279. Creating an Irrational Loyalty Program at McDonald's with Lauren Kemp & Stephen Springfield

Welcome to episode 279 of the Brainy Business Understanding the Psychology of why People Buy. In today's episode, I'm excited to introduce you to Lauren Kemp and Steven Springfield to talk about how they created an irrational loyalty program at McDonald's. Ready? Let's get started.

You are listening to the Brainy Business Podcast where we dig into the psychology of why people buy and help you incorporate behavior behavioral economics into your business, making it more brain friendly. Now, here's your host, Melina Palmer.

Hello. Hello everyone. My name is Melina Palmer and I want to welcome you to the Brainy Business Podcast. In today's conversation, I'm joined by Lauren Kemp and Steven Springfield, whom I first saw while they were giving a presentation at Greenbook's iiex Behavior last fall. The talk was all about how they used behavioral science to create an irrational loyalty program at McDonald's, and I knew instantly that I had to have them on the show to talk about this project, its insights and what you can learn from it. It is such a great case study showing how real people inside organizations, and in this case working with a great consultant can create a program that infuses behavioral insights in a smart way that's often counterintuitive to find a win win for the company and its customers. You'll also hear tips from Lauren about how she did her literature review and lots of other great insights. And do know that while we joke a little about not loving the term irrational as it's popularly used in behavioral science, if there was ever a program that proved a lot of the choices people make and what they want isn't exactly rational, this would be it. You'll see what I mean as they dig in on that case study later in the episode. Since we have two guests today, I'm going to let them introduce themselves instead of reading their bios here in the intro. But do know there are ways to get in contact with them along with related past episodes and articles all waiting for you within the show. Notes for the episode, which can be found within the app you're listening to and atthe brainy business.com279 now let's jump right in. Lauren, Steven, welcome to the Brainy Business Podcast.

Thank you. Great to be here.

Oh I'm so excited. As I am sure I will have said in the introduction, we met after a conference that we were all speaking at and you were on the stage and I remember you were presenting and just instantly saying yes, this must be on the podcast. And then just I didn't say this to you in our pre call but like your. Your information wasn't in the app when I was going to try and find and contact you. And then I didn't have the name but I was thinking I was going to go back and get the info as one does. And so I was having to go hunt you down and reaching out to Green Book and then to my very good friend Will Leach, who thankfully knew Lauren. And so here we are, we're able to make it happen. You know, we're talking about six months after that conference took place. So thank you for coming to talk about it. And now as everyone's saying. So why like what are we talking about? If you can each introduce yourselves, share a little bit about your background and then we'll talk about the work that y' all did together.

Well, thanks for tracking us down. Sorry, I didn't realize. So undercover.

Yeah, I think it was just a weird quirk of the world right. That it wasn't in there. So. No, I was determined. A super sleuth. Carmen San Diego taught me well as a child, I guess. I don't know.

Likewise. Also a fan of hers. But yeah. So thanks for having us, truly. Lauren Kemp I work in consumer insights at McDonald's on the US team specifically. So focused on our US business. It is 40% about ish of our total business. I've been there for a little under six years all focused on how can we better serve our customers and give them more of what they want with our delicious craveable food. And that's what I work on.

Awesome. And Steven.

Yeah. So I'm founder and principal of Aspen center for Consumer Science. We are based in Aspen. It is not simply an aspirin aspirational idea, although it is aspirational always. We are behavioral science firm. We actually our major thrust is understanding human response to narrative and story. So we do a lot with creative creative development, brand meta narratives, things like that. We do a lot of ad testing but in this particular case, Lauren and I go back a ways. Before the Aspen Center I was partner in a behavioral science research firm and I think that's where we first met. Started working on some of this together. Was there for about six years and if you want to know my background before that I was 20 plus years on the client side doing sort of what Lauren does and what a lot of folks do or probably listen to this program, venturing into the consultative arts, insight strategy, analytics, helping other people make better decisions. And I did that at Coca Cola and PepsiCo for those 20 plus years. I'm not going to be specific because somebody will be adding all this up and figuring out that I color my hair. So anyway, so, yeah, so we do custom studies studies like the one we did with McDonald's, because who turns down McDonald's for a custom study on loyalty, right? Yeah.

No smart person that's a.

No brainy person does that.

Yeah. Well, I would love to dig in a little bit more on each of your backgrounds. And you know, Steven, since you were just talking about yours, so how and when did you find the behavioral sciences? Because, you know, in the timeline we're talking about there, it seems like pretty early, you know, early in a lot of what's been happening. So can you share a little bit about. About that background?

