#499:Endowed Progress Effect: Perception [of progress] is Reality

Senior faculty from the Loyalty Academy™, Bill Hanifin and Aaron Dauphinee, are back to host the latest episode of the “Wiser Loyalty” podcast series. This week they bring with them insights that dive deeper into this month’s focus on the Psychology of Human Behavior.

Learn about the Endowed Progress Effect and why creating momentum through incentives or benefits for your members, when onboarding or after they’ve set a redemption goal can influence continued behaviors.

Our experts provide their thoughts on its application to Loyalty using both sector and brand specific examples.  The constructs discussed each month are taken from the Certified Loyalty Marketing Professional™ (CLMP™) curriculum and a constructs from a new course will be covered as a theme each month.

Show Notes:

1) ⁠⁠Bill Hanifin⁠⁠⁠

2)⁠⁠Aaron Dauphinee⁠⁠

3) ⁠⁠The Wise Marketer 

Audio Transcript

Paula: Hello, and welcome to Let’s Talk Loyalty, an industry podcast for loyalty marketing professionals. I’m Paula Thomas, the founder and CEO of Let’s Talk Loyalty, and also now Loyalty TV. If you work in loyalty marketing, you can watch our latest video interviews every Thursday on www.loyalty.tv. And of course, you can also listen to Let’s Talk Loyalty every Tuesday, every Wednesday, and every Thursday to learn the latest ideas from loyalty experts around the world.

Today’s episode is Co-hosted by Bill Hanifin and Aaron Dauphinee, CEO and CMO of The Wise Marketer Group prospectively. Wise Marketer Group is a media education and advisory services company providing resources for loyalty marketers through The Wise Marketer digital publication and the Loyalty Academy program that offers the certified loyalty marketing professional designation.

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Aaron: Hi, I’m Aaron Dauphinee, CMO of The Wise Marketer Group and with me is our CEO Bill Hanifin, and together we’re the hosts of the Wiser Loyalty series. This series introduces constructs from our Loyalty Academy course curriculum that we find interesting and hope listeners will find equally as interesting to become wiser on loyalty.

We also couple the weekly learnings with relevant in-market keys, examples, and sometimes we share with our listeners our own points of view. Sometimes our points of views is marry up. In other instances, we ask each other why we need to learn more and seek understanding. So join us now as we talk more about this month’s area of focus, which is on the psychology of loyalty.

It’s one of our core course curriculum. And this specific episode we’ll talk about the endowed progress effect. Bill, what is the endowed progress effect?

Bill: This is interesting. So this was actually a concept that was validated through research by two professors. One of them, Joseph Nunes from the University of Southern California, USC, and non-other Xavier Dreze, who is at the Wharton School in Pennsylvania.

And it’s a, they really talked about a phenomenon where people think that they have a head start, towards when they think they have a head start towards completing a goal, that they get motivated. So they find motivation and progress. And when they sense progress, they tend to work harder and faster towards whatever that goal is or the achievement that’s in front of them.

So if you wanna say it another way, kind of what they did is they documented why life hacks are so popular. You hear people talk about life hacks. You see it all the time online, don’t you? You know, if I get this life hack, get that one. Well, what people are really saying is I love a shortcut.

I love to have some perceived advantage, and I love to feel like I’m getting to that goal a little quicker than the other guy.

Aaron: Very good. So do you have any other specific examples in that work in practice though?

Bill: So interesting, the original research used a loyalty program as an example, and they had a car wash example.

So they said, what if we had two groups of customers and you presented one with the option to get 10 car washes and then earn one free. Another one, they offered him a twelve-step journey to get there, but they gave him two stamps to start with. So in other words, 12, two already populated versus 10, and you get one free.

And it turned out that people were more, more motivated with the twelve-punch system when they had two free. So what they learned in, and they did some other experiments, but what they learned in all their research was that when people saw that they had this head start, they got charged up, they got a little energized, and that it caused them to get more engaged.

Right. With the whole program and to put more energy into it.

