Earning the Right to Indulge: Effort as a Determinant of Customer Preferences toward Frequency Program Rewards

Abstract

Although frequency programs (FPs) have become ubiquitous in the marketplace and a key marketing-mix tool for promoting customer relationship and loyalty, little is known about the factors that determine how such programs are evaluated by consumers. The authors investigate the impact of the level of effort participants must invest to obtain the reward on the types of rewards they prefer and, consequently, on the decision to join the FP. In particular, the authors propose that higher required effort shifts consumer preferences from necessity to luxury rewards, because higher efforts reduce the guilt that is often associated with choosing luxuries over necessities. A series of studies with approximately 3100 consumers demonstrated that (1) higher program requirements shift preferences in favor of luxury rewards, (2) this effect is also observed when consumers choose between luxury and necessity rewards (of the same value) that they themselves proposed, and (3) the effect of program requirements on reward preferences is stronger among consumers who tend to feel guilty about luxury consumption and among those for whom the effort is invested in the context of work rather than pleasure. In addition, contrary to an alternative explanation based on the notion that higher requirements signal higher value of luxury rewards, the authors show that (1) when the program requirements are held constant but the individual consumer's effort is higher, the shift in preference toward luxuries is still observed and (2) increasing the monetary cost of participating in the FP decreases consumer preferences for luxury rewards. The authors discuss the theoretical implications of this research and the practical implications with respect to the design, targeting, and promotion of FPs.