Loving the One You're With

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Loving the one you’re with How behavioral factors influence responses to customer rewards and incentives

CONTENTS

Challenge: Reinforcing good behavior | 2

Thanking customers: The power of incentives | 4

Setting the stage and bar | 4

How to thank: Can’t buy me love | 5

When to thank: Timing is everything | 8

Managerial implications: Sustaining healthy customer relationships | 11

Endnotes | 13 Loving the one you’re with

Challenge: Reinforcing good behavior

“The first year I started purchasing from them, they sent me a plastic coffee mug during the holiday season. A year later, they sent me a stainless steel mug. I wondered if that meant I had been a better customer that year, or maybe they just decided to upgrade their mugs. Since then, I haven’t received anything. I am not sure whether they stopped sending out mugs or I was no longer one of their better customers.”

INNING customers’ hearts and minds— are actually quite sensitive to exactly how an or more specifically, wallets, good organization acknowledges their good behavior, Wfeelings, and positive word of mouth— and the field of behavioral economics teaches us is a perennial top-of-mind business issue across that a number of cognitive biases weigh heavily sectors. But many firms struggle with how best on perceptions (see sidebar, “A Deloitte series on to thank their customers, not only in terms of behavioral economics and management”). the amount of resources they should devote, It’s worth noting that overall, appreciation but also the most effective way to acknowledge has been an underutilized measure of today’s this good behavior. While saying thank you as consumer’s loyalty. While the majority of loyalty a way of kindling loyalty seems straightforward research has focused on satisfaction and will- enough, research suggests otherwise. People ingness to recommend, the role that customer acknowledgment (appreciation) plays in both customer satisfaction and repurchase behavior has only recently started to receive attention as a driver of both customer behavior and choice.1 This link between appreciation (acknowledgment) and repurchasing deserves further exploration. The research presented in this article suggests that:

• A simple “thank you” may do more on its own than when coupled with a small financial reward.

• The timing of an acknowledgment may be more important than the frequency.

2 How behavioral factors influence responses to customer rewards and incentives

• These “thank you’s” are not considered in organizations do to encourage customers to isolation; rather, people compare past “thank become and remain “holistically” loyal patrons— you’s” to the most recent. that is, present in both body (behavior) and mind (attitude)? Drawing from recent research, we Our prior work in this space has looked at provide insights and recommendations regarding consumer-imposed reasons for remaining in reward types, amounts, and timing, as well as sub-optimal business relationships.2 This article the importance of ensuring that these rewards explores the other side of the coin: What can offered are sustainable over time.

A DELOITTE SERIES ON BEHAVIORAL ECONOMICS AND MANAGEMENT Behavioral economics is the examination of how psychological, social, and emotional factors often conflict with and override economic incentives when individuals or groups make decisions. This article is part of a series that examines the influence and consequences of behavioral principles on the choices people make related to their work. Collectively, these articles, interviews, and reports illustrate how understanding biases and cognitive limitations is a first step to developing countermeasures that limit their impact on an organization. For more information visit http://dupress.com/collection/behavioral-insights/.

3 Loving the one you’re with

Thanking customers: The power of incentives

N his groundbreaking work, Psychologist B.F. smiling barista, who quickly knew my order Skinner demonstrated just how powerful rein- without me having to state it, a handwritten Iforcements can be when seeking to influence “thank you” note inscribed on my cup with behavior. He conditioned pigeons to perform silver Sharpie, and a vibrant community. As atypical and difficult tasks, such as playing ping- a loyal customer, every couple of weeks, I pong and dancing, by systematically rewarding earned a free drink. I loved it. them for desired behaviors and negatively reinforcing undesired behaviors.3 However, the rewards program that I came Skinner identified a number of contingencies to love has ceased to exist. With the new that should be considered when using incentives program, it seems like my social security will to elicit behaviors. Of particular relevance are kick in before I see my next reward. When did the following three considerations, explained in I become just another line on their spread- figure 1, which we refer to as the three pillars of sheet? Suddenly, the barista doesn’t seem as thanking customers: 1) The type and amount of warm as he scribbles a tacky “thank you” on acknowledgment (the “how”); 2) The timing (and my paper cup. The crowd has changed as frequency) of acknowledgment (the “when”); well—more just faceless strangers these days. and 3) The sustainability and frequency of the Have they changed their espresso beans, too? acknowledgment (the “how long”). It just doesn’t taste the same. Maybe tomorrow I’ll just settle for the instant coffee at work. At least I’ll shave off 10 minutes on my commute Setting the stage and bar and save a few bucks.

