Psychology and loyalty may seem poles apart until we think about human behaviour and how our thought processes motivate various actions. When psychology is applied to loyalty programme design, outcomes are optimised – to the benefit of both scheme sponsors and members.
Here we examine some of the fascinating theories developed by pre-eminent behaviourists and psychologists, looking at how they can be leveraged within loyalty programmes to create and sustain loyal behaviour.
Goal gradients
The ‘goal gradient’ hypothesis (originally proposed by behaviourist Clark Hull in 1932) is important when creating a tiered programme with thresholds designed to accelerate behaviour.
Tiered programmes are a useful structure for encouraging members to climb the loyalty ladder and here’s why they work. Members will strive for a ‘goal’ such as reaching a certain tier status or a desirable set of benefits. If for example, a specific tier status is granted for a period, members will want to avoid losing this privilege and will tend to accelerate their behaviour to maintain it.
Put simply, goal gradients can prevent reduction of spend. Structured into a loyalty programme, they can successfully maintain and grow value.
Loss aversion
It was Daniel Kahneman – really the father of behavioural economics – who identified ‘loss aversion.’
Loss aversion says that people are more afraid of losing something than gaining something. For example, most of us are more worried about losing a £10 note than we are pleased at finding one. Kahneman conducted a number of gambling experiments to prove the point, offering the same odds for losses and gains to find that participants concerned themselves more with avoiding loss.
This is relevant for loyalty programmes because consumers won’t want to lose benefits. If a loyalty programme provides a member with value such as an opening points balance, members will be reluctant to forfeit this benefit. Not transacting or redeeming with the issuing brand or company means that loss will follow. And generally, we don’t like loss - we have an aversion to it. So, giving customers tangible benefits which they’d rather not lose can be an effective way of avoiding disconnection from the brand.
Operant conditioning
One of the theories we borrow from psychology to design our loyalty programmes is ‘operant conditioning,’ developed by behavioural psychologist B.F. Skinner in the 1960’s.
Skinner theorised that humans and animals could be trained using a system of reward and punishment. To prove the theory, he developed a device known as the ‘Operant Conditioning Chamber,’ otherwise known as the Skinner box.
In one experiment, rats were trained to press a lever to achieve a reward or avoid a punishment depending on whether a red or green light was shown. In another, pigeons were trained to pick different patterned discs in varying orders and differing frequencies… and even perform pirouettes in between responses!
While we aren’t proposing asking programme members to press levers or perform balletic manoeuvres, well-constructed loyalty schemes can take advantage of operant conditioning by offering a system of rewards which can be habitually recognised and accessed.
There are also fixed ratios of reinforcement (FRI) versus variable ratios of reinforcement (VRI) to consider. With FRI, behaviour is rewarded after a specified number of correct responses. In the context of loyalty programmes, this could mean rewarding members after every fifth purchase or visit. For example, Starbucks offers a free drink after customers collect a set number of stars, reinforcing frequent visits and purchases. This type of schedule encourages high response rates, as members quickly learn the value of repeating the desired behaviour to obtain a reward.
On the other hand, VRI rewards members after a random number of responses, leading to longer-lasting engagement. A great example is surprise rewards or random points in a programme like Sephora's Beauty Insider. Members might receive unexpected gifts or discounts, creating a sense of excitement and anticipation. Much like a lottery, you don’t know when the reward will come, but the possibility keeps you engaged and motivated to continue participating.
Designed for the mind
These are just some examples of how psychology can be leveraged in the design of loyalty programmes. Collinson programmes are ‘designed for the mind,’ structurally integrating these techniques and more to motivate lasting loyalty.
Is your loyalty offer optimally designed for the mind? To find out, contact Collinson.