Yeah, yeah. So, I mean, I've always been a real student of academia. I mean, I had. When Google Scholar came out in beta, I was all over it. So every day was a literature review for me. I just really love, you know, the novel findings. Like everybody does, right? And I think what attracted me to behavioral science and behavioral economics was the same stuff that attracts everybody else is the novelty and the magic of the irrational. It's just so gripping. And it's ironic though, because I think as I've gone through that entire process, you come to realize as you look at the codex of 188 plus cognitive biases and growing, you kind of realize that maybe we shouldn't be deconstructing all of our biases and just recognizing that we're just not reliable as rational. Understanding of truth just is not reliable at face value. And that's one of the topics we covered at that conference, is that behavioral science isn't really about the irrational and the crazy cool stuff. It's about the scientific process applied to understanding behavior. And so in prep for the conference, I looked up the basis. The impetus of science was simply to overcome human biases. As we observe things, we think, oh, well, we must be the center of the universe. The stars seem to go around us. And then you apply the scientific process and understand that's not the case. So really what's happened is I've gotten a much more, I don't know, a much more balanced view of behavioral science as simply the scientific process applied to human behavior. And yes, from that you will find irrationalities, you will find some things that are crazy and cool and all of that, but it really is just science. It's traditional. And I think the, the dissonance comes from our expecting that what we think is right and true. That's where the dissonance comes from. It's like once you understand that what's inside here isn't meant to find the truth, it's just meant to find consistency, some consistent narrative, then you dismiss the way we think we think, and then you're able to be free to explore the science. So probably more of an answer than you wanted. But that really led to some of the themes that we covered at the conference when we said how to develop an irrational loyalty program, knowing that the irrational would attract people to the talk. And then we dug into. Hey, guys, you know, behavioral science isn't just about the funky weird stuff. It's just science.

Yeah, no, I love all of that. And it's so true that while, you know, we all love and appreciate. I'm sure Dan Ariely, he's been on the show before, and the irrational term in the same way of something that, you know, predictably irrational. Great book. And then, you know, there's this conversation of, like, is it fair to say it's irrational? You know, is that the right word that we want to be putting out there and everything? You know, that whole conversation that comes up, but so totally get what you're saying, where it's. There's a reason for it, it makes sense on some level. We just need to know what that level is and have that awareness of whatever the connection is that's being made. You know, there's. There's some logic in there. It makes sense on some level.

Yeah. And not to take all the time. I know you ask a question, but just in case this is important, most of the irrationalities, and I agree with you, to call it irrational may mean that it doesn't make sense, but it does make sense on some level. If you knew all the inputs, all the emotions, all the subjectivity, everybody would be making rational, more rational decisions all the time. They would appear to be where we tend to call things irrational much of the time. Not all the time is where there are intangible benefits. And so Lauren and I, we talked about what was it about this irrationality that we should care about? Why care about irrationality? And so we made a case. And I don't have to talk about the whole thing here, but we made a case at the conference that irrationality is where all the profit is. And I'll leave that as a teaser and then we'll move on to your next question.

For sure. And definitely, I know there are some of the points in there that I was really excited to see that very much line up with what you just said. So I think people are going to like to hear about that. Lauren, let's make sure to share a little bit more about your background. You know, how did you get into consumer insights? Did you do that before coming to McDonald's? Did you just sort of find yourself in this role? Did you study that? You know, yeah.

So I, I majored in psychology and anthropology in undergrad, and I was one of those super nerds who spent all of their time in the psych building running research for professors on my fellow classmates. And I just really fell in love with the research project, like, process in undergrad. I loved having a question or a curiosity, getting to design a way to answer that question and then, you know, running it and getting the results. And I was planning on going to grad school and getting a PhD and continuing on, you know, the professorship path, because that was certainly what all of my mentors were who were in similar positions encouraging me to do. And I got cold feet. So I, I was like, I don't, I don't know if I want to take on, you know, more student loans. You know, what's this whole career thing people have been talking about? All I've known up until this point is school. Let's see where I can apply this passion and this skill set. And I googled research careers and I read the Wikipedia page for the market research industry, so completely stumbled into it and it just clicked from there. It just made so much sense. Like, obviously, you know, large multinational companies are not putting things out there without having some level of insurance that it will sell well or do well for their business. And consumers are at the center of that. So I, you know, applied to every, I applied to supplier side first because that, you know, what I had gleaned from the Internet was that was the best way to get your foot into the industry. I landed at a, an internship at a small boutique firm called Brain Juicer. They were pioneers in this, you know, whole behavioral economic space at the time and just worked my way up there while I was there. McDonald's was actually one of my primary clients. I worked quite extensively with that team. And then after about five years there, I left and went to an even smaller boutique product design and innovation agency and set up their quantitative consumer testing practice. They had been quite focused on qualitative methods, and so their clients were asking for a little bit more rigor. You know, hey, it's nice that we heard these 11 opinions, but, you know, can we maybe ask more people? So I was there for a little over a year, and one of my former McDonald's clients called me up and said, hey, I'm moving teams. Do you want to take my job? And so I did. And I've been there ever since, working on McCafe McDelivery quite extensively over the past few years on, like, customer experience and the digital platforms, which was when the loyalty program, you know, landed on my desk.

Yeah, well, perfect segue. I feel like you planned it. It's. So with that, then let's talk about the loyalty program. So, like you said, it landed on your desk. Let's talk a little bit about the story of kind of what happened here. So what happened?

