I don’t know that the example really points to the fact that in retail, uncertain loyalty rewards will win. The discovery aspect is definitely real and the subscription service examples are a good reference point (also it is behind the success of TJX). Gamification in loyalty programs has been a proven winner but I think the certainty of the rewards has more appeal than the inverse.

Nothing new here at all. I did my graduate work and research in psychology back in the late seventies storing data on punch cards that I very quickly learned to number. Younger colleagues on the BrainTrust may well wonder “What’s he talking about?”

Even back then as we honed our research skills by training white rats, we learned that intermittent and non-predictable rewards significantly increased the desired behavior. And this outcome was known decades before that. When “rewards” are consistent and regulated they quickly become expectations and entitlement. The idea of “motivation” ceases to be part of the formula.

As someone one said: “If you want a new idea, look in an old book.” It appears the U of C did exactly that.

I’ve found that the most engaging reward programs utilize a mix of of explicit and implicit rule structures. There needs to be an understandable and core value proposition that customers can rely on, but that gets boring so adding elements of uncertainty should be utilized to keep things novel. A not-so-great example of adding uncertainty to a rewards program, in my opinion, is Panera — whose program is nearly 100 percent implicit. Sometimes you have rewards, sometimes you don’t — but because the consumer does not have a set of rules they can master, the lack of control makes the “game” less engaging. A popular example of leveraging the psychology of uncertainty is how Kohl’s (and many others) heavily utilize scratch off discounts at 15 percent, 20 percent, and 30 percent. When a customer unveils a 30 percent off offer they feel as if they “have won” and they actually feel guilty not utilizing their prize. The same emotional response would not be evoked had they simply received a 30 percent coupon as the “standard”… Read more »

The treasure hunt mentality has worked phenomenally for T.J.Maxx all these years. It’s not just the fun of the uncertainty, it’s the probability that the customer will find something they like at a great price. The uncertainty plus probability combination keeps things interesting — fun.

Uncertainty is a primary principle of the off-price “value hunting” element that boosts Nordstrom Rack, Saks off Fifth, TJX etc. You don’t know what you’ll find, there’s a scarcity factor, and every few days there appears to be limited designer styles at great discounts available. For many, it’s a lot better than attending the full-price outlet with the certainty of five to 10 sizes of each style on a rack.

A loyalty program doesn’t always have to be about redeeming points. Sometimes it’s about the company showing the customer some love and respect. A fun way to do that is with surprises. Fun goes to emotion and emotion is what loyalty is about.

I am not sure retailers should correlate the findings from the running club in Hong Kong with what would motivate consumers to spend more. Many consumers, including myself, are not motivated by loyalty programs that are unclear or uncertain on the rewards structure. For example, one retail loyalty program I am a member of doesn’t publish the reward structure and I asked a store associate once, “I have never received a reward, what do I need to spend to get a reward?” The associate said “I don’t know, but you might get a reward sometime.” This made me frustrated and it didn’t make me want to shop there.

On the flip side, when I know I am close to reaching a threshold in a loyalty program, I will consciously spend more to receive the reward. While uncertainty works well for subscription-based product programs, which has the thrill of the surprise, I am not convinced it is effective for retail loyalty programs.

It’s why people play the lottery and it’s why the whole idea of “surprise and delight” works so well in retail. Most people have a natural predisposition to engage with what they expect. When there’s something that breaks that natural cycle of monotony it’s notable and even exciting because it’s new and different. Building habits with certainty is great; keeping active engagement present with uncertainty keeps it alive.

Uncertainty makes sense only when paired with value. Customers expect that they will be getting something they want or a benefit of some sort. If not, or if the benefit is unappealing, it will backfire quickly and interest will vanish. Can’t forget the line from Forrest Gump when thinking about this question: “Life is like a box of chocolates, you never know what you’re gonna get.” The key is that you still know you’re getting some kind of sweet chocolate candy.

Another place uncertainty might pay off in retailing is in store format. This can impact any retailer with fashion or rapidly changing trends as a factor. Walking through an Ikea store is neat, but what makes it even neater is the variety of furniture configurations you would never have thought of to experience while traversing the store. Same with introducing new lines of apparel or shoes. Novelty has a place.