There may be benefits to adding uncertainty to rewards programs
While conventional wisdom suggests consumers would be turned off by uncertain gains or rewards as part of a loyalty program, a study from the University of Chicago Booth School of Business finds uncertainty can play an important role in motivating repeat behaviors.
In the study, “The Fun and Function of Uncertainty: Uncertain Incentives Reinforce Repetition Decisions,” four experiments found uncertain rewards consistently motivated consumers more than certain rewards in both lab and field settings.
In one experiment, students at a running club in Hong Kong were told they could earn points by running, jogging or speed walking on a 400-meter outdoor track during a 15-day event. Half were told they would earn five rewards points after each lap and the other half randomly received either three or five points. The ones who received the random points logged more laps, even though the uncertain point condition held the potential of a worse financial outcome.
Beyond any loyalty rewards implications, the researchers pointed to other ways uncertainty appeals to consumers:
- Meal-kit delivery services such as Blue Apron send their subscribers a box of unknown groceries every week.
- Apple music pushes a list of new music to their subscribers.
- Birchbox mails out boxes of skincare and makeup samples.
- BarkBox gives pet owners a box full of surprise dog treats and toys based on that month’s theme.
“These services all share one important feature,” said Christopher Hsee, a professor at the Booth School and one of the study’s authors, in a statement. “They keep the box mysterious and let their customers have fun opening the packages and discovering the products. The uncertainty keeps the customers coming back.”
Adding uncertainty could also help other repeat behaviors, such as encouraging shoppers to bring reusable bags. The study stated, “Our research reveals that human reactions to uncertainty are more complex and nuanced than commonly thought.”
DISCUSSION QUESTIONS: What lessons should retailers take away from University of Chicago Booth School of Business’ study showing the benefits of uncertain awards or offers? Can you think of any other examples in which uncertainty pays off better than certainty in retailing?