I have a mild addiction to coffee. The proof is in the numerous independent coffee shop loyalty cards in my wallet. Every flat white ordered brings me closer to the ultimate goal, a free coffee (which is usually a mocha, as it is more expensive)…

But why do loyalty cards work?

In order to find an answer, we have to look at animal research from the mid-30s. More specifically, Clark Hull’s studies. In a series of classical experiments, he found that animals expend more effort as they approach a reward. This is the “goal-gradient hypothesis”. In one of his studies, Hull (1934) found that rats in a straight alley ran progressively faster as they approached the food at the end of the alley (see graph below).

Kivetz, Urminsky, and Zheng (2006) showed that the goal-gradient hypothesis applies to humans by conducting a series of neat field experiments. One of them took place in a café and involved loyalty “buy ten coffees, get one free” schemes. They found that clients purchased coffee more frequently the closer they were to earning a free coffee. Very similar to the behaviour observed in Hull’s rats!

Have you ever wondered why some places stamp your loyalty card twice when you ask for one? Is the barista being nice to you? Probably not… It’s another trick! Kivetz and colleagues (2006) showed that the illusion of progress towards a goal induces even larger purchase acceleration. In our case receiving a 12 stamp coffee card with 2 “bonus” stamps results in completing the 10 required purchases faster compared to receiving a “regular” 10 stamp card. A similar field experiment was conducted by Nunes and Drèze (2006). This time it took place in a professional car wash; they distributed loyalty cards to car wash patrons. Half of the loyalty cards were given 2 “bonus” stamps (“endowed cards”), while the other half were regular and only received one stamp. Both loyalty schemes required 8 visits to qualify for a free wash. The authors found that the average time between car washes for patrons with the endowed cards was less than the for patrons with regular cards. Furthermore, patrons with endowed cards were more likely to return to the car wash and collect all the required stamps. This is known as “The Endowed Progress Effect” or “the illusionary progress effect”. But why? Giving away free stamps makes the task appear as being in progress. Previous research (Fox & Hoffman, 2002; Garland & Conlon, 1998) suggests that we are motivated to complete tasks we have undertaken in order to remain consistent with our previous intentions.

Will knowing about the effect stop you from taking part in loyalty schemes?

References

Fox, S. & Hoffman, M. (2002). Escalation Behavior as a Specific Case of Goal-Directed Activity: A Persistence Paradigm. Basic and Applied Social Psychology, 24 (4), 273–285.

Garland, H., & Conlon, D. E. (1998). Too close to quit: The role of project completion in maintaining commitment1. Journal of Applied Social Psychology, 28(22), 2025–2048.

Hull, C. (1932). The Goal Gradient Hypothesis and Maze Learning. Psychological Review, 39, 25–43.

Kivetz, R., Urminsky, O., & Zheng, Y. (2006). The goal-gradient hypothesis resurrected: Purchase acceleration, illusionary goal progress, and customer retention. Journal of Marketing Research, 43(1), 39–58.

Nunes, J. C., & Drèze, X. (2006). The endowed progress effect: How artificial advancement increases effort. Journal of Consumer Research, 32(4), 504–512.

(story originally published in It’s all in your mind)