You had me at “hello espresso.” For years, the As our opening vignette, along with the one above highlight of my morning was my visit to the suggests once any reward is introduced, custom- coffee shop. It was the perfect experience: the ers feel at best confused, and at worst betrayed, if

Figure 1. The three pillars of thanking customers

The type of reward (e.g., money vs. verbal acknowledgment) that the Type and amount customer responds best to and its amount (e.g., size of gift, amount of money, (the “how”) improvement in line wait)

The optimal timing or frequency of incentives needed to keep customers loyal, Timing and frequency while not exhausting resources; also, whether timing should be tied to behavior (the “when”) (fixed–ratio) or tied to certain times in the calendar year, such as every quarter or month (fixed–interval)

Sustainability The likelihood that the chosen acknowledgment method (type, amount, and (the “how long”) frequency) will be sustainable over time

Graphic: Deloitte University Press

4 How behavioral factors influence responses to customer rewards and incentives

it is subsequently taken away from them. Profes- Sustainability sor Michael Lewis explains that in the customer’s mind, the mere presence of a reward program Pulling back on an established “thank you” method can create a perceived contractual relationship may leave customers feeling less satisfied and with the company. Customers believe if they hold appreciated than they would have felt had the up their part of the deal, the company must do “thank you” never been extended in the first place. the same, a behavioral bias called the norm of To avoid this outcome: 4 reciprocity. Thus, once a reward is entered into ffErr on the side of caution when introducing any the equation, a customer then feels entitled to it. incentive-based acknowledgement program.

The behavioral factor underlying the decreased ffBe conservative when initiating customer incen- satisfaction that occurs when the reward is tives in terms of type, amount, and frequency. removed from the equation can best be explained by the expectancy disconfirmation model.5 As figure 2 illustrates, our satisfaction with a How to thank: Can’t buy me product or service offering is not driven by the love performance of the offering itself, but rather by the gap between our expectation of the experi- With regard to how best to thank customers, ence and the actual performance of the product financial incentives remain a common way for offering.6 Thus, our satisfaction is not made in firms to demonstrate their appreciation to exist- isolation, but is based on the expectation that ing customers for their loyalty. However, recent has been set for us, which is primarily driven by research suggests that these financial incentives past experiences and firm communications. Not can backfire. This is particularly true if incentives only can satisfaction decrease when an expected are introduced too early or when they fall under reward is taken away, another cognitive bias, loss the threshold of what the customer considers to aversion can also come into play, which suggests be an appropriate amount. that the pain felt from having something taken away from us is greater than the gain felt from ONCE MONEY IS INTRODUCED INTO THE that same item being given to us.7 Consequently, PICTURE, IT WILL ALWAYS REMAIN PART firms need to err on the conservative side as they OF THE CONVERSATION think about the type, degree, and frequency of the rewards they offer customers as a means of One recent stream of research found that how acknowledgment. we reward customers early on in the relationship

Figure 2. Expectancy disconﬁrmation model

Expectations

Disconﬁrmation Satisfaction of beliefs

Perceived performance

Source: Adapted from Richard Oliver, "A cognitive model of the antecedents and consequences of satisfaction decisions," Journal of Marketing Research 17, no. 4 (1980): pp. 460–469. Graphic: Deloitte University Press | DUPress.com

5 Loving the one you’re with

Type and amount

Using financial incentives to thank customers can be a slippery slope, and can have long-term negative implications. Factors to consider:

ffIn lieu of financial incentives, consider providing customers with verbal acknowledgments, personalized treatment, or other perks.

ffEnsure any financial incentives offered are both sustainable and at what the customer considers to be an adequate market base level.

ffWhile there are ways to mitigate the negative impact of small financial incentives, such as charitable giving programs, note that customers typically feel just as appreciated (if not more) when offered a verbal acknowledgment alone.

