What exactly is the Endowed Progress Effect? It is a breakthrough piece of consumer research by professor Joseph Nunes and Xavier Dreze that analyzes how artificial advancement affects customer effort when it comes to loyalty programs. Simply put, customers will spend more to reach a goal if they are given a head start towards meeting that goal. Take for example a study on the behavior of customers who got a free carwash after purchasing 8 carwashes. Researchers gave out 300 loyalty cards to random customers. 150 of the loyalty cards had 8 blank spaces and a free space.
A total of 80 cards were redeemed with 720 visits. The redemption rate of customers possessing a card requiring a total of 8 stamps was 19% – not too bad. The redemption rate of customers possessing a card requiring a total of 10 stamps (remember 2 stamps were provided from the start) was 34% – that’s nearly twice as many redemptions! This study would suggest that people are more likely to reach a goal if it has already been started for them. It can be daunting starting any new task, and a loyalty program is no exception.
What are you doing to get your customers engaged in your loyalty program (if you don’t have a loyalty program, you are far behind the curve)? Nobody likes starting a new task from scratch – give your customers a head start.