So all of our digital capabilities and platforms are managed by our global team. And so we had been. I mean, McDonald's, as you can imagine, we've been kicking around the idea of a loyalty program for, gosh, I want to say, close to a decade. So even before I got there. And our global team, you know, put pen to paper and really started, you know, shaping this thing up. And they created it in such a manner that they could hand it over to the individual markets and leave some space for the markets to make their imprint on the program and make it work for their market specifically. So they developed it to be on the app. And the decisions that they left open to the markets were things like, okay, we're going to give points per dollar, but how many points per dollar, you get to decide the rewards menu. We are going to make it a tiered rewards menu. You can decide the structure of that rewards menu, what products you put on it, what tiers they sit at, how many points you want to, you know, charge for them all up to the market. So we had sort of set parameters given to us for this project from the global team. As far as, you know, these are the blanks you can fill. You can fill in. And because I knew we were somewhat last to the table with a program like this, you know, loyalty programs have been around since the 80s with, like, airlines and hotels. My first instinct was to go learn from those other industries and academia, because it's not loyalty. And loyalty programs weren't a new thing. They were pretty well established in other industries and other places, and I knew they had been studied quite a bit. So I. I wanted to figure out, okay, what is truly the intent of this loyalty program for us, and then how do we, you know, best make the decisions around these parameters to make it be the most influential for our customers and the most meaningful to our customers? So Conducted a literature review, academic, old school academic literature review, went on Google Scholar. At the time I was in grad school. So I leveraged the library there and just pulled as many, you know, academic and industry based articles. You know, really doing a secondary research landscape of, you know, what, how can, what is going to be most important for a successful loyalty program and how can we best design it to be successful? So is the first step really forming solid hypotheses around each of those questions?

Well, I'm gonna, I'm gonna stop you and we're gonna stretch this out. So I, I like, I know in, in most places maybe you say like I did a literature review and they're like, okay, we don't need to, that sounds boring. We don't need to talk about that. And I'm gonna say like, no, no, wait, wait. I told you, leading in. I know that the audience is going to be very interested in this literature review process. And if they, if you're not, you should be right? So this is so foundational to what you're doing. I have an episode called what problem are you solving? You know, and the biggest issue I see in business, when one, of course, when you're looking to apply behavioral science, whether it's with my clients or interviews I'm doing, or if you're just working on any sort of project, which is always behavioral whether you think about it or not, the, the problem is not spending enough time thinking about the problem and understanding the questions. And like you said, you know, you both have said about building an irrational loyalty program, but there is a lot of understanding there, right, to say, what's the right question you're asking? And you know, bravo to everyone at McDonald's that left you the, the, the space to be able to build out the program and with a lot of room and flexibility within those defined parameters. Because too often the thing that's handed to you is someone decided that like, well, I bet we should have like this is here and this is that and this is the most important thing and I want to give away whatever. And so like this is the prize. And then you're kind of stuck with something that's not going to be as motivating as it could be. So, so let's talk a little bit about that approach to the literature review and tips or advice you have for someone and going beyond, you know, so one Google Scholar is our friend. If you don't already have that bookmarked, do that now for sure. But what's your approach to the literature review? And like you said, thinking about the question and making sure you were asking the right questions. Maybe because the way it landed on your desk, I'm guessing, is not what you ended up researching.

No, I guess the. And this was like spring, summer of 2020, so forgive me if my memory is a little fuzzy at this point.

But was something going on at that point in time? That's a joke. You know, just a little.

Just a little something that impacted all of us at the same time.

All right, sorry for the. Yeah, yeah.

No, I mean, yeah, very. I guess, like, that's part of the. The, like when you mentioned space and time to be able to do it, I wasn't doing much of anything else, so why not read some academic articles that could make me smarter in the workplace?

Yeah. Serendipitous timing, right?

Yeah.

Yeah. To have the free time to be able to do extra work and get a master's degree, which is the pandemic, was why I did that. The thing that was really important to me is that I didn't want the program to feel like another. Like we were doing this just because we felt like we had to do this because everybody else was doing it. Like I really wanted it to have. And I think that that's important for Insights professionals. Doing what we do, we're often not the decision makers. We are the people influencing the decision makers with a set of information. So for me, it was all about driving the program to be as profitable as possible and enabling us to, you know, better serve our customers in the future. Because consumers are smart, consumers are savvy. They know they're. They're providing their very valuable personal data to the company every time they identify themselves as a member of a loyalty program. And we know how important that is for CLV and CRM and, you know, et cetera, et cetera, as far as, you know, leveraging that information on the business side and so that it needed to entice customers to have, you know, to engage with the program. And that was also really important to the people leading the project. They wanted it to be a consumer centric program and to set us up a little bit apart from our competitors. So starting from a place of understanding what other competitors had been doing and what things had worked in other industries just made sense to me to not start from zero, because it isn't, it isn't a new thing. I guess the process that I took to the academic, you know, literature review was really just getting my hands on as much material as possible. And what I ended up doing Was, you know, highlighting those really important passages and bringing those proof points back to the team and saying, you know, these really smart researchers at Yale, these really smart researchers, you know, here, this example from the airline industry, like, these are things that we need to keep in mind as we are shaping and developing this program for our consumers. So obviously summarizing the information for the team was really critical. And then just, you know, using that information to make really smart hypotheses about the decisions that we needed to make about the program. As far as, like, let's take points, for example. Points are, it's not actual money. It's not, you know, it kind of can feel like monopoly money at time. It's not, you know, you can only spend it at that retailer for their products. So it's somewhat limiting. But there is a power to having points, like, feel almost more rewarding than dollars than the dollars you spend. And so how could we capture, you know, that feeling of them being, you know, being rewarded when they got points? And then also, it had to be transparent enough for people to really understand that translation between, oh, I spend $5, I get 500 points like that. Like, to have that calculation be really easy to understand was also really important because consumers don't like it when, if they feel like they're being tricked or like it's clouded. And, you know, transparency is so huge in our culture these days. So, you know, those were kind of the two things that I discovered in the research that were things that we needed to drive towards for the answer, like, as important for the answer.