has implications for the relationship moving customers in the early stages of the relationship, forward. Specifically, if you fall into the trap of as this sets expectations moving forward. These showing customer appreciation through price can include training sales associates to build discounts in the early stages of the relationship, personal relationships and identify and antici- customers will then expect higher discounts as pate customer needs, just as our barista in the the relationship continues, a phenomenon known vignette did. Tactics like these increase loyalty as the loyalty–discount cycle.8 A behavioral bias because customers believe they are receiving that may explain this phenomenon is the crowd- special treatment, which is one of the primary ing out effect,9 which suggests that once financial reasons why consumers remain in existing busi- benefits are brought into a business transaction, ness relationships.10 they will override the inherent benefits derived from a product or service. How monetary acknowledgments can backfire Given these biases, thanking with money is clearly a slippery slope. Therefore, companies should In addition to the negative long-term implica- consider finding nonfinancial ways to thank tions outlined above, additional recent research found that financial incentives that fall under a certain threshold can immediately undermine Thanking with money basic communication efforts to thank customers. Specifically, in an effort to understand the is clearly a slippery effect a small financial incentive included with an acknowledgment had on customers, researchers slope.... Companies looked at the responses to acknowledgments of hotel guests and college campus dining patrons. should consider finding The hotel guests were asked to write a review of their stay, while the dining patrons were asked to nonfinancial ways to thank complete a dining establishment review. In both cases, the participants were divided into two customers in the early groups: One group received a written acknowl- stages of the relationship, edgment thanking them for their time and feedback, while the second group received the as this sets expectations same note but they were also promised a nickel to thank them for their assistance. Respondents moving forward. were then asked to indicate the degree to which they felt appreciated. As figure 3 illustrates,

6 How behavioral factors influence responses to customer rewards and incentives

Figure 3. Appreciation felt after company acknowledgment

6 5.6 4.4 5 4.9

4 3.4

Appreciation level 2 ( 0 = not at all appreciated; ( 0 = not at all 7 = very much appreciated) 1

0 Hotel patrons (n = 49) Dining patrons (n = 46)

Acknowledgement only Acknowledgement plus ﬁnancial beneﬁt (nickel)

Source: Adapted from Peggy J. Liu, Cait Lamberton, and Kelly L. Haws, “Should firms use small financial benefits to express appreciation to consumers? Understanding and avoiding trivialization effects,” Journal of Marketing 79, no. 3 (2015): pp. 74–90. Graphic: Deloitte University Press | DUPress.com respondents who received the small financial business by encouraging others to shop there, benefit with their thank you felt significantly less and writing social media reviews about the store appreciated than did participants who received and its products. a verbal acknowledgment alone, a phenomenon Participants were then presented with one of known as the trivialization effect.11 nine email thank-you responses with varying This finding is consistent with recent behavioral discount offers, ranging from no discount to economics research outlining how individuals 40 percent off their next purchase.14 Similar to keep two sets of norms, or expectations, regard- the previous study, after receiving the email, ing patterns of behavior and how the world participants were asked to rate how appreciated should work. Social norms include simple they felt. The results suggest that including a requests that people make of one another and financial benefit can be fine, as long as it is not subsequent acknowledgments of thanks. Market too small. Specifically, the retailer benefited from norms, meanwhile, include fair exchanges and an this incentive only when the discount reached expectation of comparable benefits for efforts 15 percent. This indicates that firms may benefit exerted.12 It has been well-established that people from providing some sort of financial perk, as live concurrently in these two worlds.13 long as it isn’t below market expectations.

How market norms affect loyalty Mitigating the trivialization effect

In an effort to confirm that the reason feelings Given what we know about how tricky it can be of appreciation eroded was due to the inclusion to use financial incentives to win loyalty, prac- of the small financial benefit (nickel) amount, the titioners are wise to consider how to provide researchers conducted a follow-up experiment. the right amount of financial incentives, which Here, they asked participants to imagine that are sustainable over time, without “giving away they frequently go shopping at a mid-priced the store.” Factors such as the existing customer clothing store and bring the store a lot of experience within the product category, the

