How Loyalty Programs Work (Part 1)
Leveraging Human Psychology to Improve Loyalty Program Effectiveness
Having a loyalty program in place does not automatically guarantee positive business outcomes. Previous large-scale academic studies have shown diverse program performance. Some loyalty programs make a positive business impact, some have no impact at all, while a small percentage of programs even show a negative impact.
How can loyalty programs become more effective? Ultimately, it comes down to well-crafted program design, careful program management, and the strategic use of program data. To master each of these elements, you need to understand the human psychology behind loyalty programs.
In this two-part series, we introduce six crucial psychological mechanisms loyalty programs can build on to create the desired member behaviors. In this first part, we look at the first three mechanisms:
Mechanism #1: The Rewarded Behavior Effect
Rewards are powerful motivators, the fundamental premise many loyalty programs build on. Multiple academic studies have confirmed that consumers often buy more after receiving a reward from a loyalty program, referred to as…
