Earning The Right To Indulge: Effort As A Determinant Of Customer Preferences Towards Frequency Program Rewards

Although frequency programs (FPs) have become ubiquitous in the marketplace and a key marketing mix tool for promoting customer relationship and loyalty, we still know very little about the factors that determine how such programs are evaluated by consumers. The present research investigates the impact of the level of effort that participants must invest to obtain the reward (e.g., the required number of miles, points, store purchases) on the types of rewards they prefer and, consequently, on the decision to join the FP. In particular, we propose that higher required effort shifts consumer preferences from necessity (e.g., gasoline or supermarket vouchers) to luxury rewards (e.g., massage, cruise), because higher efforts reduce the guilt often associated with choosing luxuries over necessities. This proposition was supported in a series of studies with approximately 3,100 consumers, which demonstrated that (a) higher program requirements (e.g., 50 vs. 10 required purchases) shift preferences in favor of luxury rewards, (b) this effect is also observed when consumers choose between luxury and necessity rewards (of the same value) that they themselves proposed, and (c) the effect of effort on reward preferences is stronger among consumers who tend to feel guilty about luxury consumption and among those for whom the effort is invested in the context of work rather than pleasure. In addition, contrary to an alternative explanation based on the notion that higher effort signals higher value of luxury rewards, we show that (a) when the program requirements are held constant but the individual consumer’s effort is higher, the shift in preference towards luxuries is still observed, and (b) increasing the monetary cost of participating in the FP decreases consumer preferences for luxury rewards. We discuss the theoretical implications of this research as well as the practical implications with respect to the design, targeting, and promotion of FPs.