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The Psychology behind Loyalty Programs

Over the last few decades, our understanding of how human beings really make decisions has improved immensely. This has implications just about everywhere in life – but it’s especially useful when it comes to persuading people to buy things.

The modern loyalty program aims to develop several distinct psychological mechanisms, in order to persuade customers to come back for more. Let’s take a look at a few of them.

Expectancy Theory

Expectancy theory holds that our behaviour is influenced by the results we desire. If we believe that our efforts are going to be justified by the outcomes we get, then we’re more likely to buy in. In the context of loyalty programs, this means getting people to go to the effort of signing up. By dangling a sufficiently appealing carrot, you can persuade customers to buy in. By rewarding them at the outset, you’ll create the expectation that they’ll be rewarded again for future contributions.

Instant Gratification

The modern customer is extremely time-poor. They won’t want to wait around for a reward, and so providing them with a steady trickle is vital. For example, Waterdrop provides customers who return every five days with an instant gift of thirty points. This helps to establish a pattern of behaviour that ultimately benefits the brand. Eventually, customers will return to the site out of habit, rather than in the hope of any reward.

Tracking Progress

According to the ‘goal gradient’ theory, human beings tend to speed up their progress when they perceive they’re nearing the finish line. A consequence of this is that rewards cards for things like coffee will get filled in faster if you fill in the first few squares when it’s first handed out. In the world of e-commerce, you can achieve a similar outcome by keeping customers apprised of the rewards they’re going to be receiving when they commit a bit more time and energy to the process.

Appeal to the Heart

Human beings are just cold, calculating decision makers. They can also be impulsive and emotional. By forging emotional bonds with your customers, even if they’re largely illusory, you’ll keep them coming back. Your brand’s loyalty scheme should align with the emotions of your customers. This might also extend to ethical causes, like reforestation and disaster relief.

Desire to Belong

Human beings are naturally social animals. We are extremely sensitive to social cues, and crave membership of a wider community. There’s nothing quite like being invited to a party – especially if you view the party as prestigious.

By offering perks which bring customers into a community, loyalty programs can exploit this instinct. Thus, discounts which are exclusive to members, or chat functions and online groups, can all be attractive lures.

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