In an earlier column, we had discussed about the behavioural reaction to customer loyalty programmes. Continuing with the theme, here is a related issue – many of us do not always use the points accumulated on our loyalty card. The question is: If we care about loyalty programmes offered by our service providers, why do we simply accumulate and not redeem the points often enough?

Points don’t matter

It turns out that we care about other benefits offered by our loyalty card apart from just the points we can accumulate.

Take your frequent-flyer card. If you are like most others, you view the premium boarding that the card offers as a great benefit.

Say you areoffered a job that will pay you 15 per cent more than what you currently earn. You, however, have to deal with one factor – you will work alongside your business school classmate who will earn 25 per cent more. Will you accept the offer?

If absolute money was the only criterion, you will be earning much more than what you do today. But relative wealth or social comparison matters!

So it will hurt to know that your classmate earns more than you do for the same job. And you will be reminded of that fact everyday if you work with her in the firm. Ignoring factors such as how happy you are with your current job, chances are you will politely decline the job offer, even if it means forgoing the higher pay.

How is this relevant to loyalty cards? Such programmes play on our need for social comparison. A premium loyalty card indicates that you are higher up in the pecking order than most customers of the company. You get to board the aircraft first or you have a priority lane at a bank and so on.

Rewarding progress

Loyalty cards also offer visible evidence of your progress. You may be motivated to gather 10,000 points on a store card to avail a 2-day free trip to an exotic resort but fail to actually make the trip for other reasons.

While the 2-day trip would have been good, the mere fact that you achieved the targeted 10,000 points was itself thrilling. This sense of satisfaction is similar to the one you feel when you move from one level to the next while playing a video game.

Finally, loyalty cards provide another benefit – to show off your accomplishment. That is, perhaps, why we display our premium frequent-flyer tag on our handbags, even when we are not flying!

(The author is the founder of Navera Consulting. Feedback may be sent to > knowledge@thehindu.co.in )

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