Loyalty Cards – Percentage of Percieved Progress

When designing your loyalty card program it is good to refer to the study done in 2006 by 2006 PJoseph Nunes and Xavier Dreze.  The Endowed Progress Effect: How Artificial Advancement Increases Effort.

Part of that study looked at the effect that the percentage of perceived progress had on peoples uptake of the offer.

They got 150 students, and told them that there was a new restaurant opening up in the local area that was going to have two loyalty programs, and they could choose which one to sign up for.

The first offer was a 12 purchase model before they would qualify for the prize, or in this case the free meal, with a sign up bonus of two stamps.
The secoind offer was a 15 purchase model, with a 5 stamp bonus if they signed up.

For both of these models they only needed 10 purchases to qualify for the prize. So the first card was the same in regards to the number of purchase required to qualify for the free meal.

What they found was that the students liked the idea of getting five bonus stamps in the 15 purchase model, but they signed up for the 12 stamp model.

What we can learn from this is that if you are offering a bonus, people will look past the bonus to the next card. Even if the first offer with teh bonus is a good deal, your customer will still consider what it will be like without the bonus. In the case of the experirment they would prefer to make 12 purchases rather than 15 to get the free meal.
The next idea we can draw from it, is it reinforces the idea of giving people a bonus stamp that first time you hand out the card. The extra stamp does help.
And the last thing we can learn from these results is when you’re designing the loyalty program and deciding how many purchases your customer has to make to qualify for the prize, the fewer purchases required, the more attractive your offer will be.

 

For a more in depth analysis go here.

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