There are fundamental differences between monetary and non-monetary rewards that loyalty industry professionals really need to understand. And that’s exactly what this episode of Let’s Talk Loyalty explains.
Professor Yuping Liu-Thompkins joins us today to explain the key differences between these two types of rewards, and when you might use one form of reward versus the other in your loyalty program.
Yuping is the Founder and Director of the Loyalty Science Lab, and she is extremely passionate about identifying and researching key topics around customer loyalty to help support and guide our industry in creating compelling and effective programs.
I really hope you enjoy today’s conversation with Dr Yuping Liu-Thompkins, discussing the key differences between monetary and non-monetary rewards.
1) Professor Yuping Liu-Thompkins
2) Loyalty Science Lab – LinkedIn page
3) Loyalty Science Lab Medium website
Welcome to Let’s Talk Loyalty, an industry podcast for loyalty marketing professionals. I’m your host, Paula Thomas, and if you work in loyalty marketing, join me every week to learn the latest ideas from loyalty specialists around the world.
Let’s Talk Loyalty is inviting you to come and join us to talk all about loyalty. We want to know what are the biggest challenges you face to capture the loyalty of your customer as we approach 2023. In partnership with Collinson, Let’s Talk Loyalty is planning a live session on LinkedIn, to talk about creating customer loyalty in the year ahead. I’m inviting all of you listening to share with me the burning questions and key topics you’d like to hear us cover in a live discussion. Simply drop me an email. It’s email@example.com. Then we’ll pick the most popular ideas and questions and talk them through on our Let’s Talk Loyalty Live event this November, powered by Collinson. My email address again is firstname.lastname@example.org. Please do send over your questions and ideas and then join us as we talk loyalty live together for the first time.
Hello and welcome to episode 308 of Let’s Talk Loyalty. I’m delighted to have Professor Yuping Liu-Thompkins joining me again today.
Professor Yuping is the founder and director of the Loyalty Science Lab, and this is her second time joining us on the show. For anyone who missed our last conversation in July, 2021, we will make sure to link to that in the show notes of this episode. Yuping is extremely passionate about identifying and researching key topics around loyalty programs to help support and guide our industry to create truly compelling and effective programs. In today’s discussion, she shares her research and insights on the importance of both monetary and non-monetary rewards and the key differences between them. She explains when monetary rewards might be more appropriate, than non-monetary rewards, and how to make these decisions for your reward portfolio when often customers themselves don’t understand what they want and why.
I really hope you enjoy today’s conversation with Dr. Yuping Liu-Thompkins from the Loyalty Science Lab at Old Dominion University.
Paula: So Yuping, welcome back to Let’s Talk Loyalty.
Yuping: Thank you, Paula. It’s great to be here again.
Paula: Oh, it’s fantastic Yuping. I always love to see the kind of work that you are creating and publishing, and I think you think about a lot of things that I don’t even realize need to be thought about. So always extremely interesting and today is no exception. So, before we get into our big topic for today, as you know, we always start our show asking people about their favourite loyalty programs. So, coming from the Loyalty Science lab, please do tell us Yuping. What is your favourited loyalty program?
Yuping: Well, if I were to get nostalgic, I would probably say my all-time favourite is, uh, a program that no longer exists, uh, which is the Starwood Preferred Guest program. Uh, in 2018, about four years ago, they got acquired by, uh, or merged into the Marriot Bonvoy program. Uh, but I really did love that program. It just gave travellers, a lot of flexibility in their stay using points to book hotel nights in combination with currency and so forth. So, um, I very much like the program.
However, um, talking about a current program that is my favourite, I would probably say it’s The Nordy Club by Nordstrom, um, which is a, um, retailer in the US. Um, on the higher end of things, uh, sell fashion products, more of a department score, but with a strong fashion focus.
Paula: Yeah, absolutely. And why do you like that one?
