Thursday, April 30, 2015

How to Fix Reward Programs

Once the bastion of airlines and credit cards, rewards programs have expanded to the point where it is now possible to be “rewarded” for buying everything from a pack of gum to a brand-new car. Every retail checkout clerk is trained to ask, at every visit, if you would like to join the store’s rewards program. Merely sharing your email address can result in a bombardment of messages promising points, rewards, and other inducements ... The evolution has led to some serious questions about rewards programs ... To understand why, you have to go back to Psychology 101 — specifically to the concept of “operant conditioning,” also known as reward–response. Pioneering psychologist B.F. Skinner required subjects to be placed in a “Skinner box.” The box allowed Skinner to control the stimuli that a subject was exposed to and ensure that the program of rewards would establish the operant conditioning. Unfortunately for most marketers, consumers can’t be contained in Skinner boxes — aka an environment where the product would have a monopoly. But even if they could, the operant conditioning of reward–response doesn’t quite achieve its objective of repeat behavior and consumer preference. A program might be successful at first. But as soon as other competitors enter the mix, the conditioned behavior is no longer operative, because rewards are no longer unique and the environment is no longer controlled. Instead of behavioral conditioning, companies get balance-sheet liability and consumers are bombarded with offers and emails. Worst of all, consumers may come to expect rewards for doing nothing. To a degree, then, traditional rewards programs are a waste of corporate money. more

No comments: