Framing Reward is as Important as Reward Itself-Nir&Far-Episode#46

Hi, I'm Nir Eyal and this is the near and Far Podcast. This podcast is about business, behavior and the brain. On this show, I do a few things. I read quick articles I've written about topics shaping your behavior. I interview authors of books I enjoy, and from time to time I devote episodes to answering your questions. If you want to ask me a question, visit the podcast page on itunes, go to Ratings and Reviews, and ask me a question. By leaving a review, I promise to read it and possibly include your question in a future episode. So please ask me anything now. Enjoy the episode and for more, you can always Visit me@nearandfar.com.

Framing reward is as important as reward Itself By Nir Eyal and Sam McNerney On May 1, 1981, American Airlines launched its frequent flyer program A Advantage. Since then, a flood of loyalty programs have attempted to bring customers back through awards. Today, you can become a card carrying member of just about anything hotels, supermarkets, drugstores, and pizza chains. If you're in a store, chances are someone will ask, would you like to join our rewards program? Marketing professors, store managers, and executives are still not sure how effective these initiatives are. One puzzle is a link between participation and loyalty. It's not that strong. Millions of Americans are enrolled in at least one loyalty program. It's just a fraction of them that are dedicated customers. Typically, loyalty programs work only to the extent that they reward the customers who are already loyal. Another part of the mystery is the reward itself. Most loyalty programs offer additional perks to create a positive feedback loop. The more we shop at one store, the more we get in return, the less we shop at another store. But in a world of saturated offers, it's difficult to turn a reward into a habit. Here's one Instead of asking, what reward should we give away? Ask how should we give away the reward? It might not be the reward per se, but how the reward is framed and the steps customers must take to obtain the reward that matters. How to Frame a reward? In 2004, marketing researchers Joseph Nunes and Xavier Darice teamed with a local car wash in a busy metropolitan area. For one month, the researchers handed out loyalty stamp cards every Saturday. They used the two different cards depending on the week. Customers on the first and fourth week received the card with an offer to buy eight car washes and get the ninth one free. The second group of customers received the card with a slightly different offer. They were awarded one free wash for every 10 purchases, but they were also gifted two free credits. In absolute terms, each deal was the same eight trips to the car wash earned one free wash, yet twice as many people in the second condition completed the stamp card. Having earned two free credits, the feeling of progress nudged them to return. Nunes and Darice termed this tendency as the endowed progress effect. We're more committed to completing a goal when we have made some progress. How to frame progress PayPal illustrates how complete my profile is with an easy to digest visual by highlighting the progress I've already made. Even though the progress is a mere act of signing up, I'm motivated to give them my phone number. No turning back now. I'm already 80% of the way there. LinkedIn, where I can gauge my profile strength is similar. My profile is nearly finished but not quite a compelling reason to strengthen it. Yet LinkedIn is more sophisticated than PayPal. It informs me that six people have viewed my profile in the past 15 days, adding an element of social pressure. Notice the copy underneath this notification. Your rank or profile views improved by 11% in the past 15 days. With the feeling of progress, I'm more likely to click on the apply place LinkedIn Premium offer candy Crush Saga, an addictive puzzle app, is different from PayPal and LinkedIn, but employs a similar tactic to keep their users engaged. If a user does not complete a level in a given number of turns, the game offers bonus items like lollipop hammers, disco balls, and more turns. However, there's a price for the virtual goodies. Users must pay real money for a better shot at finishing the level. It's unlikely players would agree to pay at the beginning of a level, however, after spending time and energy, it's a different story. Given the chance to beat that level you've been stuck on, these offers are much more appealing. What's true of Candy Crush Saga is true of other popular games and platforms. They convert the user's investment of time into money. Framing as a Tool to create Habits an important step in creating routines is a gap between variable reward and investment. Variable rewards, like new tweets, specials at a restaurant, and deals at a retail outlet, keep us coming back for more, but they don't necessarily lead to investment unless the product is designed to get the user to put something of value into the service. The Variable reward on LinkedIn, for example, is the news feed and the notifications. Investment occurs when the user updates his profile, makes connections and purchases. LinkedIn Premium Smart Framing can convince users to invest further in the experience, making it more likely for them to return. It's a subtle but psychologically powerful maneuver. Instead of trying to persuade customers to invest in a product or service, why not show them what they've already invested? Loyalty programs, in contrast, typically attract customers by offering better prices or superior products. Spend $100 and get $10 off, or become a Platinum Elite member and get a free upgrade are two different examples. Yet focusing on what the customer can acquire instead of the time and money they've already spent could be one reason these programs are ineffective. The trick is not strengthening the link between use and loyalty with better deals, it's reinforcing the perceived relationship between use and loyalty that starts with smart framing.

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