Yuping: Uh, well, I think that, you know, the company has very well thought our rewards, um, given that it is a higher end, uh, fashion retailer or retailer in general. It’s a bit challenging to create a loyalty program because a lot of times you come across as too transactional, which is, would not be very consistent with the store image. Um, I think when they created a reward program or redesigned it a couple years ago, they really, uh, thought hard about creating rewards that are consistent, uh, with the store image and trying to reinforce that image. So, a lot of the rewards, when you’re looking at it in beyond, um, they, they have something called a Note where you can use your purchases, earn points that converse into Note that you can use for your purchase. Um, but a lot of the other benefits are very much focused on fashion, lifestyle, wellbeing. Um, so they have special events that, they call it Lifestyle Events. They have, uh, alteration benefits. If you buy something at the store, they can offer you a free alteration of the product to fit you better. And there’s um, also priority customer service and so forth. So overall together, I think it’s more about that enhanced customer experience, not just, um, spending the money here, I’m getting a couple of dollars back. Um, is in addition to that, I think it works very nicely with the way the retailer positions itself.
Paula: Very nice, yeah, there’s a lot to be said about, uh, alignment Yuping. In fact, we just did a show talking about like all of the focus that goes on building these brands. You know, it’s like, it’s incredible how much, you know, creativity and, you know, investment goes into building a brand. And then sometimes the loyalty program is developed in a silo. So as much as they know the same customer base, they forget to align the proposition or it gets, I, I think what actually happens is, I don’t think anyone forgets Yuping, but I think by the time they, they design them and then they launch them, it gets diluted. Or there’s too many people maybe making decisions about what they should launch. So that’s my experience anyway. Does that sound, sound like what’s something you might have seen?
Yuping: Yeah, I absolutely agree with that. In fact, I think one of the most common mistakes is to treat the loyalty program as something that’s separate from the rest of the company. Because a lot of times, you know, these are managed by external agency or company of some sort. Um, and, and I think in that process, there’s more integration that really needs to be happening with the main strategy.
Yuping: I will go back, say one thing about the, uh, the Nordy Club, um, if there were any complaints about the program, I would say it’s probably the name. Uh, you know, they, when they redesigned their loyalty program, they changed their name of it. I know it’s supposed to be something that’s linked to Nordstrom. Nordy. Uh, but somehow in my mind, it feels like Vikings rather than fashionable customers.
Paula: And I was thinking nerdy, you know, which is obviously the total opposite of, of elegance and, and exactly what the department store is aiming for. So, I think you’re right, and I’m certainly not a brand expert, but Nordy doesn’t have the same quality feel as Nordstrom. I think they’re; they’re trying to create that tribe feeling. So, I can kind of see where the creatives got carried away. But yeah, for me it doesn’t actually resonate either. So anyway, hard to be, hard to be good at everything, huh?
Yuping: Yeah, but you know, the program itself is great. Uh, the, the name needs a bit more creativity.
Paula: Absolutely. Well, we, we’ll watch this space and, uh, I mean obviously we’d love to talk to them. So, if anybody out there knows anyone from Nordstrom, please do let us know because we’re always looking for great brands to interview and uh, they might be able to shed some light on that. So, with all of that said, um, it is, you know, today is the opportunity Yuping to talk exactly about rewards. And you’ve mentioned some very nice ones there. I really do like, for example, what you were talking about in terms of free alterations as something very practical, um, as distinct from, as you said, coupons or, or, or anything that feels too transactional. So, I know one of the pieces of work that you’ve been focused on recently is the difference between monetary rewards versus non-monetary rewards. So, um, dying to get into, um, what you’re learning about this. So, tell us a bit about what are, you know, how do you define these? First of all, define a monetary reward and define a non-monetary one.
Yuping: Sure um, the, uh, so when we think about monetary rewards or some people referring these to tangible rewards, economic rewards, there are different names to it, but basically the idea of this particular category is incentives that are focused mainly on more tangible economic value. Right? I’ll give you some examples. Um, a lot of grocery stores, they offer discounts. Uh, to their loyalty program members. And they also allow you to, uh, use your points. Uh, for discounted price on gas, a very common practice here. Uh, companies like Kroger, Harris Teeter, they all do that. Um, some of the loyalty program like the Walmart Plus and the Zappos VIP programs also offer free shipping benefits. Um, that would be considered to be a monetary, uh, economic reward as well, and, and of course you know, what you said as an example, a lot of times, um, you can transfer or translate the points into currencies, vouchers that you can use in the purchase. So, all of those are meant to give people some money back. Um, essentially a monetary, uh, economic value driven type of focus. And the other type, um, we generally call them non, non-monetary rewards. Some people say intangible rewards, social rewards. So, there’s a lot of different, um, type of rewards, I think can be categorized under non-monetary rewards. But the fundamental idea of it is that it needs to convey more of a significant intangible value that is usually more psychological or emotional in nature. So, for example, make me feel good, make me feel appreciated, um, make me feel connected to others as community benefits, for example. Um, those are all considered to be non-monetary rewards. The typical examples that you would think of in the tiered program. Typically, the higher tier customers would receive more, uh, preferential treatments, for example. So that would definitely be part of that non-monetary rewards. And other examples like birthday gifts, even though it’s also monetary in nature in some ways, at the same time, it’s meant to treat you on your special day and so it goes beyond that fundamental monetary equation and adding some additional to it. Um, one final example I would say is that more recently, loyalty programs are frequently adding in the ability to donate your points to charitable organizations. And so that is in the form of non-monetary rewards as well. Give people a sense of having an impact um, that is not necessarily purely monetary in nature.
Paula: Got it, got it. So just so I’m clear then, for example, the status, benefits, and the tiers of an airline loyalty program, obviously that would be literally considered a non-monetary reward.
Paula: Is, is this the first time that you’ve researched, uh, this particular distinction Yuping?
Yuping: No, we have, uh, look at this, um, monetary versus non-monetary reward program in my own research, I would say, you know, we have one previous project actually, uh, looking at, not necessarily in terms of offering what type of rewards, but more in terms of communicating what kind of rewards. And the fundamental premise, I think on that research is, one of the biggest criticisms, I think a lot of people criticize loyalty program for the reason that a lot of times many of these programs foster or develop that loyalty towards the program itself, but it doesn’t quite do enough for the company behind the program. So, in other words, I can become a really big fan of a particular loyalty program, but not necessarily feeling anything special about the company that’s giving me all of these rewards. So there creates this big gap between what the loyalty towards the program and the loyalty towards the company behind the program. And so our premise in that particular research project is really to see what really contributes to that loyalty gap, what we call loyalty gap between the program loyalty and company loyalty, as well as how you communicate with customers that would help reduce that gap. Mm-hmm. Um, and so that’s where the monetary versus non-monetary rewards come in, that we actually field testing in collaboration with a fuel retailer uh, in Europe. And we tested versions of, uh, messages that are putting more focus on the soft rewards the company offers um, versus putting more focus on the, or soft rewards, I said in the sense of non-monetary rewards.
Yuping: Um, versus the hard economic rewards that the company offers. The program actually offers both. And we found a, the non-monetary rewards had a great ability in reducing that gap in between the program loyalty and company loyalty. It makes consumers create more of an emotional bound with the company, um, and increases their association with the brand. And generally, just have a better impact, um, in terms of reducing that gap, even though both of them had a similar kind of effect to program loyalty. So that’s the interesting thing if you are really just focusing on the program itself, you would say both of them are equally effective. But it’s when we consider the company behind it, the long-term consequence of it, I think there’s a big difference between the two.
Paula: That’s fascinating. I, I, I had never really considered the, um, the loyalty gap that you’ve just described, Yuping. That’s, um, certainly an unusual concept because I would’ve assumed that when we measure loyalty and we segment our customers, you know, their loyalty to the program and their loyalty to the company, to me would’ve been I think almost one of the same. Am I, am I, you know, unusual in that or is this very new thinking? Did I miss a memo? I’m just, uh, super surprised
Yuping: No we uh, we actually found, um, in our research, when we really try to measure them separately, you know, in terms of, uh, scientific constructs. Um, the, when we talk about loyalty to the program, it’s more about, you know, do you like what you’re getting from the program? Would you be, um, willing to talk to your friends about the program, um, and, and so forth. Take the example of the Dunkin Donuts program, right. Recently the program got designed and really got, you know, criticized you know, for the redesign. People are feeling like they’re being devalued, you know, with what they have earned in the program. And, and I don’t necessarily think that’s necessarily changing, um, how companies feel about Dunkin Donuts food or the Dunkin Donuts service, for example.
Paula: Very true.