The academic review is really important for us because it really scoped this thing tightly. I mean, this was a gift of a project because we've had other loyalty projects before where it feels like a survey, an ANU survey. Like, what do you love about loyalty? I mean, just nonsense. And so this project was scoped so clearly one, because there was already somewhat of a framework, you know, where not everything was included. And then on top of that framework that had, like, really tight, like you said, sort of plug in the answer type stuff, it allowed us to go deep. And like Lauren said when she did this academic literature review, now we know what we don't need to research because it would be redundant. It's already known. It's already been well proven. And what novel aspects can we add to the literature to some degree if we, if we, if we do this right? And so that was great. And I think one of the most interesting things we found was that, and this is just cursory reading A few of the the research articles is that the value of a loyalty program is engagement with the program itself, not the reward that you get. The reward that you get for paying money for other items is transactional entirely. And if somebody just redeems every time they get points, that's just serial redemption. That's quid pro quo. You might as well just coupon. So what we're trying to create is an irrational sense of fun and engagement and collecting and all those human motivations we have that creates value above just pay so many times. Get free item. And if you ask people what they want from loyalty program they want, I want it simple. I want to be able to get my favorite items free as quickly as possible and redeemed as easily as possible, period. So they want transaction and they want the transaction to be in their favor. We know that you don't need to go ask questions and do surveys and stuff. What we had to do was do empirical research to understand what things made people do things that were a bit crazy. You know, where you're doing things that maybe aren't in your best interest, tangibly, objectively, but that you're getting something intangible out of engaging with this program. And the real trick here is that all the literature focused on things like levels of programs where you get VIP status. Think about your airline rewards where you're a gold member of platinum. Now you get to go to the front of the line, and now you get to do all these. This program didn't allow for a lot of that. So we had to find really subtle ways to create engagement like Lauren was talking about, where the points would convey some sense of status, where there was some interest that you might have in approaching higher levels so you wouldn't constantly just redeem for the lowest price item possible. So that was a big learning for us. And we had to talk to some executives about why you don't just want somebody that collects the points and redeems. Collects the points and redeems. There's a lot of profit in just collecting and not redeeming.

I'll just say that for sure.

Yeah.

Not to mention cash flow.

One quick question just to go. And I promise I won't make us talk about the literature review forever. But I would love to know how much time did you spend in literature review before jumping into the project? And so in this way, you know, obviously you don't have to have a specific number of days or hours that you spent, but about how much time would you say you spent in that process? And how much was just this gonna see what I can find before you, you know, trying to prove something?

Yeah, I think it was maybe a week or two. Like max. Yeah, it wasn't, you know, I would say it wasn't. I, I didn't want to boil the ocean because that takes time and effort. So I, I went for the, the quick hits, the, the really often cited articles. You know, that was a shortcut that I took to, to sort of narrow the field of reading. I, I definitely looked outside of our industry, but took a lot of examples from inside of our industry because, you know, we're very focused on our industry, obviously in QSR and ieo, informal eating out. That's an internal term for y'. All. We love our TLAs, our three letter acronyms. So, yeah, it was. I didn't really take a whole lot of time because we needed to move quickly to designing, you know, getting the answers. And I think that, you know, the team appreciated sort of. Okay, well, here's our starting point for how we then go get those answers for our brand. Because we knew we were going to be doing primary research. And it was just important to me to have a. Found a solid foundation to build that primary research upon. Especially because, you know, selfishly, this was a really high profile project. This was, you know, the thing on, you know, the tip of everyone's tongue, top of leadership's mind. I knew it was going to be getting a lot of internal visibility and so I knew it had to be rock solid. And to me that means a solid foundation from, from which to build upon. So didn't take too much time, just enough.

But it's good, important time. And for someone who's not familiar with research, like you said you were in grad school, you've done this before. You have decades. Maybe not decades, but at least a decade based on when I'm like adding up the, you know, some of your time from when you were working that like, you know how to go look for stuff. So, you know, people should invest the time. But it doesn't have to be six months of research before you jump in. Right. You can find some important stuff with some dedicated search time. So thank you for that. And now I want to just sort of knowing that your presentation was longer than this, I want to hand over and say, I guess like, do your talk or like a short version of what y' all talked about in Chicago, like what you want to share about the loyalty program, what you found, what you did.

