Supercharge Your Loyalty Program

One of the most effective ways to motivate your customers through your loyalty card program and keep them coming back for more is to offer them a head start.

Various academic studies on loyalty programs have demonstrated that providing your customers with a head start, in the form of free stamps or points, enhances their engagement with your loyalty program and accelerates their progress in completing their loyalty card, compared to blank loyalty cards.

This phenomenon is known as the "endowed progress effect." Researchers Joseph C. Nunes and Xavier Dreze conducted an experiment to test the idea that when individuals receive some artificial advancement toward a goal, they are more likely to commit to achieving that goal.

In their test, loyalty cards were distributed, each requiring 8 purchases to earn a free car wash. The first loyalty card necessitated 8 stamps for redemption, while the second loyalty card required 10 purchases, but with two of the spaces already stamped.

While both cards required the same number of purchases to earn the reward, the results were striking. Within the same test period, 34% of customers who received the Loyalty Card with 2 free stamps had redeemed their rewards, compared to 19% who had cards without the free stamps.

In simpler terms, customers who received the two stamps upfront were almost twice as fast in redeeming their rewards compared to customers who were given a blank stamp card, despite needing the same number of stamps.

The endowed progress effect creates the perception of a head start in customers' minds, reducing the perceived effort required to reach the goal and motivating them to participate actively.

Beyond being perceived as a goodwill gesture from the business to the customer, this finding is grounded in psychological principles.

Framing the task:

By pre-filling some blank spaces, the task becomes more visually understandable for the customer, making it easier to comprehend the requirements to complete the loyalty stamp card for the reward. Visual aids help customers process information more effectively.

Desire to complete a task:

People naturally dislike leaving tasks incomplete. This is known as the Zeigarnik effect, which suggests that individuals tend to think about unfinished tasks more than completed ones. When presented with a stamp card with some stamps already filled in, customers are more motivated to complete the entire loyalty card.

Goal gradient effect:

Earlier research by psychologists Clark Hull in the 1930s, later developed by Judson Brown in the 1940s, showed that the momentum to achieve a reward increases as people get closer to their goal. The closer they get, the harder they try, because the goal suddenly appears more attainable.

Expectancy:

Numerous academic studies have explored the concept that when expectations are reasonable, individuals are more likely to reach their goal. Conversely, if the goal seems too challenging, motivation decreases because there is a lower expectation of success, discouraging people from starting the task.

In summary, the principle is quite straightforward. If you want to maximize the effectiveness of your loyalty program, consider offering your customers bonus stamps, punches, or points on their loyalty cards to give them a head start on their journey.