How we change what others think, feel, believe and do
The ChangingMinds Blog!
Joseph C. Nunes and Xavier Dreze, professors in the University of California Marshall School of Business in Los Angeles and the University of Pennsylvania's Wharton Business School, respectively, did an interesting experiment with a car wash business as a part of their study of loyalty programs.
They ran two very similar programs together and examined the difference in
behavior that they engendered. In one program, they gave away stampable cards
that gave free wash after 8 visits. Thus, every time you have a car wash you get
your card stamped, and after eight, you get the ninth free. In the second
program, they gave exactly the same economic benefit, but now offered stampable
cards that gave a free wash after 10 visits, but with two 'free'
Another thing that they found was that the time and effort taken to gain rewards was important. Too easy and they would not value it as highly. Too difficult and they would quickly give up. For example, they found that a grocery store that offered a $50 reward for every $500 spent led to greater loyalty than either a $10 reward for every $100 spent or a $100 reward for every $1000 spent.
There was also a June 2006 Harvard Business Review article by them, in which they suggested that loyalty programs, done right, can offer five benefits:
Here's a news release about them: http://www.usc.edu/uscnews/news_releases/detail.php?id=113
More details here: http://harvardbusinessonline.hbsp.harvard.edu/b02/en/common/item_detail.jhtml?id=4095