Yuping: So that part versus the program, the program itself is somewhat of a distinct entity. Um, even though you are integrated into the whole customer experience. But I think the, the two things’ people do have weigh in from different perspectives. I think when it comes to program loyalty is more about how engaged you are with earning the rewards, with, um, whatever behaviour that the program is trying to encourage. Versus the company loyalty is more about, you know, would I be um, willing to stay with your company? Would I be, uh, shopping at multiple, you know, retailers rather than giving my so business to you? Um, and so forth. So, it’s more of a, the emotional bond is happening at a different, um, level or different target. I would say loyalty program is more of an accessory kind of type of, uh, loyalty versus, I, I hope company’s ultimate goal is really to develop that loyalty towards the company. And so, in my personal experience I would also say that I have companies absolutely love, uh, but then I think their loyalty program is probably so-so. I’ll give you Lego as an example of, many people know I’m a Lego fan, so I love Lego as a company, but when I look at their reward program, I think they have so much more potential to do more with that program. They are different.
Paula: Yeah. Another iconic brand. So, and one I didn’t know had a reward program, so there you go. That’s why I love doing this show. I learn from people like you. It’s super exciting. So, to get back to this piece of research, um, so monetary and non-monetary rewards, um, first of all, fascinating that you’re doing, I suppose, so much research around the world, not just in the US, where I know you’re, you’re located personally. Um, and you mentioned a fuel retailer specifically, was this a single brand retailer, like one particular business that you were working on in order to do this piece of research?
Yuping: Uh, no, that was just for that particular project, that was our partner. Um, we are also combining that with, um, with looking at actually lab experiments where we carefully control for things, and we see people’s response to the different things. And there are previous, other researchers have actually tackled this issue as well, uh, by conducting consumer surveys and, um, yeah, also conducting experiments in different contexts. So, there’s, uh, research, for example, in the beverage context. Um, there are research that’ll look at, you know, hotel context, um, and so forth. So, there’s a variety of contexts actually have, look at this differentiation between monetary rewards and non-monetary rewards. And there are really some significant differences between, um, what happens, um, when you give people each of these types of rewards.
Paula: You mean psychological differences?
Yuping: Yes. The, uh, so psychological difference is when you really think about, um, what these kinds of rewards do to customers. Um, one of the biggest difference, I would say from a mindset perspective is that the monetary rewards tend to be more of a focused on economic exchange. So, it’s very much of a transactional relationship. Sure. Um, when you offer people monetary things is basically, I am in this relationship with you because I want something, right and so it’s, it’s a give and take, um, type of relationship based on fair economic value. I’m putting my effort, making the purchases, and then you are rewarding me with a, you know, economic return to me as a result. Um, so, so it, it focuses people’s mind essentially on that economic equation. Um, is a fair value exchange, is it? Um, am I getting something in return for what I’m giving? And versus non-monetary rewards research has, uh, found that it’s more kind of focused on what psychologists call social exchange. Okay. And so that social exchange is more focused on developing relationships. So rather than just being purely transactional, it’s also based on certain social norms. Right? So sometimes it may not necessarily be a short-term fair decision in terms of give or take, it could be developed over more of a longer period of time. You are more focused on the quality of the relationship. Um, there’s also more of an emotional component to it um, therefore, you know, your, your focal point is basically different. In fact, when. Um, when researchers actually did a research study and looking at, um, economic rewards or monetary rewards versus non-monetary rewards, they found that some of the times that monetary, tangible, monetary rewards actually create some interference. Um, and with the association that you have with the brand because it tends to focus your mind on the money. Um, and therefore, as a result of that, you know what brands wanted to be known for unless you are, I would say a low-price brand where price is really your selling point. Yeah. Um, a lot of times your brands really hope to associate with other things too, such as higher quality or cool image or whatever it is that you wanted to associate with. And, um, monetary rewards tend to kind of shift away the focus away from that a bit. And, um, versus the non-monetary rewards, kind of putting that more back into the equation. So that’s, I will say that’s one, um, major difference between what these kind of rewards actually focus people’s mind on. Um, we also recently did a very, uh, small pre-test as part of our project looking at monetary versus non-monetary rewards. And we also see different emotional impact, um, in between the two. So, we presented people with basically monetary rewards in terms of like gift vouchers versus not monetary rewards at early access to special events. Um, and we found that monetary rewards did immediately generate more of a emotional stimulation. Um, so on the stimulation, component it’s, its people are definitely responding to that. So, there’s, um, no doubt about that. However, when we look at the valence of that emotion, which basically means like how positive, okay, uh, the emotion is, we do find more positive emotions that are, um, associated with the non-monetary rewards. And so, there is some fundamental psychological reaction that the way we react to, to money related issues versus non money related issues, the feel good type of issues is a different type of psychological response.