Yeah. So, Lauren, do you want me to give It a start.

I saw you put your hand up. So I was like, is, did you want to.

Well, I was, yeah, I was, I was answering, I was going to add on that we took the literature review that you did and then we went further and then followed a few other citations. And you know, I mean, I think that you can overdo the, you know, hyper intellectualize the literature. You, some of it's just so you're not naive. I mean you read this stuff and you're like, oh, you know, okay, somebody's already gone down this path and you know, they frame things in a way and it's stuff that's been researched. And so you know that if you're going to go a different direction, you're going off the path and you better have, you know, pretty good reason to do so because there's been research on research on research. If you're not standing on the shoulders of those others, then, then you better have some, some overarching reason to do so. So just getting out of the naivete, getting familiar, generating your own hypotheses, you know, it tightens everything when you start. So it doesn't have to be, you know, a year long literature review that like Lauren said, you know, you dig in, you spend some devoted committed time. I think the supplier is going to have to do the research review as well. Follow the same articles, look at them so you're all on the same page. And then when you come with your proposal, you know, it's tight and you can reference some of those materials and why you came up with these hypotheses and not others. And then you guys chose a behavioral approach before you started. So we want a behavioral approach to this so we can dig into that. Maybe the why behind that a little bit later. But we knew it had to be empirical. We knew this wasn't just going to be a bunch of self reported. What I love about loyalty program research. Anyway, so digging into what we found and what we presented in the conference we started, and I teased this earlier in the conference, we talked a lot about the things we found that are irrational. And that was not our goal. Our goal was not to find irrational things. It's always the hook. It's the stuff that we love to talk about, but really I love to talk about all of it because I'm a business person and I think we appreciate when you find really good paths to doing better business. But when you're talking at a conference, we talked about irrationality and we said, you know, there is an aspect of what we'll call irrationality for lack of something better, just kind of as a heuristic. What we liked about that is that it's where the profit is. As we said before, if you ask people what they want from a loyalty program, they want as much free stuff as possible as quickly and as simply as possible. And that doesn't help the business. And you've got to find some way to offer something of value that's not completely transactional. And so irrationality is where the profit is. It's that I can offer something less tangible that I don't have to pay for that you do get value from. You may not admit it to yourself that you want to pay for that, but you do pay for that, and you are willing to pay for that. So we said, that's really helpful. And that was one of the reasons you want to do a behavioral study in every instance. I wonder how much of the research industry is missing out on profits. Because you're asking people questions that create a rationality bias where they're telling you how to transact with them. They're not telling you how to. How to wow them or please them or offer them something intangible. So that's why we positioned it as we did. And almost everything we did was pretty simple. It wasn't crazy stuff. It was some exposure to an element of the program, exposure to another element of a program with a different group of people and perhaps a control. And you just measure the difference. What's the impact? You isolate the difference of the element by looking at the difference between the groups. I mean, that's. That's as simple as it is. And there's three different notions that we looked at. Lauren brought up one earlier. It's. And I'll phrase these as questions to try to create some curiosity in the listeners. How do you know how many points to assign when somebody spends a dollar? If a dollar's a point, is that too sort of easy? And it just seems like I said, more transactional. If you give them a million points for a dollar, is that too monopoly money and foolish and just childish? So what other aspects do you consider? And that's one of the reasons for literature review. What are the different elements or notions you should consider when deciding how many points? And we'll take these one at a time as we go through. The second one is what food do you offer? People will tell you what their favorite food is or they might choose. I think Lauren and the team had already done some sort of choice testing, maybe a maxdiff or a conjoint so you can figure out what foods people prefer. But does that mean it's going to drive a trip? You know, we've done studies in the past where people will drive across town to save, you know, to get, you know, $5 off of their groceries, but they won't drive across town to get $5 off a new business suit. Right, but it's the same $5. So we wanted to ask which items are more potentially going to drive trips, because that's the point of the loyalty program, is to get people to visit more often, not to get them to take more free items from you.

Yeah, when they're already there.

When they're already there. That's right. And then the last one is that Lauren mentioned was the program structure, which is. Is there something to. We didn't have the ability to do gold, silver, platinum, with VIP and special offers. It was pretty simple. It was, it was how many items offer at each tier? How many tiers do you offer? So again, back to the tight scope. It's almost like a grid. Do you do three by three? Do you three by four? Do you do seven by seven? How many things do you need to decide between before it's paradox of choice stuff and how many tiers or levels before it's incense you to move up, but not so high that you kind of give up on that and just take your free nuggets and go. So those were the three elements. And why don't we start with points value and Lauren, I'll, I'll let you riff on that a little bit, if you remember.

