You’ve likely run a giveaway, sweepstakes, or contest for your business before. You’d be surprised to know, though, that not everyone believes that your winner is chosen at random. In fact, your most loyal customers think the odds are skewed in their favour.
Why, you might ask? It comes down to a phenomenon known as the lucky loyalty effect. To help you incorporate this concept into your marketing strategy, we’re going to walk you through what this effect is, what it’s caused by, as well as tips and tricks to leverage it for success.
What is the Lucky Loyalty Effect?
The lucky loyalty effect is a cognitive bias that tells us that customers who are loyal to businesses believe that their investment in a brand (in terms of time, finances, or emotions) makes them more likely to win random promotions than other customers. In plain terms, it means loyal customers see themselves as “luckier” than customers who have invested less into a brand.
“The more consumers invest into your brand, the more they incorrectly believe that they'll win entirely random promotions over less loyal customers.”
Reczek, Haws, Summers (2014)
The more consistently your loyal customers shop at or talk about your business, the more deserving they believe they are of your best treatment. While this assumption may be fair (after all, it’s always wise to save your best rewards for your best customers), these people are mistaken in their belief that they will be rewarded for all future efforts -- especially if they’re random.
What Causes the Lucky Loyalty Effect?
Although we know that lucky loyalty is based on customer spending, it also extends beyond that. In addition to their finances, customers invest a great deal of their time and affection into their relationships with brands they choose to shop with.
Let’s look at how financial, time, and affective commitments can lead to the lucky loyalty bias.
Our financial commitment to a brand is often the first example of “investment” that comes to mind when considering the lucky loyalty effect. This is because it’s often the easiest form of “spending’ to relate to.
For example, consider a grocer entering all customer receipts in a draw for a free shopping spree. The store’s big spenders jump at the chance to have their receipts entered into the draw, and their average number of purchases jumps dramatically during the promotion. However, the winner ends up being someone who happened to drop in to only pick up a pack of gum during the contest!
Although contest rules clarify when draws will be random, the high-spending customers in this situation mistakenly assumed that their financial history with the grocer would improve their chances of winning.
Put it Into Practice
For businesses, this is a huge opportunity to encourage your top-spenders to spend more during contests and promotions. Your highest-spending customers will be more likely to take risks and engage to win the prize that they “deserve”!
Time is arguably the most important resource we have, and we invest a great deal of it into our favorite businesses! Whether you’ve stuck with the same clothing retailer for 10 years or you visit the same coffee shop every morning before work, you’re making a choice to invest time that could have been spent doing something else.
Take the example of the avid radio listener. For someone who has listened to the same station every morning for 15 years, losing an all-inclusive cruise to a first-time listener isn’t just perceived as disappointing - it’s unfair! While a call-in contest is based entirely on timing and luck, the avid-listener wants to be recognized for their choice to stick with one station over the years.
Put it Into Practice
If you’ve noticed long-time customers trailing off, run an audience-wide promotion to bring them back. Not only are they more likely to participate in a contest they feel likely to win, but it also presents an opportunity remind these customers why they’ve invested in you for so long.
While affection is more difficult to quantify than time or finances, it’s a form of commitment that can run extremely deep between brands and their most loyal customers!
I have personally fallen prey to the lucky loyalty bias as a result of my affective commitment to a brand! Recently, a small business that I follow on Instagram ran a giveaway that invited followers to comment on a photo for a chance to win a prize. Outside of promotions, I already engage with this account often, liking photos and tagging friends to share products that I love. When this promotion was announced I falsely believed that my commitment to social engagement would skew the odds in my favor. Even though I knew thousands of people were participating, it was my engagement that I assumed would ultimately be recognized.
Put it Into Practice
Take advantage of the lucky loyalty effect in your most affectionate customers with a social media or customer referral contest. Since these forms of promotion are so closely tied to your customers’ behaviors and personas, their relational ties to your brand leads them to believe they’ll win.
The Power of Lucky Loyalty + Customer Rewards
Without the right approach, incorporating the lucky loyalty effect into your marketing strategy has the potential to do your business more harm than good. As previously mentioned, this bias is based principally on feelings of perceived fairness or deservedness. Although these feelings are not rational, your loyal customers may still feel disappointed or disengaged from your business when they don’t win the prize they believed they deserved.
Since the lucky loyalty effect creates an unsolicited expectation in your loyal customers, failing to win may threaten their loyalty to your brand. The solution? A rewards program!
When businesses with rewards programs run contests, sweepstakes, or giveaways, their active program members are more likely to engage because of the lucky loyalty bias. The best part is that members don’t have to win to feel recognized. As a rewards program member, they still get a similar VIP treatment, all without having to win anything.
In the long run, the lucky loyalty bias works with a rewards program to lead your customers to believe they’ll receive a “prize” or reward in exchange for their loyalty to your brand. Whether or not they win your contest, they’re right.
With a rewards program, it’s not the lucky loyalty effect that results in rewards - it’s simply the effect of customer loyalty.