When Loyalty Points Beat Price Differences
Every merchant seems to have a loyalty program these days. It makes sense to reward customers for their patronage and encourage even greater frequency. But, it appears there’s one kind of loyalty reward that may be more effective. One study showed that “irrelevant information” (in this case, largely valueless loyalty points) changed consumer buying decisions.
…irrelevant information may influence choice even when there is an easily justified basis for choice other than the irrelevant attribute. [From Irrelevant Information and Mediated Intertemporal Choice by van Osselaer, Alba, and Manchanda.]
What the researchers identified in their experiments went beyond the logical and expected effect of a loyalty program: the mere presence of point values influenced customer buying decisions. Even when the value of loyalty points was less than the value of a real-money price difference, they were swayed by the loyalty points:
Choices were influenced by points even when consumers were provided with other truly discriminating information (e.g., price) and the irrelevance of the loyalty points was readily discernable. This implies that irrelevant information can influence choice when other, easily justifiable bases for decisions are available and, therefore, that irrelevant information can function as more than a tie-breaker. [Emphasis added.]
Maximizing Loyalty Program Impact
The Neuromarketing takeaway from this research is that exposing customers to point values at the time of purchase can amplify the effectiveness of the loyalty program. Want to encourage sampling of a new product, or drive upgrades? Or get a customer to visit you instead of your competitor? Try something along the lines of, “100 extra Rewards Points with every purchase!”
It might be worth setting the value of the loyalty currency in a way that lets you use larger vs. smaller numbers. E.g., “100 points” might be more effective than “1 point” even if the value was the same. I’ve often wondered about the effectiveness of airline mile restaurant promotions. I often get notified that a local establishment is offering “triple miles” if I use my airline-branded credit card. The final number of miles earned seems rather paltry, and I don’t think my purchasing behavior has been affected at all.
Then again, maybe at some level my brain HAS responded with, “Oooh! Three times the points!” and my rational, conscious thought process has merely justified the dining choice on a seemingly logical pretext.