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A Concept That Could Double Your Loyalty Program Results

The whole idea of a loyalty program is to encourage and reward customers for doing business with you. The easier you make it for them to earn rewards and the more desirable those rewards are, the more likely a customer will utilize your program by returning to your business. How many supermarket “loyalty” cards do you have? Most people have one for each grocery store they go to, both regularly or occasionally. Is that proving loyalty? No, it’s a customer using the loyalty card only because they happened to choose that grocery store on that day.

 

So, how do you make your loyalty program meaningful? A program where the customer chooses your business every time, not just when they were going to anyways?

 

An interesting study by two consumer researchers resulted in a concept they named the “Endowed Progress Effect”. In essence, the “Endowed Progress Effect [is a phenomenon], in which people who are endowed with progress toward a goal increase the effort that they exert in reaching that goal.”

 

One of the studies conducted by these researchers was at a local car wash. One day they handed out 300 loyalty punch cards. Half of the punch cards required the purchase of 10 car washes to receive one free. However, these cards came with 2 of the 10 car washes already stamped with special stamps, which they explained to the customers, was part of a promotion they were running that day, so they only really had 8 car washes to go to get one free. The other half of the cards required the customer to purchase 8 car washes to receive one free. The fact is that both cards really had the same offer; buy 8 car washes, get one free. Half of the customers received what they perceived to be a head start, however.

 

Over the course of 9 months, the researchers tracked the purchases and use of these punch cards with the owners affixing dated stamps to cards whenever presented by customers.

 

The results? The customers that were given the cards that had no “head start” converted – meaning they satisfied the requisite 8 purchases and redeemed the card for the free car wash - at a rate of 19%. The customers that were given cards that had a 2-stamp head start (but still needed to purchase the same number of car washes) converted at a rate of 34%! That’s almost double!

 

It became clear that the customers with perceived progress in the beginning were statistically more apt to complete the program to earn the free wash. They also wanted to see if there was more effort put into the achievement. Those with the 2-stamp head start cards had on average 2.9 days less between visits which decreased an average of ½ a day after each additional visit.

 

What does this mean? Not only did giving the customer the illusion of progress from the start almost double the success rate of the promotion, those customers made more of an effort to achieve the goal faster.

 

After reading about these findings, you might want to consider incorporating this practice into your existing loyalty program or, if you don’t have one yet, using this to your advantage once you get one.

 

The bottom line is that the car wash never gave any special treatment to any of those 300 people. They were all required to buy 8 car washes in order to receive a free one. It’s all about a perceived advantage and is an interesting concept that can be used to maximize the value and use of any loyalty program. It could help to create a loyalty program people make an effort to use, not one they use only when it’s convenient.

Views: 1041

Tags: advice, effect, endowed, hint, loyalty, program, progress, rewards, success, tip

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Comment by Big Tom LaPointe on June 12, 2013 at 8:56pm
Love this. People are awesome. Exactly why dept stores have to disclaim that their merchandise never actually sold for the original tag price
Comment by Mike Gorun on June 12, 2013 at 4:24pm

What a perfect clip to compliment my article, thanks Bill.

Mauro, it's funny how the things we think will work best aren't always the ones that actually do. Thanks for sharing!


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Comment by Mauro Rodriguez on June 12, 2013 at 7:57am

That's and awesome idea. But it's funny about how people think sometimes. We ran a Free Oil Change special and only 30 claimed it in one month. Then we ran a $9.95 Oil Change Special and we had over 100 claims in 2 weeks. Crazy.

Comment by Mike Gorun on June 12, 2013 at 5:43am

Thanks for the comments!

Comment by Jason Mickelson on June 12, 2013 at 5:31am
This makes sense and adds a new twist. I love it!

Influencer
Comment by Diane Anderson on June 12, 2013 at 3:22am
Wow, great info! Who would have thought!

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