Loyalty programs are usually sold as a discount with a login. The research behind the ones that work says something more interesting: the reward matters less than the feeling of getting closer to it.

The car wash

In 2004 Joseph Nunes and Xavier Drèze handed out 300 loyalty cards at a car wash. Every card needed eight purchased washes to earn a free one. Half the cards had eight empty slots. The other half had ten slots, with two already stamped. Same effort, same reward. Only the starting point looked different.

34% of the customers with the pre-stamped card finished it, against 19% with the plain card. They also came back sooner, about three days less between washes on average Published. Nunes and Drèze called it the endowed progress effect: people work harder toward a goal they believe they’ve already started.

People finish what they believe they’ve already started.

The coffee card

In a paper published the same year, Ran Kivetz, Oleg Urminsky and Yuhuang Zheng studied a café reward card that gave a free coffee after ten purchases. Customers bought more often as they got closer to the reward: the gap between visits shrank by about 20% from the first stamp to the last. Customers given a twelve-stamp card with two stamps already filled finished faster than those with a plain ten-stamp card, 12.7 days against 15.6 Published. The goal gradient, an idea psychologists first described in the 1930s, works on coffee drinkers too.

What this means for your program

• Start everyone with progress. Points on sign-up or on the first order, framed as a head start toward the first reward, not as a balance.
• Show the distance. Every message that mentions the program should say how close the customer is to the next reward, not just how many points they have.
• Put the first reward within reach. A first reward that takes a year to earn doesn’t pull anyone forward. Time it to arrive around the second or third order.
• Recognize the top, don’t discount it. Your best customers respond to first access, a real person’s attention and being known. A deeper discount is the most expensive way to say thank you to someone who was going to pay full price.
• Pay in currency, not percent. Points and credit spent on the next order keep the reward inside the brand and don’t teach a lower price. The First Offer has a chapter on this.

Do this

• Read your loyalty program’s first message as a new customer would. If it says “You have 0 points” or shows a balance without a goal, rewrite it to show a head start and the distance to the first reward.