The Psychology Behind a Loyalty Points Program

March 14, 2018
Points-Psychology-Feature

Points programs are one of the most well-known and established retention marketing strategies in the world.  Used by millions of brands in virtually every industry, they’re the most common definition of the term “loyalty program”, but why?  What makes them so successful, and why have they worked well for so long?

The answer lies in basic psychology.  Let’s take a look at three psychological principles that continue to drive us to sign up for points programs.

1. Points Motivate Customers to Engage in Order to Earn Rewards

Motivation is one of the most powerful psychological factors at play in any rewards program.  It’s what makes a customer believe that they can achieve something, and also what pushes them to succeed.  In a brand-customer relationship, motivation is largely powered by a brand’s ability to deliver on the promises that they’ve made their customers. 

hand receiving coins
Offering points in exchange for completing specific actions motivates customers to stay engaged with your brand.

Loyalty points and the rewards they can be redeemed for are one of the most common promises a brand must deliver on.  When businesses prove that they follow through on these promises, it starts a cycle that keeps their relationship with customers going.  By offering additional benefits for engaging with a brand, points turn your customer experience into a challenge customers want to overcome.  This prompts engagement that might otherwise be missing, encouraging customers to come back as repeat customers.

2. Rewards Positively Reinforce Valuable Customer Behaviors

When you reward customers for completing actions at your store, you encourage customer behaviors that keep customers engaged.  When customers are rewarded for engaging at your store, they’re more likely to enjoy their experience with your brand. More importantly, they’ll be encouraged to continue performing those same actions in order to reap those benefits again!  

This establishes a relationship that they grow to trust and look forward to.  As a result, they are more than willing to complete actions they may not have otherwise!  With this solid emotional foundation, your store becomes their first choice for future purchases, further developing the rewarding experience your loyalty points put in motion.

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3. Points Inspire Long-Term Commitment

With so much competition, commitment is by far one of the most valuable things a brand can secure from their customers.  

Loyalty points create a switching cost that helps secure that long-term relationship from customers.  With the threat of losing the value your program’s points represent, customers start to return to your brand because they want to - not because they have to.

store with heart above it
Loyalty points help establish commitment that incorporates your brand into a customer's shopping routines.

Points encourage frequent interactions that become part of a customer’s shopping patterns and routines.  Considering how many other brands they have to choose from, this is incredibly significant! Points have the power to solidify a lasting relationship with your brand that customers simply aren’t willing to give up, giving them access to awesome rewards and you more loyal customers.

 

How to Leverage Psychology to Improve Your Points Program

Now that you know why and how psychology plays into your loyalty points program, it’s time to look at what it can do for your existing program!  The following tips (and the rest in our ultimate guide to points program strategy) will help you take your program up a notch and put everything you’ve learned to the test.

Offer Rewards Your Customers Want

As we learned, motivation is ultimately rooted in understanding your customers.  If you don’t know what they like, how they think, and what they’re after, there’s no way you can offer rewards that will actually push them to engage with your brand.

Muscle & Strength offers a diverse range of loyalty rewards

That’s why reward diversification is so important.  When you offer more than one type of reward, you can appeal to each of your customers and guarantee that they’ll be able to find at least one reward that meets their needs.  This will increase their commitment to your program and their desire to engage.

Additionally, make sure your customers know what your rewards are!  Use email and onsite marketing to your advantage to make sure that every customer has the opportunity to fall in love with the rewards you offer.

Display Progress Towards the Next Reward

There’s a theory called the Goal Gradient Effect which states that we tend to work harder towards a goal the closer we are to achieving it.  This is because we’re influenced by the perception of progress: if we feel we’ve moved closer, we feel the goal is attainable and as a result want to keep working so that we can say we’ve achieved it.

Mpix displays progress to the next reward in their customer rewards panel

You can incorporate this effect into your points program by making each customer’s progress towards their next reward easy to see and understand.  This is actually something we put a lot of time and thought into at Smile.io.  With a Smile rewards program, progress bars are built into the customer panel so that you can easily put this information in front of your customers.  On top of that, it’s highly visual, branded, and extremely easy to find!

MUN uses VIP tiers to move customers through their program

Whether you use onsite progress bars or not, you can also turn it up a notch by varying the ways your customers are working towards your program goals.  If you’re running a VIP program, why not accelerate points earning the higher they are in your program tiers? You could also run a bonus points events to boost their account balance and push them closer to their next goal.  Remember: the closer they seem to the goal, the harder they’ll work to achieve it, which means more purchases and increased engagement - a true win-win for your program!

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VIP tiers take your points program to the next level.
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Provide Clear Value Upfront

The great thing about points programs is that customers already know how they work.  The challenge becomes demonstrating the value of yours. Customers want to know that their business is going to be appreciated, and the best way to do that is by demonstrating value early.  

erin condren welcome points email

Instead of making them wait for it, show customers that you value their business by giving them welcome points.  It’s an easy but extremely effective way to show customers what they can expect from your program and that their membership is appreciated.  You can also do this with birthday points.  Not only is this an easy way for them to earn points, but it also helps strengthen your relationship with them, personalizing their experience with your store.

These quick and easy returns on investment jumpstarts the positive reinforcement process.  Establishing the satisfaction of earning and redeeming rewards early will motivate them from the start to keep earning, spending, and redeeming at your store.

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