Yeah, I mean, the, the two things coming out of the literature review for, for points value was positive, you know, subconscious perceptions that that sort of warm, fuzzy feeling is how I referred to it with my marketing partners and then just sort of ease of, of understanding how the program works. Like, I spend X, I get Y, I spend, you know, a dollar, I get 10 points, or I spend a dollar and I get 500 points. So we tested, I think, five different point levels, you know, from 1 point to 10,000 points. And really, you know, what shook out as far as, like that, that sweet spot between warm fuzzy feeling, but not going into, you know, this doesn't make sense. Territory and ease of, you know, understanding. Like, hey, My bill at McDonald's is 563. I get 563 points. So we landed on 100 points per dollar. And that also really helped with the sort of rounding conversation we were having internally as well. Like, what do you do. If you only give 10 points per dollar, that's, you know, 50 points. But what do you do with those 63 cents? Like, do you round up? Do you round down? So going with this, you know, it kind of helped us from three different angles. You know, we didn't test that last piece, but it made sense from a. From a business perspective and being as fair as possible to the customer. At the end of the day, we.

Did some implicit testing to determine which point level conveyed a sense of status and a sense of prestige of having those points in your wallet. For some people, it's pretty cool. I mean, you know, the only, you know, 3,000 of anything you'll have in your wallet is, is, you know, my rewards points, my, you know, and so we wanted to convey a sense of status, but we also measured implicitly the associations with, you know, being fake, being phony, being not real. I've forgotten the notions or the specific terms that we tested, but we found a pretty good, you know, where the lines crossed, you know, where it didn't feel like Monopoly money, like where it didn't mean anything, and where it did convey some sense of pride of having those points and feeling pretty good about it. So that was a pretty interesting thing. But I actually think the most interesting thing came from Lauren's literature review where it said, and this is just so simple. You talk about behavioral science, right? So the goal is to get somebody to purchase something with an eye towards achieving something later. So I want to. One of the reasons, one of the drivers for coming to McDonald's and then the reason for spending at McDonald's in my mind, is partially for some future reward because I love this program. The important notion there is having them be able to do the math. Can they do the mental budget? What does buying an extra thing of fries, how close does that get me? How much more do I have to buy to get the free Big Mac or to get the free crispy chicken sandwich? And so mental budgeting and be able to do the math is super important. And we found this from literature. The simplicity of being able to say, to connect the current behavior with the future reward. Simple, right? But we didn't think about it. So we did a test where we had people do the math in the research where we said, here's a scenario, here's your menu. What would you have to buy to get the free? Whatever? And we had a timed math problem, basically, as we saw how easily and quickly people could figure out, if I buy this, I'll get that. And we had never considered that 100 points would be easy math, but it's actually you just add the word hundred to the end of anything. Like it was so much easier than we thought and it covered the bases on status and that kind of stuff. I wanted to give that example of that math problem as ease of mental budgeting to show how simple behavioral science can be when you know the question you want to have answered. It doesn't have to be implicit neuro, whatever. It's just simply having people do it instead of asking them what they would do or hey, which of these do you think would be easier? It's like just have them do it and see which is easier.

Yeah, well we, we like to think we're really good at things.

Right.

Assume like I'd be able to do that. But we don't do that. I have episodes, I have one that's called Math is hard and one on lazy brain biases where I did an all the biases series. So those will be linked in the show notes too. As we talk about. There's so many things that keep us stuck along those lines. I would really love to talk about the reward items and where. This is where I think a lot of that like irrational piece comes in. Right. As far as what we think people are going to want and what we need to pay out and what is actually motivating for people is so, so interesting. Can you share about that?

So yeah, great question. That was a, that was one of our favorite parts of this study. You start getting into actual product names and costs and rewards value. And so I asked Lauren if they knew which products were their most popular, least popular. And she said they had done a choice test, fine trade off type test on preference. And I said, well, let's go back to the literature review. Let's go back to the objectives. What are we trying to do here? We're trying to get people to come to McDonald's because they have rewards and they want to accumulate more rewards. And then at some point they would like to redeem those rewards. And so you might think of a scenario where you have the ability to redeem, let's say a cheeseburger at McDonald's and you're hungry and you've got the free cheeseburger sitting in your pocket in terms of the points you have on your app. But you know, you kind of feel like maybe a pizza or a competitor, like maybe you're closer to a BURGER KING and McDonald's is across town, which is unlikely. But anyway, let's just give that scenario, what is it, you know, what product makes you go, you know what? I'm going, because I want that thing. And we knew from other research that it's not always your favorite thing that drives the trip behavior. You know, we've looked at things like milk and gas as being more motivating to drive a trip if you have discounts on milk and gas and necessities and other items. I'm sure there's something about emotional arousal, something about hedonics that drive that too. So we said, let's do an actual test to see what drives trips. So we set up a condition where you've got a free item at various QSR locations, quick serve restaurants. And we did the trade offs based on which restaurant would you visit to buy something, knowing that one of the items you could get was free. And then we continuously varied the free item and continuously varied the quick serve restaurant, keeping the proprietary items with those restaurants in case it was a Whopper or a Big Mac. In many cases it's a Coca Cola or a Pepsi product and those would be varied between restaurants. So we did this test and we did the trade offs and we found that there was some linearity with the value of the item and the trip driving behavior, as you would imagine. Like if I can get something really great for free, that's more likely to drive a trip than something that's really low price. And so you saw a nice linear relationship. But there were outliers. And that's the important thing is we want outliers because we want the items of lower value that drive trips, because there's profit. There's your profit and irrationality. So we know that if you offer free McDonald's french fries, you're more likely to drive a trip than certain other higher value items, which is not rational from a purely material monetary perspective. But it is if you've ever had McDonald's french fries. But there were other items too. There were certain dessert items. And you could make this rational. You can come up with plausible narratives around hedonics, around differentiation, maybe McDonald's french fries that taste you can only get at McDonald's. Maybe it's about the certain times of day, like, you know, it might drive a trip for a sweet dessert item, because maybe other types of QSRs don't have really good desserts or don't even offer desserts. So there's all kinds of stories within that that you could come up with. But simply doing the behavior research in a reliable way and a predictable way, people will choose certain McDonald's items, I won't go into all of them for proprietary purposes, but you will be more likely to go to McDonald's even if that item is at lower value than just simply giving away the big Big Mac or some other high value item.