Aaron: That’s really interesting. It sounds like the inspiration for lots of the tactics we’ve see in our loyalty programs today, for sure. And I can think of enrollment bonuses on credit cards or, you know, quote unquote free credits in any loyalty program as akin to this this type of tactic.

Bill: Yeah. Well, you know what I love about this whole topic, about the whole area, the psychology or loyalty that we’ve been looking into for a while, is it’s explaining to me a lot of the things that either we encountered and we wondered. I wonder why that works or I wonder why they quote the brand. Does it?

So like the LinkedIn profile when we all got involved in LinkedIn, in the beginning, we were building our profile. Do you remember where they used to have the progress bar? And they’d say hey Aaron, Hey Bill you’re 30% of the way, you only have to do ABC and then you’re gonna have a completed profile.

Well, I’m not sure that we ever thought about, why having a completed profile was all that important, but it just seemed like something we should do. Maybe there’s that social proof, ’cause you see, like, you know, especially if they put a number up there, like seventy-five percent of your colleagues have completed their profile.

Well then absolutely I’m behind. I need to get going. I need to do this. So but that’s the endowed progress effect at work. And so what’s interesting about it is it’s not just about punch cards, it’s not about car washes, but it’s something that can be applied to profile completion. It can apply actually in an e-commerce type setting.

Think about this, where you go into an e-commerce into the shopping cart. You know, you’ve already done your research, you’re ready to buy something, and now you’re trying to make that final decision. Well, when your information gets pre-populated. You sense that as a human, you being a human, sense that as, okay, I’m closer to the goal.

I have less to do to accomplish what I want to get done. So people have this they have this feeling of great, two more clicks and I am done. And they usually finish it.

Aaron: Yeah. I know,, and I, that reminds me so much of the whole effect that, that we’ve often spoken about before in terms of the rising faster too, as you get closer and closer to that goal.

I know even of myself in lives we’ve experienced programs, whether they’re in travel and hospitality or as you said in retail, where you set a, you have a goal set, you know, whether it’s a more tangible goal that comes sooner or something that’s more aspirational, such as a flight or staying at a hotel place.

Really the key thing is as you get as you said, closer and closer to the goal, you, yourself had the, this natural elements of coming out. But the program operator and in fact could help you get you there quicker, faster to increase your satisfaction or your engagement in the program as well too.

So there’s two roles. There’s your, the role of the individual and there’s the role of the operator as well.

Bill: Yeah, absolutely. And, you know, just to put a cap on this, I don’t know if this is appropriate, but there’s a guy named David Goggins out there that a lot of people know about and he’s famous for saying, motivation is crap.

And another way to say it is that motivation is like a sugary snack. So, you know when I eat a sugary snack, when I get that donut or something, I get this little charge of energy, but you know what, I better act on it quickly or it’s gonna dissipate, it’s gonna go away, it’s fleeting. Right? So I kind of feel like with marketers, the endowed progress effect, it is interesting, but when you put the motivation in front of somebody and you’re giving ’em that head start, you’re attracting their engagement, you’re getting ’em really charged up to do something with you, you need to put some sort of, timeframe around it. A sense of urgency, you need to build that into the program.

Even think about you, you mentioned about the Bonuses for credit cards. You need to put, there’s always a timeframe, isn’t it? Spend so much and you get X, but guess what? You have to spend it within 90 days or else you get nothing. So those two things go together. So that, I mean, that’s, final thought, I guess is just that you, the endowed progress effect is impactful on all of us as humans, but you’ve gotta apply it in the right way with some conditions and with some limits to really make it impactful.

Aaron: Well, let’s leave it there and we’ll pick up more next week. Sounds great.

Bill: Thanks.

Paula: This show is sponsored by Wise Marketer Group, publisher of the Wise Marketer, the premier digital customer loyalty marketing resource for industry relevant news, insights, and research.

Wise Marketer Group also offers loyalty education and training globally through its Loyalty Academy, which has certified nearly 900 marketers and executives in 49 countries as certified loyalty marketing professionals.

For global coverage of customer engagement and loyalty, check out thewisemarketer.com and become a wiser marketer or subscriber. Learn more about global loyalty education for individuals or corporate training programs at loyaltyacademy.org.

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