The Psychology of Rewards

We live at the best time ever to be consumers. Every brand we love and store we frequent wants to reward that loyalty. It seems marketers have figured out the big secret: We humans are just like a pack of dogs, or rather Pavlov’s dogs, and come running for rewards.

Rewards
“Rewards,” Creative Commons license. | Credit: Flickr by GotCredit

We live at the best time ever to be consumers. Every brand we love and store we frequent wants to reward that loyalty. It seems marketers have figured out the big secret: We humans are just like a pack of dogs, or rather Pavlov’s dogs, and come running for rewards.

Extrinsic motivation, or our behavior which is driven by the anticipation of being rewarded by others for engaging in specific behaviors, drives much of the choices we make in life — how we perform our jobs and what products we chose to buy.

And down deep that motivation is linked to what I’ve said before is our greatest psychological driver: our survival DNA. Unconsciously, rewards help us feel like we are getting closer to that place in life where we have what we need to survive the daily battle to fulfill needs and wants that propel us ahead of the pack.

When we get something cheaper than usual, more than what we paid for or something for free, as a rewards program often delivers — in our unconscious minds, we are stronger, better, richer, faster or have more resources than others, and so we are posed to survive. And it’s fun!

Getting rewards is like playing a game we know we can win. We do little things that take little effort on our part and get something back, like a two-for-one deal, a free gift, a big discount on a purchase. Even small prices, like a free car wash worth $10, can spark a dopamine rush. And when we drive out of that “free” car wash, we have a bigger smile on our face than when we paid for a car wash that was just as fast and clean. It’s simple how we are wired.

Loyalty Programs Spark Brain Triggers

Rewards programs have long been successful, in all industries, to spark trial, boost incremental sales and secure loyalty. We eagerly sign up for point programs that can earn us free pizzas, airline tickets, hotel nights and such.

And then really smart marketers came along and let us choose our rewards, like American Express Membership Rewards, that let consumers shop various brands for products purchased strictly through points. And today, marketers are getting even smarter and building apps for rewards programs that cater to the current frenzy and greatest needs of consumers today: instantaneousness.

Ibotta Case Study: Ugotta Love It and UGottaDo It

One of the best examples of a reward program that caters to the psychological state of most consumers today, regardless of there generation, is Ibotta, a young app birthed just five years ago in the basement of a fire station in Denver. It simply helps consumers get rewards, such as rebates and discounts, or loyalty premiums redeemed faster and easier than before. Ibotta allows users to submit their receipts online in order to get instant cash back, which is deposited into their accounts and can be cashed out via PayPal, gift cards or other digital processes, eliminating the “check in the mail” process that seems to take forever in today’s world. Just this past holiday season of 2016, Ibotta at four years old, was the third-most-used shopping app during the holiday shopping period in December 2016, outpaced only by Amazon and eBay.

Its growth has been staggering. Take a look at these numbers:

  • Nov. 16, 2012 — Ibotta app launch on iOS
  • Dec. 18, 2012 — Ibotta announces 100,000 registered users on iOS; announces Android version launch
  • Feb. 5, 2013 — Ibotta announces 500,000 registered users in just under four months
  • May 14, 2013 — Ibotta users have earned $1 million in cash rewards in just six months
  • July 20, 2013 — Ibotta users have earned $2 million in cash rewards

While every stat above is very telling about this successful new business idea and its value to consumers, take a look at the last two bullet points. In just one month, Ibotta doubled its payouts from $1 million in cash rewards earned to $2 million. And this, at just seven months old. This is serous validation as to how powerful the force of rewards is for attracting customers and keeping them actively engaged in what matters most: shopping! And shopping for rewards.

But not all rewards programs grow this quickly. Here’s what Rich Donahue, SVP of Marketing for Ibotta, has to say about the company’s success:

“What we’re focused on at Ibotta is helping consumers live a ‘Life Rewarded.’ Our goal is to make sure that you earn rewards on everything you buy, wherever and however you shop. With Ibotta, you earn cash back and make those rewards count in your life.”

Creating awards around everyday routines and shopping needs has catapulted Ibotta’s growth during its mere five years of existence. As of this past week, Aug. 9, 2017, Ibotta users have earned more than $200 million in cash rewards and a download total of 23 million. On top of that, it’s become the 43rd most-used app in the App Store.

So Whatta? Marketers Ask, ‘What’s in It for Me?’

What does all this mean for marketers today? Alotta!

  • Rewards, small or big, matter — and matter a lot — as they are not just prizes for the conscious mind to get excited about. They are triggers of the unconscious mind, which drives 90 percent of our thoughts and choices.
  • Instantaneousness matters, too. Everything about our lives is instant now … instant access to information via Google searches 24/7 on our mobile devices, which are instantly available as they are in-hand or pocket 24/7.
  • And Choice matters, too. We are long past the days of reward programs for more of a brand’s product and only that brand’s product, and on that brand’s terms, not ours. Brand loyalty programs may have a lot of enrollment, but they get very little redemption. According to a Forrester report, which surveyed members from the Loyalty360 association, only 16 percent of consumers, on average, redeem points from brand loyalty programs. To succeed, brands of all sizes need to take on the Ibotta and American Express approach of letting customers be rewarded for products and services they choose vs. get rewarded with “stuff” they may not need at the moment, if ever.

Conclusion

While I’m not suggesting you expire all of the points your customers have earned with you to-date (there are many cases of this backfiring), I am suggesting you take a look at your system to make sure you are offering choices that matter, and the speed to redemption that clearly matters to consumers today.

If you don’t up your rewards program to fit our psychological need to win rewards that help us up our chances to survive (emotionally, physically, financially, socially and more) and do it quickly, you’re wasting alotta resources of your own. Make your time and effort matter by changing your game to up the fun and fulfillment of the consumers’ game when it comes to getting the best deal and reward. It’s just something you GOTTA do!

Author: Jeanette McMurtry

Jeanette McMurtry is a psychology-based marketing expert providing strategy, campaign development, and sales and marketing training to brands in all industries on how to achieve psychological relevance for all aspects of a customer's experience. She is the author of the recently released edition of “Marketing for Dummies” (Fifth Edition, Wiley) and “Big Business Marketing for Small Business Budgets” (McGraw Hill). She is a popular and engaging keynote speaker and workshop instructor on marketing psychology worldwide. Her blog will share insights and tactics for engaging B2B and B2C purchasers' unconscious minds which drive 90 percent of our thoughts, attitudes and behavior, and provide actionable and affordable tips for upping sales and ROI through emotional selling propositions. Her blog will share insights and tactics for engaging consumers' unconscious minds, which drive 90 percent of our thoughts and purchasing attitudes and behavior. She'll explore how color, images and social influences like scarcity, peer pressure and even religion affect consumers' interest in engaging with your brand, your message and buying from you. Reach her at Jeanette@e4marketingco.com.

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