The Beauty (and Danger) of Customer Rewards Programs

Earlier this year I started collecting frequent flyer points. By collecting points for money spent that I would normally spend, I could get a free flight every now and then.

Something for free, right?

Well it started out that way at first.

I kept to the specials and remembered only to buy what I needed. I resisted the urge to spend that little bit more if I hadn’t spent enough to be awarded a fuel discount voucher. I bought things in bulk that could be stored and used later. The difficult part was finding ways to stick to these rules while also spending over a certain amount; otherwise I wouldn’t be awarded any points at all.

And then I decided to get a credit card to link to the rewards program. This card gave me one point for every dollar I spent. There was even a large bonus offer of points just for signing up.

Even better, right?

Well it was fine at first, but after a while I started to observe myself thinking along the lines of:

  • “If I buy something else, I’ll get even more points.”
  • “The surcharge on this credit card transaction will probably cost me more than the points are worth, but that’s ok – I deserve the treat.”
  • “Surely there’s something else I can buy?!”

The simple psychological principle at work here is that of receiving a reward for a specific behaviour. Pretty much everything we do is a result of attempting to acquire some kind of reward, be it physical, emotional or intellectual (think about the methods used to train animals). So we continue to do the things that bring us rewards; in my case I was rewarded with points for spending money.

But I think what also makes customer rewards programs like this work is similar to what is at work in systems like organised martial arts, organisational hierarchies, role playing games and more – it’s about getting to the next level and reaping the greater rewards that come with that higher level.

It can start with a simple goal, like redeeming a particular product for a small number of points. But after some time, you look further up the ladder – “If I save more points, I can earn something even bigger.” Saving points for a new set of headphones turns into saving for the latest smart phone which turns into saving for an international flight.

And that’s not necessarily a bad thing. The beauty of these programs is that if you can control yourself, you can indeed get something for free. The danger is falling into the trap that the program is designed to be in the first place.

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