Spend Consideration on Money versus Points

Many customer loyalty programs allow a member to use accumulated points to acquire items which also could be purchased from the marketer with money. Researchers at University of Calgary, The University of Western Ontario, and University of Georgia were interested in what determines which of the two currencies the customer will choose to spend.
     This matters because there are arguments for preferring our customers use their points. For instance, the researchers report prior studies showing that the action of redeeming points motivates further sales. But there are circumstances where we’d prefer to have customers build their point total for future use and give us additional cash income now.
     The researchers hypothesized that what is central to a customer’s decision whether to use their points or their money is the difference in how people conceptualize the two. Consumers tend to think of specific, relatively small dollar amounts in concrete terms, with a focus on the feasibility of the expenditure and on the gain in the short term. We’re accustomed to spending money and are able to define its value across a range of contexts.
     By contrast, people conceptualize loyalty program points in more abstract ways. For one thing, the value of a point is determined by the specific marketer so is hard for the consumer to concretely define. For another thing, the accumulation of points usually occurs in ways less direct than with how money is obtained. We get points while our mind is on making a purchase, not on the fruits of our labor, and we might be given bonus points by the marketer for reasons we don’t fully understand. Thinking about points carries the hypotheticals of thinking about the future.
     This reasoning, validated by the researchers’ studies, leads to recommendations: 

• When you prefer customers spend their money rather than their points, offer items which are available promptly and are easy to use. 
• When you prefer customers spend their points, offer items which are of highly desirable quality, with less attention to the practicality of the item. 
• When you prefer customers spend their money, offer abundant concrete details about the items. 
• When you prefer customers spend their points, offer experience items, such as concert tickets and hotel stays.

     Clearly, there are additional considerations for consumers. For example, they would be much more likely to use up their points if learning those points will expire very soon.

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Profit from Status with Loyal Customers 

Grace with Loyalty Point Expiration Extensions 

Vary Velocity for Loyalty Program Motivation 

Contract with Near-Term Use via Contractions

Realize Realities of Cause-Related Marketing

In cause-related marketing (CRM) promotions, a marketer pledges to donate a small portion of sales revenues to a nonprofit organization or cause. Past studies say such promotions improve brand attitudes and purchase intentions. But while taking note of those conclusions, researchers at Vienna University of Economics and Business, University of Hamburg, Vrije Universiteit Amsterdam, and University of Groningen say that the conditions under which the studies were conducted are not sufficiently representative of the typical conditions under which marketers conduct these promotions.
     The most common use of CRM promotions is by marketers of fast-moving consumer goods (FMCGs), such as in grocery stores, where a shopper is choosing from a multitude of alternatives under time pressure. The vast majority of past studies, however, have been conducted in lab or field settings where participants are choosing among a few alternatives with ample time to carefully consider them all.
     In their own study, the researchers analyzed 63 actual CRM promotions including a range of 20 grocery and drugstore product categories. The average duration of the promotions was 11 weeks, and the average donation amount was about 3% of the product price.
     The average sales lift from the promotions was about 5% per week. But the most successful of the promotions accounted for the realities of FMCG contexts: The shopper should want to buy the particular product for reasons other than the charitable contribution. Sales lift can more than double when the brand is a market leader in the category or the item is priced below the alternatives in the category. The sales lift also was greater for categories with few alternatives and when the price differences for equivalent items were small.
     The combination of contribution to a charity with discount for the customer was also explored in a Temple University, Aalto University, Hanken Swedish School of Economics, and Sichuan University study. Analysis of results showed that a moderate discount in this situation works better than no discount or a deep discount. The moderate discount used for the studies was 30% and the deep discount was 50%. In discussing their results, the researchers say a discount in the range of 10% to 30%—more than only 3%—would be best for increasing sales.
     Why doesn’t a deep discount boost item sales as much as a moderate one? Because the deep discount erases the motivation of feeling charitable. People are buying for the price alone.