Yeah, and that was obviously huge to us from a business perspective because, you know, you're giving points for a purchase and then they're redeeming those points for a product. You're essentially, you know, from an owner operator perspective, giving away that product for free. So if there were products on our menu that are of a lower cost to us to produce, that would still, you know, drive engagement from a customer perspective and drive those trips to our brand versus our competitors. Huge unlock for the rewards menu.

Well, and this is what I loved so much about the presentation and the conversation and the thoughtfulness in everything, in that it's finding that like uber sweet spot of the thing that people like. Why you need behavioral science in general. Right. Like, people would not tell you that that's the thing they want. And that logical mindset of I want the biggest value thing and I want the to pay the least for it. But maybe I don't actually. I never choose a Big Mac on my own. I would always get a Quarter Pounder with cheese. Cheese. Or I like chicken nuggets. And I think I would want, like, I'll splurge and get a Big Mac, but if it's not the thing that I'm excited about, then I'm not going to get it. But, you know, a McFlurry I don't typically get, but that's such a cool, like, splurge that I get to go get my, like, Oreo McFlurry or, you know, my Shamrock Shake or whatever it is that I'm gonna get as that extra treat that, you know, the kids are kids want something. I get to be, you know, the hero of the day because we get milkshakes today or whatever it is because I got the free bonus item and it feels better. I couldn't have told you that it was the thing I was going to want. That's going to make me excited. There's the surprise and delight element and it is that engaging. I feel good about you and it's something that's better for the organization. Just like all the layers of this being the perfect program. But if you would have just asked people, they wouldn't have told you and it wouldn't have been something like you said, it becomes transactional. It's just the punch card or whatever boring thing that doesn't, that people lose and don't care about. But I just love all the testing that went into it and being able to find that it doesn't have to be the most expensive thing. It's often these other things that people get excited about and they feel like it's a win. And it's also a win for you, which is just amazing.

It's not any kind of manipulation. It's that people actually value those items more. They may not want to tell you that, they may not know that themselves. I think the first step in any of this is acknowledging that consumers can't tell you what they would do or why they would do it. And it's folly to ask them and expect the truth. But. But it's a lot easier to explain to executives because when people tell you, oh, this is what I want and why I want it, you have an instant presentation on your hands. There's a reason that when I talked about people chose the trip to McDonald's for the lower value free french fries. There's a reason that I said, hey, we've all had McDonald's franchise, they're delicious. Or it's the hedonics. I'm giving plausible narratives. We don't know why it is and you have to be okay with that. Now, I don't think that going in front of executive and presenting the the codex of cognitive biases is a good explanation, but you do have to have plausible stories because the empirical, the scientific, behavioral science prioritizes the what, not the why. And we have to be okay knowing that, hey, these are some interesting things, some outliers that are going to help. Like you said, it's going to create a win for us, a win for them. And do we know why? Well, we could do more research and probably get closer to that. But we have to be okay not prioritizing the why, knowing that we're probably not going to get a good what or a good why because people just. It's a myth of consumer self understanding.

Yeah, no, definitely. And you know, there's further review and testing that could be done if you wanted to know more of the actual narrative and story. But in that's the difference between academic research and work. And you know, in that applied corporate side. Right. Is we want to know enough of why it's going to work to make sure it's going to be engaging and we're going to get the value out of it. And, and we know there's something here and there are some other Insights about our fries that maybe we want to go looking into and make sure we don't change those recipes or anything like that. Because we don't need a new Coke for, you know, new fries at McDonald's. No good, right? But having that insight that people are excited about and being able to explain it, like you said, in the right way, but not having to, you know, huge amounts of explanation and that you did test. And in that way, what I heard from what you were saying is if people, if it had come in and people said, we want Big Macs, I don't care, like, give me my Big Mac, I want a free Big Mac, then the program would have been built that way. If that's what you found in the testing, that that's what drove behavior, that's what you would have done and made it work. And often there's this, you know, serendipitous space where it really works out with something. The thing that drives that behavior doesn't have to be the most expensive thing. And I think that's really important for people to hear.

