How Customers Are Like Lab Rats
It seems we are more like animals than we may think. In the 1930s, research revealed animals tended to work harder as they got closer and closer to a reward—a phenomenon dubbed the goal gradient hypothesis. New findings indicate this concept also applies to consumer loyalty programs.
Research at Columbia and Fordham Universities found that consumers in a coffee loyalty program bought coffee more frequently the closer they got toward earning a free cup of joe. Another study found that Internet users who received reward certificates for rating songs rated more songs and visited the Web site more often as they neared their goal.
Even the illusion of approaching a reward appears to make consumers work harder toward their goal. When presented with frequent purchaser cards of equal value (a 12-stamp card with two stamps given for the first purchase and a 10-stamp card with no stamp given for the first purchase), consumers in the coffee loyalty program study behaved differently. Surprisingly, the customers given the 12-stamp card bought coffee more frequently from the establishment, thus earning their reward more quickly than customers who did not get stamps for their initial purchase.
The Po!nt: Customers in loyalty programs speed up their product consumption as they get closer to getting their reward. Experimenting with how customers perceive your offer might improve their uptake.
Source: "The Goal-Gradient Hypothesis Resurrected: Purchase Acceleration, Illusionary Goal Progress, and Customer Retention" by Ran Kivetz, Oleg Urminsky and Yuhuang Zheng. Journal of Marketing Research, 2006. Click here for a PDF of the report.
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