Paula: So, it sounds like, if I’m understanding you correctly, then Yuping, it sounds like consumers, and I’m guessing it’s, um, you know, perhaps subconscious, uh, for a lot of us is that we’re picking up on an intention coming from the, the company and that we’re making judgements and assessments about how we feel, um, responding in certain ways, but as you said, it might just be okay. That’s fine, maybe, uh, you know, a transactional award to me feels quite lukewarm, although, you know, it’s better than nothing, I guess. But it, if it is something, like you mentioned, obviously the charity donation, which is obviously a, a very well-known non-monetary reward, that that is something that does generate that overall emotional trigger. We just feel more connected then with the, I don’t know whether it’s the intention behind the program or the intention behind the brand, given that we, just to touched on the differences, but would you say that that’s true? It’s maybe the intention behind the program that they start to buy into and feel.
Yuping: Absolutely. Uh, one of the, one of the tricky points I think in discovering and why there’s so much bias, um, towards more of a monetary reward. Cause if when you put all of the programs together, loyalty programs together, you would see a lot of monetary rewards only program. Um, and of course we also see programs that are balanced between the two. Very rarely we would see something that’s purely not monetary. Um, and if you were to ask consumers directly what they want, um, people are price sensitive. Um, I’m going to say that price is an important factor and what you’re getting back in terms of monetary value is a very important decision maker in the, uh, in the purchase process. And so, um, I think in the, the most recent Merkle, uh, Loyalty Bar-, Barometer report, um, from 2022, they actually ask consumers, you know, what are their most preferred rewards? The top three in their research was discounts, cash back and free products. And so, if you look at those, all of those, you know are considered to be monetary rewards. In fact, I think. Uh, they found that about 49%, which is like roughly half of their participants say the main reason that they participate in loyalty program is discounts. And so, if you ask consumers directly, would you like to have a hundred dollars or would you like to donate your points to charity? Most of the time I would say people would basically say, you know, uh, I would do that $100. But I think that what consumers say or immediately react to as an obvious question versus what is the long-term consequence of redeeming for these kind of rewards are two separate things. Um, and I think there has been, uh, academic research that really shows a differential reaction to, to these, um, type of rewards. And so, I mentioned earlier that there was, um, some research before, um, where an experiments were conducted by looking at offering more tangible rewards in terms of a free product, um, versus an intangible rewards that are, uh, email communication with customers, that member only communication or, you know, things like that. Or a specialized, dedicated member website that kind of creates more of a community feel. And when it’s a temporary program that’s run as an experiment. And what the researchers have found in that context is that after the program is done, when you really measure people’s thoughts and their association with the brand, they found that the monetary rewards had little influence on that. In fact, created what I mentioned earlier as the interference effect. Versus, you know, when you are really looking at, uh, not monetary rewards, it creates a stronger, more accessible, uh, brand association or, probably in our more familiar term, top of minus. So, it created more of a top of mind for the brand, um, and just generates a longer-term effect. So, so I think we need to take it with a grain of salt, what consumers exactly say, this is the only thing I want, or this is the top thing I want, um, that is dangerous to, to basically base the decision purely.
Paula: I was just thinking exactly the same thing, Yuping. Because you know, asking customers and doing this kind of wonderful research directly, um, listening to our customers is something we always do advocate. And yet it seems, and it’s I’m sure never a good time, but I think economically the world right now is definitely suffering in many different, uh, countries. So, I don’t think consumers or members are gonna say, other than monetary rewards if we ask them. So, I think it leaves a lot of us very confused, dare I say it, as loyalty marketers, because I think you’re right and, and this I think is one of the biggest questions in marketing overall, not just loyalty programs. You know, short term, tactical, monetary, um, type of propositions do tend to maybe generate that shorter term response and engagement, whereas anything else, investment in the brand non-monetary rewards, they’re much more like the longer term, and as you said, emotional benefits. And I think for most people working certainly in whether it’s public or private companies, there’s so much pressure on short term returns that that’s exactly what we almost default to. And yet I think as human beings, I know what we want to do is show the love and do something that’s more, more thoughtful, and more wholesome. So, I don’t know what my question is for you, but I guess, you know, what would you do if you were running a loyalty program? And I guess it’s very different in every sector, but when should we use monetary rewards versus non-monetary, would you say, given that there’s pros and cons to each.
