopamine Effect into action, it becomes a personalized marketing strategy. Adding on discounts, incentives, and even just directly calling a customer by their name are all ways to make the buying experience more pleasurable.

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How to use psychology to create a personalized offering

Achieving a personalized marketing strategy is easier said than done. While 70% of companies say that personalization is a “top priority”, few seem to be implementing it effectively.

Here’s what you need to know about the psychology of marketing and personalization before investing in a new strategy.

Emotion and the Dopamine Effect

It all comes down to enriching your content (and your experience) with emotional triggers. The more you can ignite an emotional response from your customer, the more likely they are to experience a rush of dopamine and continue interacting with your brand.

Don’t underestimate the power of a story. Draw on real and meaningful moments, motivations and connections, and share those with your customer.

The next level to this is integrating behavioral data to create direct connections between your brand and your customer. If your offer has personal meaning to a loyal customer, they will likely want to engage.

How can marketers deliver?

The first step to personalization is identifying specific customer preferences to understand what drives individual purchasing decisions. This step requires smart technology that can effectively leverage historical customer data and integrate that information across all your channels.

91 percent of consumers are more likely to shop at brands that provide recommendations with personal relevance to them. The better you understand what consumers desire, the easier it is to make meaningful connections.

The next step is to create a marketing mix of offers, rewards, and promotions based on the information you have. This process can be automated, using machine learning technology and a comprehensive data stack.

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Using customer data to measure the Dopamine Effect

The final stage of creating personalized experiences is tracking the effectiveness of your marketing efforts. While you can’t measure dopamine itself, it is possible to analyze strategies by looking at data. There are three key methods to doing this:

Transactional analytics combine data from in-store POS systems, mobile channels, and online orders for a granular view of customer buying behavior. Using this information, brands can uncover purchasing trends and infer what offers or tactics are triggering dopamine.

Digital campaign ROI analytics present the data that surrounds purchases – including app downloads, reward redemptions, online baskets, loyalty status changes, and digital engagement. This can give brands a clearer picture about which areas of your personalized content and marketing budget are most effective.

Segmentation analytics are focused on real-time consumer behavior insights. The key factors include responsiveness, connectedness, location, media preferences, and moment-to-moment decision-making. Segmentation data changes rapidly, but it can give valuable information about ongoing cognitive changes in your customers – helping brands make smarter marketing decisions.

All these tools are essential to understanding and tracking your personalized marketing efforts. Using them effectively can help your business take advantage of a growing demand for personalized services – and expand your base of loyal customers.

Making the shift to personalized marketing (and doing it seamlessly) is crucial to stay competitive in today’s market. Enable that change for your business by investing in data-driven technology.