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Loyalty and Reward Programs
Millions of Americans are enrolled in loyalty or reward programs in hotels, supermarkets, drugstores and restaurants, and there are two major challenges:
- As the outlets with loyalty programs tend to reward only the customers who are already loyal, the participation percentage is on the lower side.
- Customers find it difficult to be loyal, due to other chains and outlets offering great discounts as well.
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The Endowed Progress Effect
How a reward is framed, and the steps the customers must take to 'earn' the reward, is the key to a successful loyalty plan.
If customers are shown their efforts and the progress they have made, in absolute terms, with a clear path on what to do next, it is more likely they will push themselves to complete the program.
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This Endowed Progress Effect Applied
This Endowed Progress Effect is successfully deployed in games like Candy Crush Saga, and websites like Paypal and LinkedIn, which show a prominent progress indicator, with easy to find ways for completing the next milestone. These apps and games use social pressure tactics and freebies to lure the customers into providing more information or buying a premium service.
Once the customer sees that time and energy has been spent, and progress made, they are less likely to drop out.
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Variable Rewards Trick
Customers come back due to some variable rewards. These can be: a new tweet, a special offer at a restaurant, or a fresh new deal at a shop.
Variable rewards, which have an element of uncertainty and unpredictability, work like a slot machine for our brains. Smart framing focuses on the time and money the customer has already spent, instead of what they can get.
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