Yuping: Yeah, absolutely. Um, I, I, um, would, you know, definitely agree with your point earlier about, you know, monetary rewards is a very sensitive lever. Uh, in the short term, you’re going to see a big impact on, you know, what people do. Um, for sure. The, uh, and I would also say that, you know, it kind of depends on the, what you emphasize, uh, in terms of rewards, it would also depends on whether you are looking at the stage where you are communicating with non-members. You’re trying to get them to enrol in the program, or are you looking at a customer who’s probably two-yearing with the program? And have been using the program for a while. Um, it makes a difference because there is pretty robust research that actually shows that attractiveness perspective. People do find monetary rewards to be more attractive. So, if you were to ask them to join the program. Okay. Uh, the program that has, you know, if you paired it with one with purely monetary rewards, the other one with purely non-monetary rewards, people absolutely choose the monetary rewards.
I would say a majority of the consumers, I can’t say for everyone But um, so from a initial enrolment perspective, I think that monetary rewards is necessary to kind of dangle in front of the consumers, um, to, to, to get their interest and get their attention.
Yuping: But I think as, as, as we move into more of a relationship building stage where you are going beyond just, you are a customer who’s starting to get to know us, uh, to become more of. You are a one year in customer now, two year in customer. Now you are familiar with the program, you’re familiar with the company. Um, and if you’re still here, uh, by that point in time, I think it’s necessary to kind of move that, um, post a little bit more towards emphasizing that social rewards maybe remind consumers to say, these are the other things that you can also do with us. Or maybe it could be coming a form of a surprise reward, um, of some kind or a special event that the customer can potentially participate in. Um, I think there’s some research that really shows a difference in between. Both monetary and not monetary rewards can create that customer retention, uh, effect. So, in other words, it makes customer more likely to stay with the company, but some research actually shows a difference in terms of why people would actually stay. So that commitment that you have towards the company in, uh, the monetary situation is more of kind of fear of losing out. Right. So, I don’t want it to leave because I don’t want to lose my points. I don’t want it to leave because I don’t want it to not be able to get these rewards. Um, so it’s, it’s, it’s a bit of a fear of opportunity cost in a way. Um, versus the, the, the commitment that you get from non-monetary rewards is more of an emotional bound based and so of course, each of those mechanism have its use um, in the. Probably if you are a company brand that’s more of low end in a price sensitive setting, I would say monetary rewards are consistent with your brand image and that’s what you wanted to go for. Um, and versus if you are looking at a more higher end setting, like the Nordstrom example I mentioned earlier, you know, it’s just more consistent with their brand image to emphasize a bit more with the non-monetary rewards. And it’s, um, you know, like I said earlier, the customer that you are dealing with as well, right? For longer term customers, it makes more sense um, to, to develop more of that emotional bound, to create non-monetary rewards over the course of time really shift their attention away from that, what they’re getting in return, but more in terms of I’m in a relationship with you, um, and we wanted to be loyal to each other and so forth. So, I think it depends on the timeline. Uh, depends on what kind of brand you are, depends on how involved, uh, the, the type of setting that you are dealing with. Low involvement brands versus high involvement brands. They all kind of comes into play in terms of which one is more effective. And I will add to that too, is that a lot of programs are going to be both right. And so, so therefore, I think one of the ways to work with that context is to think about how you shift your communication about the rewards with your customers over time. Um, cause from our research that I mentioned earlier, that communication actually makes an impact. Uh, we’re not changing if the rewards the company is offering, we’re just basically telling customers say, hey, look here, you know, these are the rewards that your program actually offers. And it makes a difference um, the, on the feeling that they have towards the company, towards the program and so forth. So, communication comes into play, um, a very important role in that.
