Written by David R. Kille on March 10, 2015
in Customer Experience

Canadians love their reward programs. We buy 6 coffees in order to get the 7th free, and we accumulate points redeemable for travel by using one credit card over another. Reward programs not only benefit consumers, but companies benefit through increased revenue and share of mind resulting from consumer loyalty. How can marketers optimize reward programs to maximize consumers’ repeat purchases?

A recent set of studies from the Journal of Consumer Research illustrates one factor that can lead to a more successful reward program. Researchers found that consumers were more likely to complete a reward program when their purchases had to be made in a fixed and sequential order, versus in a flexible order. In other words, if consumers must try 6 different coffee drinks before earning a 7th for free, they will be more likely to make all 6 purchases if they must do so in a specific order (e.g., a latte first, then a caffé misto followed by a macchiato, etc.) rather than in any order they chose.

According to the researchers, a fixed structure has a positive impact on consumers’ follow-through because it provides unambiguous direction in terms of what to do next. When consumers do not need to decide on the next course of action, they experience less difficulty in pursuing their goal and are more likely to act. Indeed, in one study, consumers reported decreased difficulty in a task that involved a fixed structure compared to consumers who could complete the task in any order they chose.

If you are surprised by this finding, it is likely because there is more to the story. Although a fixed (vs. flexible) order led consumers to more successfully complete the reward program, when it came to initiating or deciding whether to start the reward program, flexible reward programs were more appealing. Hence, a fixed sequence is only beneficial once customers are already on board with the reward program.

What does all of this mean? Marketers are often in a position to guide customers, and the research suggests that customers are more likely to act if they are provided with clear guidance. It is important to remember that having a clearly defined path can greatly aid in helping consumers reach their goals with little difficulty. Indeed, in Ariad’s latest White Paper entitled ‘Suffering from premachurn™? How to fix onboarding, keep customers, and get more from your marketing dollars‘, Ariad Senior Strategist Kieran Miles argues that many companies have broken onboarding processes that result in premachurn – or the premature loss of recently acquired customers. As Kieran outlines in his paper, one of the ways premachurn can be stopped is by providing your customers with clear steps throughout the onboarding process. Much like consumers benefit from step-by-step guides through a reward program, newly acquired customers benefit from having a definitive guide to “what’s next” when completing the necessary tasks to become a customer. These guides can be implemented in a variety of creative ways, from elegant progress bars on online application forms to automated emails that prompt users to complete unfinished steps. By understanding what causes friction on a consumer’s path, and providing the tools to alleviate that friction, we can build better marketing programs to help consumers reach their goals.

David R. Kille, Ph.D., is a Researcher at Ariad Communications.

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