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Double Down on Cause Marketing 

Cause Donations to Enhance Business Credit

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Consider Shaming Captive Consumers

Encouraging our customers, clients, and patients to take responsibility for their behavior offers advantages to us. Placing a mirror behind the places where you accept complaints reduces the intensity of customers’ dissatisfaction. When a consumer sees an image of herself, her self-awareness increases. This leads to the consumer subconsciously considering what part she played in the unsatisfactory experience.
     When a health care professional is meeting with a patient who has not complied with medical recommendations, subsequent compliance is more likely if the health care professional demonstrates disappointment and impatience while analyzing the reasons for noncompliance and developing a corrective action plan.
     However, this holds true only when the complaint desk staff demonstrate their commitment to solving the problem and when the health care professional’s initial reaction is positive concern for the noncompliant patient. We want to induce guilt without activating shame. The distinction is that shame arises when a person perceives not only that they’ve behaved badly, but also that the bad behavior signaled an immoral personality.
     Guilt motivates attention to the specific behavior or behaviors. Shame instead motivates attention to the self in ways which make it harder for a person to see their positive qualities. It can lead to self-punishment. When a consumer feels ashamed, they’ll want to run from those who are making them feel that way, and we don’t want our consumers running away from us.
     Yet how about the situations in which the consumer can’t run away? In this case, a small dose of shame might turn the trick.
     A set of studies at Imperial College London, University of Chicago, Monash University, and University of Warwick explored reminder alternatives when a government agency has overpaid a citizen on a claim and is now demanding that the citizen reimburse the excess. Ivo Vlaev, Professor of Behavioural Science at Warwick Business School, and his fellow researchers compared two messages to be sent to debtors. One message framed the nonpayment as a matter of omission or inaction: “Our records show you have not been in touch about this.” The other message framed the nonpayment as an intentional commission: “Our records show you have not been in touch about this. Previously, we treated your lack of response as an oversight. Now, if you do not call [telephone number], we will treat this as an active choice.”
     Repayment rates within 30 days of message receipt were almost double with the commission phrasing compared to the omission framing, 23% rather than 12%.

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Mirror Responsibility at Complaint Desks 

Increase Health Compliance by Easing Stigma 

Aim Away from Shame 

Round Down Accounts Receivables 

Identify When to Use Self-Identity Appeals

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Swirl Absentee Ballots for Windy Weather

It makes sense that high winds on Election Day dampen voter participation. People hesitate leaving home or work when the weather is bad. It’s less obvious how even moderate wind speeds lead voters to select more cautious policy alternatives, on average, when they get to the polling place.
     The explanation is that moderate wind speeds, compared to lower wind speeds, activate an urge to protect against losses, according to a team of researchers at University of California-Berkeley, Harvard University, University of Zurich, and Columbia University. The effect is an example of the promotion-focused versus prevention-focused distinction seen throughout consumer psychology research. People in a promotion-focused mindset seek opportunities for growth and are interested in creativity. People in a prevention-focused mindset seek security and avoid risks. The researchers verified in their studies that outdoor windy conditions move people toward a prevention focus.
     The researchers emphasize that this makes a difference only when the voter is choosing between what the voter perceives as promotion- versus prevention-oriented alternatives. The study data were collected on ballot issues such as immigration restrictions, Scottish independence, and Brexit from voters who voted or could vote on those issues.
     Along with reporting the results of their findings regarding wind speed, the researchers cite prior studies showing how other weather phenomena, such as rain and heat, influence decisions. They advise election administrators to stay aware of these factors, which may appear irrelevant. To bring election results closer to the true sentiment of the people, the researchers recommend making mail-in voting and early voting available. Spread the effects. Windy weather on Tuesday may have been preceded by a week of calm weather, and a windy weekend might be followed by a calm Election Day.
     Evidence is it’s not just a moderate wind which can influence decision making. Researchers at University of Massachusetts and University of Houston found that a gentle wind blowing in a person’s face increases openness to innovative ideas—the opposite of what was found for a moderate wind in the election influence study. These wind-in-the-face studies compared the effects with those of wind blowing on a person’s back.
     The front of the head is more sensitive than the back to airflow. The researchers attribute the effect to energizing the individual. It should be particularly relevant for the many consumers in society who are not only constricted in their thinking, but also too fatigued to think innovatively.