Paula: Yeah, and certainly my own experience, Yuping is that often times when customers or members of, of, um, of a program, if they have a negative, um, response or a lack of engagement or something that’s coming through, very often it seems to be because they just didn’t, they weren’t aware, they weren’t familiar. They didn’t understand it like it’s a communications issue rather than a proposition problem. And I think certainly for, yeah, that, that’s probably, you know, as loyalty marketers, for me that was always the most frustrating because I always felt I was competing with the business for attention with our customers and to communicate my proposition because I didn’t have ownership of just our communications. But sounds like this is a pretty broad problem that you’re seeing as well.
Yuping: Yeah, absolutely. I think that, you know, uh, monetary rewards, um, type of situations or the communication issues that customers just don’t have in many situations, don’t have the time or energy to really dig deeper into all of the things the program has to offer. There are definitely savvy customers out there that are, you know, aware of every single thing that a program has to offer to maximize the benefits. But for a lot of others, you know, there’s less involvement in that situation.
Yuping: So, communication really is very important in engaging the customers in the process. Particularly I think when we talk about that later stage customer who has been here for a year. Um, who has been here for a little while, they kind of settle into a pattern, you know, I buy, I get $10 back and I buy again, I get another $10 back. So, before they kind of really settle into that kind of pattern, um, I think it’s important to let them know that there are these other things that they can potentially do with the program, and it will make them feel good.
Paula: For sure. And, and given all of those various parameters that you, um, that you, you talked us through there, Yuping, the one that I was wondering about is the various segments, in fact, because it’s one thing to have the life cycle, and I think you made a great point around, you know, sometimes you just need the simple transactional, monetary reward to get people in. And that definitely has a role to play in terms of acquisition. And then of course, as. Into the, the relationship, as you said, you can start to leverage those non-monetary rewards, but I was just wondering then do, do you have any insight or do you think that there’s any difference with, you know, people who are high spenders, like your top customers versus your much less loyal, like the degree of loyalty? Do you think they have distinct preferences on, on monetary versus non-monetary?
Yuping: Yeah, that is something I would probably say that the, uh, I don’t have currently have like, uh, evidence to necessarily support that to be the case, but that is actually indeed one of the hypothesis we would like to test. Okay. Um, we are actually in the middle of conducting research by looking at that right now to see if there is indeed a preference, um, you know, towards more of a non-monetary rewards as a customer become more of a top user or top customer for the company. Uh, I would say there are some, uh, practitioner, uh, wisdom basically tend to suggest that to be the case. Uh, but we are gonna try to put into the test and on, on top of that, you know, in terms of different segments, there are other individual differences that I think would lead to different, um, preference towards these kind of rewards as well. Um, one of the things that I think, um, previous research has done is looking at a person’s long-term orientation, uh, basically looking at, in terms of time horizon, do you tend to look at the long term or do you more focus on the here and now? And um, and that research basically showed that for people who are more focused on the longer term, they tend to have a, uh, stronger preference for that non-monetary reward versus the people who are more short term oriented. You know, I wanted to gratify whatever desire I have right now. You know, they tend to be, uh, wanting to take that monetary reward. And I will add to that, um, another, this is an ongoing project we are doing so still a bit of an early stage. Um, one of the things that we are actually looking at is in terms of the current value of a future reward. So, what I mean by that is that if I tell you next year, I’m gonna give you a hundred dollars, right. Um, most people are gonna be saying, why don’t you give me the money now? Right.
