Consumers Want Treats Without Tricks: Designing Loyalty Programs

October 31 2013 by Borja Saldana

Halloween candy has a much higher perceived value than its actual costs. Marketers should embrace this knowledge when they design their loyalty programs.

A brief instant of silence, followed by an outburst tears, a fair share of screaming and the occasional lecture – “well good for you, now you’re going to have a belly ache”. This is what happens when you tell kids you ate their Halloween candy over night. You may remember these images of horrors of a peculiar kind (if you haven’t, watch here). It’s a great piece of sociological insight that we owe to TV host Jimmy Kimmel, who organized these cruel parents challenges on YouTube for the past two Halloween’s.

But beyond the prank, we should not miss the opportunity to reflect on the essential piece of information that Kimmel’s skit uncovered. Precisely: what does this tell us about the mechanics of Halloween? (Other than we are teaching the rudiments of extortion to our kids with the slightly menacing ‘trick-or-treat’ gimmick… ) These videos show us something essential about the difference between real and perceived value of a tiny present.

As the videos of the Jimmy Kimmel highlight, the pain and suffering caused by the sudden disappearance of a bag of candy seems huge. However, numbers show that the economic value of what has been taken away is far from extravagant. On average, an American household spend 23 dollars on candy for Halloween. Three out of four households give out two pieces of candy on average. So the price to replace the candy in a kid’s bag would not be huge.

Nevertheless, the perceived value of the candy, gathered through much trouble for a quite little reward, is way higher than its price on the shelves of Wal-Mart. Why is that? Part of the value of the Halloween candy lies in the fun of gathering it – spending time going from door to door with friends, throwing fake threats of vandalism in the air, soon to be rewarded by a small but very valued piece of chocolate. Part of the value of the treats also rely in the fact that they are an immediate reward of an experience that one will remember eventually.

In that way, the dynamics of trick-or-treating are not very different from a good relationship with a customer. The threat of him/her not completing a purchase or going to the competition is looming, but he/she is quite happy to stick around if the perspective of an immediate reward was there. So why not just treat your customers with a virtual piece of candy, a digital mint that serves as an act of good faith? It shows the willingness to play the game by the rules, while offering to delight immediately the person who came to your doorstep.

The Halloween example also demonstrates that there is no actual need in making a customer jump over crazy hurdles to make him *feel* the great value of a prize. A small gift perceived like a true treat is way more valuable to your relationship than a bigger prize obtained after getting through a series of tricks. Because then it feels like a deserved piece of value rather than an extraordinary add-on.

Knowing this, there should be no effort put into trying to earn someones loyalty by designing insane loyalty programs! Programs that try to lock the users in rather than provide them instant satisfaction and feel more like… well, tricks. Frequent flyer programs are the anti-Halloween treat. They induce the idea of a gift (“miles”) one can’t use or that are accessible only to a few elite-level members, at the expense of the herd of good paying customers.

Since Halloween is not shy of macabre images, let’s take a moment to design… loyalty’s afterlife. Drop the small secondary points that nurture the hope of redeeming a big prize. Go for this Halloweenesque transactional loyalty that offers a low cost reward with a highly perceived value. In a world where competition is just a click away, we cannot afford to delay any gratification. We have to show to people showing up on our doorsteps that the reward for their loyalty is just one click away too.