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Promote Supervision Which Prevents Problems 

Dog Decision Rigor During Dog Days 

Unwind Rejection Using Wind in the Face

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Grasp Profits from Enjoyment of Crafting

In my tale for today’s post, a man possessing fine aesthetic tastes comes across a distinctive handmade vase at a craft fair. He locates the artist to express his admiration and present a special request. “I’d like to purchase two more which look just like that one to give to friends. How much would it be for the three?”
     The artist thinks for a bit, then replies, “You saw that I want $75 for the vase that’s there. My price for the second one would be $100 and for the third one, $150.”
     “I don’t understand,” says the man. “Why would you charge me more for the copies?”
     “It’s because when I make duplicates, it changes the joy of craftsmanship into the burden of toil,” explains the artist.
     An explanation consistent with conclusions from a study at Tilburg University, Northwestern University, and Lehigh University. Well, actually, perfectly consistent with the obverse of one of the conclusions. The researchers report that sellers will accept lower prices for merchandise they enjoy making and services they enjoy providing.
     But it’s an additional conclusion which is of more interest to retailers: Shoppers are willing to pay higher prices when they learn that the seller enjoyed producing the items. Shoppers are also more likely to click on ads for the items and to end up purchasing the items. The researchers’ explanation, supported by their studies, is that both sellers and shoppers view production enjoyment as leading to higher quality outcomes, but only the shoppers rely on this view when determining a proper item price.
     An important condition is that these conclusions apply only when the shopper believes that creating the particular item requires specialized skills. We don’t expect to see it with automated mass production or simple manual assembly.
     The production enjoyment effect is quite different from the commonly experienced endowment effect, in which, with items carrying an emotional attachment for the seller, sellers tend to set noticeably higher prices on items than shoppers are willing to pay. A possible reason for the difference is that the endowment effect is usually encountered when the seller is not the same person as the manufacturer, such as with sales of secondhand merchandise.
     When facing the endowment effect, consider lowering prices. When facing the production enjoyment effect, consider raising prices. And for items which require specialized skills to produce or provide, give shoppers evidence of your enjoyment.

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Harvest the Joy of Selling Your Creativity 

Wash Your Hands of the Endowment Effect 

Gimme Some Lovin’ Handmade

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Slow Shipping to Reduce Returns

Provide customers ample time to work through regrets about purchasing from you. That’s a takeaway tip suggested by a study based at Julius-Maximilians-Universität Würzburg and Goethe University.
     The researchers analyzed data from about 1.8 million ecommerce customer orders. The average delivery time for an order was about five days. With an important exception, the rate of item returns for items delivered in a shorter time was significantly higher than the rate for items delivered in a longer time. The exception: When delivery was substantially delayed, rate of item returns climbed.
     Two explanations for this exception are that customers get irritated at the retailer when a delivery date promise is not met and that when delivery is substantially delayed, people find another source of supply.
     The researchers’ explanation for the main effect of somewhat longer delivery time decreasing item return rates is in terms of cognitive dissonance, a phenomenon familiar to every introductory psychology student, often via its nickname “buyer’s remorse.” Often at some point in time after making a nonroutine purchase, the consumer doubts the wisdom of their decision. The highest probability for buyer’s remorse is shortly after the purchase, so this is when we’d expect item returns to be most likely. As time passes without an item return, the consumer begins rationalizing the purchase, generating for themselves reasons the purchase was not, in fact, deserving of remorse. We’d expect the rate of returns to drop. And this is what happened in the study when delivery time was longer rather than shorter. The cognitive dissonance explanation was supported by an informal follow-on study in which some customers were asked about reasons for their returns.
     The researchers report the evidence from past studies that shoppers are attracted by promises of prompt delivery, and they recommend that retailers balance this factor against the advantages of lowering costly returns. Their filtering of the data collection is still another argument for using the study results as an impetus for your own exploration of what delivery times are most profitable for you. Data in this study were collected from only U.S.-based shoppers at one very large online retailer and excluded transactions in which it appeared the customer was ordering a large number of similar items because they weren’t sure which size would fit best, for instance.
     If longer delivery time promises aren’t advisable, consider other research-based methods, such as putting a clock image on the order form, to reduce item returns.

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Delay Assumptions About Fast Shipping 

Sharpen Time Sensitivity to Reduce Returns 

Quote Measurement Units for Future Buys 

Shower Cold on Regretful Customers

Motivate the Rushed Toward Motivated Reasoning

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