Money vs Memory

Choosing the right reward offering can determine the success or failure of your loyalty strategy.

One of the most effective strategies to achieve customer and employee loyalty is through the implementation of points-based reward programmes. These programmes incentivise specific behaviours and foster loyalty by tapping into the potent combination of biological, emotional, psychological, and social factors.

Keep reading to discover how points-based rewards can create a more memorable and engaging experience and why this approach is a game-changer for your business.

The biological perspective

From a biological perspective, points-based reward programmes tap into our brain’s reward system. Each time a customer or employee earns points, it triggers the release of dopamine, the ‘pleasure’ neurotransmitter. The satisfaction from this dopamine hit can reinforce the decision to engage with the brand again, thereby encouraging repeated behaviours to earn more rewards.

Moreover, the anticipation of rewards can also stimulate dopamine production, creating a cycle of positive reinforcement. This leads to the phenomenon of ‘expected reward,’ a powerful motivational tool. Not only does the person experience pleasure when they receive points, but the anticipation of earning more points also creates a state of excitement and motivation.

The emotional impact

Points-based programmes are designed to create positive emotional experiences. When customers or employees are rewarded for their loyalty, they feel emotions like joy, satisfaction, and a sense of being valued. This positive emotional response strengthens the bond between the customer and the brand, increasing the likelihood of continued engagement and loyalty.

As points grow and customers get closer to achieving a reward, feelings of excitement and anticipation increase. This, combined with the gratification of finally achieving the reward, can create a powerful emotional connection with the brand.

The cognitive influence

The effectiveness of points-based programmes also lies in their ability to leverage psychological principles. One of the key principles at play is the ‘endowed progress effect’ that suggests people are more motivated to complete a task if they believe they have already made progress towards it. Points accumulate and show progress toward a goal – increasing motivation and encouraging continued engagement.

Points can also create a sense of ownership or investment, tapping into another psychological concept called the ‘sunk cost fallacy.’ Once collectors have invested time, effort and money into earning points, they’re more likely to continue engaging with the brand to avoid losing their investment.

The social implications

Finally, points-based programmes play into social dynamics. The idea of earning and redeeming points can create a sense of community, further connecting with brands. The exclusivity often associated with higher reward tiers can make participants feel valued and special, strengthening their loyalty to the brand.

The social proof associated with these programmes enhances their effectiveness. As more people participate and express satisfaction with the rewards programme, it attracts new participants and increases loyalty among existing ones.