When we ask people to answer questions in syntax where there's an imagined other with a survey, it creates a rationality bias. People are maybe embarrassed or don't like to think that I'm paying money for something that is not tangible. They do like it. I mean, we're not pulling one over on people. Like there is joy, there's happiness, there's all sorts of things that are intangible, you know, reinforcing my self image. You know, people do that all the time when they shop at Whole Foods, and we're willing to pay for that until somebody asks us. And then we have to rationalize it because we don't feel like it's rational. I think that's where most of the problem is. If it weren't for that issue, we probably wouldn't need behavioral science because then we could just ask people questions all the time. But I think it's more important to get it right. Have it be predictive in a reliable, you know, consistent way. And then we can worry about whether we know the why or not. That's why analytics have gained such popularity. It's like, hey, if the numbers put, you know, we don't know why, you pull lever A and you get, you know, result B, but you want the money or not?

Well, and the good thing is then, like we said, we can dig in on things that we need to and we can just sort of accept the unknowns in there and say, that's an Interesting finding. It might be because of this. And let's move forward, right? We don't have to solve all the brain's circumstances before we make business decisions, thankfully, because then nothing would ever get done.

You know, I pointed this out in a presentation I just made on behavioral science where we were pointing out that science isn't really interested as much in truth as things that are reliably predictive. And the example I gave is quantum entanglement. Like, scientists have no idea how that works. I read a great article from a really renowned physicist that if anybody tries to explain this to you, it proves they don't know what they're talking about, because nobody knows how it works, but they know that it works. And so it's useful, you know, so, you know, if we can find things in behavioral science that are useful, patterns, of course we'll learn more about them. As you're saying, Melina, trying to get to truth, trying to understand the why and all that. But it's not necessary. Science just says, I need to know if you know that A causes B every time in whatever boundaries.

Right.

I love that. Really, really great insight. And again, knowing that our literature review should not be. Not just. It's not that McDonald's is only looking at Burger King research. Right. You're going into, like you said, airline and other things and also other fields are really important. And to see what we can learn from other areas. I will put a little note here for anyone who hasn't yet listened to or read Sam Tatum's book Evolutionary Ideas, or if you haven't heard his interview on the show, highly, highly recommend that where it's looking at what we can learn from. From nature and how things. How we've evolved as species and all these great insights. Fascinating book. Very much makes the point that you're making there about learning from physics and from biology and, you know, all these other areas that can really teach us a lot about natural behavior and what we should do there. So for everyone who is now so intrigued and excited to learn more, to connect with you, what's the best way for them to do such things? And of course, we'll go one at a time. I guess we'll start with whomever wants to. I was gonna say Lauren, but whatever works.

Well, apparently I'm secret and underground and difficult to find. So I'm gonna go with just, you know, if you want to reach out, please do. I'm on LinkedIn. Probably the best place to get in touch with me in this capacity.

Perfect.

Yeah, I think LinkedIn is great for me. Steven Springfield with a ph or you can find the Aspen center for Consumer Science. And happy to talk about any of this or any of the things that we work on with regard to story, human response to story and narrative and and happy to pick up that topic as well.

Wonderful. Well, we will link to all that in the show notes. I look forward to continuing stories and conversations with both of you into the future. And just thank you so much for your work and for joining me on the show to talk about it.

Thanks for having us.

Thanks Melina. It was great fun. I feel brainier already.

Oh good. Thank you again to Lauren and Steven for joining me on the show today. What got your brain buzzing in today's conversation? For me, I always love a great applied case study that shows how behavioral insights can help a company to save money while making customers happier and more loyal. It's awesome and I love that it comes from a brand we all know, like McDonald's, as they said. And you might have known going into this they were late to to the game in a loyalty program and other companies might have felt the pressure to just copy what everyone else was doing and push something through quickly that they could clean up later if needed. But I love that they allowed for the time to do that literature review to see what science said and to do some testing and to implement something that may have seemed off but totally worked. Take a moment before we close out the show to think about what you can take away from this. What can you and your brand learn from McDonald's and the work they did on this irrational loyalty program? Is it about the benefit of a literature review and how it doesn't need to take eons to incorporate good behavioral science research into your projects? Or perhaps on how they framed out their testing or forming good hypotheses or not getting bogged down on what's logical and they believe to be true? Whatever it is, take a minute now before the next episode starts or before you move on with your day to determine what you're going to do next to implement this into your work. What's one thing you can do to be a little better on your next project? I'd love to hear about it. If you want to share, come find me as the brainy bizarre on all the Socials and as Melina Palmer on LinkedIn. And if you come to LinkedIn, be sure to include Lauren and Steven as well, as I'm sure they would love to hear about what you've done based on their inspirational work. There are links to connect with us all in the show notes, along with related books and past episodes. It's all waiting for you in the app you're listening to and@the brainybusiness.com 2 7. And thank you again to Lauren Kemp and Steven Springfield for joining me on the show today. It was a delight to chat with and learn from you. Join me Tuesday for another Brainy episode of the Brainy Business Podcast. It's going to be a lot of fun. You won't want to miss it. Until then. Thanks again for listening and learning with me, and remember to be thought thoughtful.

Thank you for listening to the Brainy Business Podcast. Molina offers virtual strategy sessions, workshops and other services to help businesses be more brain friendly. For more free resources, visit thebrainybusiness.com.