Gamification of Retail Loyalty Programs

Retailers have used loyalty or membership rewards programs as a customer retention tool. Research by Accenture Labs shows that “42 percent of customers are enrolled in retail loyalty programs, and these customers generate 12 percent to 18 percent more in incremental revenue compared to non-members.” Predictable rewards programs – “buy $x, to earn y points/rewards” are so common that they are no longer a differentiating factor in retailer choice, consumers expect them.

 

Researchers at the University of Chicago Booth School of Business conducted four experiments in lab and field settings and found that uncertain rewards are more effective in motivating consumers to make repeat purchases than certain rewards, even when the uncertain reward makes customers worse-off than certain rewards.  In their study, “The Fun and Function of Uncertainty: Uncertain Incentives Reinforce Repetition Decisions,” Drs. Shen, Hsee, and Talloen explain that the psychological boost consumers experience when the unpleasantness of uncertainty is resolved motivates consumers to repeat their actions.

 

Many subscription-based online retailers use uncertain rewards to gain and retain customers. Birchbox, Blue Apron, BarkBox, and Stitch Fix send their subscribers a mystery box each week or month with a different combination of products. Customers look forward to opening the boxes and enjoy discovering products. The uncertainty keeps customers continue their subscription.

 

 

Tom Ryan, discussing this research in the RetailWire article, “There May Be Benefits to Adding Uncertainty to Rewards Programs,” and several BrainTrust experts comment that “discovery, chance, mystery, surprise, and delight are all essentially emotion-based concepts, and that’s why they appeal to shoppers/consumers in the loyalty space” (Anne Howe) and that the “uncertainty gamble” only works if the consumer likes the surprise products and services. Consumers provide their product preferences that subscription-based online retailers use to create their surprise assortments for the mystery boxes.

 

This entry was posted in Online Retailing, Part 3: Targeting Customers and Gathering Information, Part 6: Merchandise Management and Pricing, Technology in Retailing, Video Clips (non-career) and tagged , , , , . Bookmark the permalink.

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