Yuping: Yeah. And a lot of them are going to be willing to accept a smaller amount to, to say, okay, um, instead of waiting until next year to give me that a hundred dollars, why don’t you give me $75 now and we will call it even, right. And, and so in psychology, this is called temporal discounting. So essentially, we are looking at a situation where a future reward tends to be discounted as somewhat of a rate. You know, if you are looking at, uh, today, um, for example, the, so they’re willing to accept a lower value. So, one of our research projects actually in collaboration with our Italian colleagues, um, is to look at how people actually discount monetary versus non-monetary rewards. And some of our, uh, preliminary findings is essentially telling us that, um, monetary rewards the same value type of rewards, right? So, if let’s say a monetary reward that’s $100 of a gift voucher versus a hundred dollars’ worth of something that you are doing that’s not monetary. So it could be, for example, event, ticket you a special event that would be worth a hundred dollars. Um, when we are looking at how people are discounting that. Um, people are more patient to wait for that non, non-monetary reward. And they discount a bit more. So, if you are promising people the same hundred dollars’ worth of monetary versus non-monetary rewards, you’re going to see that it’s worth more today, um, for a consumer on the non-monetary side than the monetary side. Um, as I said, it’s an early, uh, process and we are trying to kind of understand why that might be the case. We think emotion play a role. As I mentioned earlier, the stimulation, emotional stimulation versus the valence of the emotion can potentially play a role and there could also be other cognitive reasons, for example, uncertainty when it associated with, uh, monetary rewards and so forth. Well, so it’s, it’s a fascinating subject I would say to, uh, study and see the difference of.
Paula: Totally. And I can imagine myself and I, you know, we’ve done a little bit of this in the past ourselves, but you know, the, the sense of anticipation. For example, I would’ve worked with brands that were giving non-monetary rewards, but um, tickets to concerts, for example. So, they’re extremely valuable. Um, and even if it’s not maybe a band, for example, that I would’ve chosen to go and see if I’m given a ticket, even if it is a year away, that I have that whole year of feeling good about the brand, looking forward to it, or gifting the ticket to somebody else, so, so I think the halo effect of a non-monetary reward just makes it much more worth waiting for and people can kind of justify it, you know, because it’s, I don’t know, whether it’s just because it’s not beyond your control or just something that they feel like, you know, you’ve thought about it and you’re doing it ahead of time, that makes people feel that much more valued.
Yuping: Exactly. That could very well be a good reason to explain why that might be the case. So, so, you know, it’s, it would be intriguing, you know, from a, because when you think about loyalty program, most of the rewards are future rewards. So, most of the time you’re, you might get some enrolment benefits, but a lot of times you’re accumulating points to redeem for a, for a reward that’s not gonna be today, right? Yeah. And so, so therefore, when you look at the appeal of these different things that if in fact people see a future, same value reward in a non-monetary site to be more valuable today, um, it might be more motivating, a bit more motivating on their purchase behaviour. Even if you asked them, they would still tell you they prefer the monetary rewards.
Paula: Totally, totally. Well, I think the one thing that I’ve concluded today, Yuping, is that your work will never be done. Um, it’s, it’s certainly fascinating and as I said at the start, I always love to learn, um, because you have a great way of getting under all of these very important, very, very subtle topics that can really, I think, literally make, or break a program. So, Super interesting and exciting. So that was all I think I wanted to touch on today from my side in terms of these monetary and non-monetary rewards topics. But is there anything else that you wanted to mention, uh, Yuping before we wrap up?
Yuping: Um, I think we’ve pretty much-covered everything, so I’m very happy to have a chance to talk about this with you and with your audience.
Paula: For sure. Well, we’ll be definitely doing it again on a regular basis as always. Um, I think we talked about the best place for people to find out more, which is probably the most important thing. Given that this is ongoing research, as you’ve said. So, your uh, LinkedIn page for the Loyalty Science Lab, is that the best place for people to stay up to date with you?
Yuping: Definitely. We, we typically share our research on, uh, either on the medium website or on LinkedIn page, but if you follow us on LinkedIn, I think you will, um, absolutely see all of the articles that we have written to be shared on there.
Paula: Super, and I think there’ll be some hot off the presses as this goes to air as well. So, with all of that said, Yuping Liu Thompkins, Professor of Marketing and Founder and Director of the Loyalty Science Lab at Old Dominion University. Thank you so much from Let’s Talk Loyalty.
Yuping: Thank you, Paula. Great to be on the show.
This show is sponsored by The Loyalty People. A global strategic consultancy with a laser focus on loyalty, CRM, and customer engagement. The Loyalty People work with clients in lots of different ways, whether it’s the strategic design of your loyalty program or a full service, including loyalty, project execution, and they can also advise you on choosing the right technology and service partners. On their website The Loyalty People also runs a free global community for loyalty practitioners, and they also publish their own loyalty expert insight. So for more information and to subscribe, check out theloyaltypeople.global.
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