Give Your Customers a Head Start
People will invest more towards realizing a goal if they’ve already made progress towards that goal.
That’s the conclusion Joseph Nunes and Xavier Dreze came to when they conducted a pair of studies to measure something they call the “Endowed Progress Effect” in their 2007 paper titled The Endowed Progress Effect: How Artificial Advancement Increases Effort 1 (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=991962).
The researchers conducted a 9 month study at a Car Wash where they distributed 300 punch cards. All of the cards required 8 punches to get a free car wash, but half of the cards required 10 total; with two punches pre-punched. In other words; all of the cards required 8 punches for a free wash; but half of the cards gave the customer the illusion of advancement.
34% of customers who received the artificial advancement continued to gain punches until they redeemed them for a free wash; whereas only 19% of customers who received the simple 8 punch cards did the same. The customers who received the artificial advancement also completed the goal more quickly (and washed their cars more often).
This led the researchers to formulate 5 hypotheses that businesses can leverage for their loyalty program:
- Presenting a task in such a way that people believe the task has been undertaken and is incomplete increases their’ commitment toward completing the task, even if the absolute distance from the goal—or the actual task—does not change. So get your customers off to a good start by preloading their loyalty accounts.
- As people perceive that they are progressing, their effort will increase, and completion time decreases. Make sure that your loyalty program demonstrates progress for the customer – choose behaviours and reward them!
- Persistence depends on relative progress and not on the amount that would be lost by failing to continue. Remember that customers need to be reminded of the progress they’re making.
- When progress is issued in points (or punches), the return on their effort appears more significant, and thus effort will increase.
- The effect is more likely to operate when consumers are provided with a reason for the extra punches.
The loyalty of customers is an important part of any business so make your loyalty program more effective by understanding how your customers behave.
Our advice? If you use a traditional Punch Card system; start all of your customers out with a couple of starting punches, even if that means adjusting the number of punches required, before customers receive a reward, accordingly. And if you can gift the starting punches in a way that makes the customer feel like they’re being treated specially; all the better. Odds are good that you’ll increase your customer’s visit frequency and they’ll be more likely to follow through to achieving your reward(s).
Our own QR Loyalty Cards provides businesses with the means of starting each new punch card with a specified number of punches. This “Pre-Punch” functionality was added originally to save businesses from having to punch cards as they are handed out, but is often used to give customers a starting bonus. Businesses can, of course, punch cards as they are handed out if they choose to.
- Nunes, Joseph and Dreze, Xavier, The Endowed Progress Effect: How Artificial Advancement Increases Effort. Journal of Consumer Research, Vol. 32, March 2006. Available at SSRN: https://ssrn.com/abstract=991962 ↵