7 Loving the one you’re with

prevailing market environment, and competitors’ IF IN DOUBT, LEAVE THE FINANCIAL discounts may dictate what an appropriate offer ACKNOWLEDGMENT OUT might be. However, there may exist opportunities for firms to leverage anchoring points when Taken together, these studies suggest that finan- setting financial benefit levels. Anchoring refers cial acknowledgment can do more harm than to individuals’ tendency to rely on initial, recently good if the incentive amount is not gauged prop- presented, or salient information to guide future erly (for example, unless the amounts are well decisions or expectations.15 above established market expectations). Beyond exhausting company resources, these financial With this behavioral tendency in mind, research- acknowledgments have the potential to under- ers tested how a 5 percent discount on a purchase, mine efforts to show appreciation. Companies included with a verbal acknowledgment was with resource constraints that wish to reward received when it was provided alone versus offers customers financially may choose to give a small in which their discount was highlighted within amount to charity, ideally of the customers’ a list of other smaller discounts (for example, 1 choosing. In the end, though, a simple expression percent, 2 percent, 3 percent, and 4 percent).16 of thanks may be more favorably received and As the anchoring cognitive bias predicts, when less risky than offering a financial reward. consumers were privy to these additional lower potential discounts, their level of felt appreciation increased by almost 20 percent vs. when When to thank: Timing is they received the 5 percent discount with the everything acknowledgment. Still, it is worth noting that this felt appreciation level did not surpass the average Our final consideration deals with how often and appreciation felt from a verbal acknowledgment when a firm should show their appreciation. It alone. turns out that timing can be everything. Research shows, in fact, that the timing of an acknowledg- Another study looked at whether giving a small ment can sometimes be more important than the financial donation to a charity on the customer’s actual form of that acknowledgement. For the 17 behalf would be a better strategy. While the acknowledgment to be effective, the research we study found that giving a small amount to a reviewed suggests that it needs to be viewed as a charity instead of the participant does mitigate response—or reaction—to the desired behavior.20 the trivialization effect, there was no significant difference between appreciation felt using this WHEN ANY RESPONSE IS BETTER THAN tactic vs. offering a verbal acknowledgment NO RESPONSE alone. It is possible, though, that charitable dona- tions made on a customer’s behalf may create a Through a series of experiments, research- balance between the trivial and market expecta- ers concluded that any reaction (response) is tions for financial acknowledgments. Consider this: Cash-back incentives for a new automobile Timing and frequency purchase rarely dip below $500.18 Despite this, Subaru has completed its eighth year of donat- The timing of “thank you’s” may be more important ing $250 for every new vehicle sold or leased on than the frequency of these acknowledgements. behalf of the purchaser throughout the holiday Time it right by: season.19 Based upon the behavioral research, it ffEnsuring the acknowledgments quickly follow would seem that $250 may not be enough of a desired customer behavior market-level incentive. But given the popularity of this program, customers may respond favor- ffSimultaneously communicate to customers the ably to appropriate pro-social acknowledgments, connection between their desired behavior and even if they fall below market value. the acknowledgement

8 How behavioral factors influence responses to customer rewards and incentives

People like to repeat behaviors that generate reactions, even if the reactions are negative or not useful. better than no reaction, as long as it is viewed in a payment box, which had a narrow opening at as contingent upon (or a reaction to) the indi- the top to insert coins. Attached to the box was vidual’s behavior. People like to repeat behaviors a sign that read: “Pay what you want/use dimes that generate reactions, even if the reactions only! Drop one dime at a time!” There were two are negative or not useful; the mere presence payment box conditions: one from which sound of a reaction makes the corresponding behavior was elicited with each dime dropped, and one more engaging. This phenomenon is known as that remained silent with the dropping of the the mere-reaction effect, and beneath it lies an dime. In an effort to control for any social desir- important cognitive bias, the illusion of control.21 ability associated with the amount given, the Humans routinely demonstrate a desire to have researchers left the room, leaving the participant control over their environment, and to exercise alone in the room to make their payment. Among control where opportunities to do so exist.22 In those who paid, the participants whose payment essence, to seek a reaction is to seek informa- box had sound, on average, gave 80 percent more tion about one’s power in controlling something. than those whose box had no sound. The information value is in the presence of the response itself vs. the content of the response. CONTINGENCY VS. FREQUENCY

One simple study illustrating this point was a To tease apart whether the increase in desired bean-throwing experiment. Here, participants behavior was due to the sound itself or the fact were placed five feet in front of a target, with a that the sound was in response to the partici- bucket of soybeans at their feet and then asked pant’s action, these same researchers conducted to spend three minutes throwing soybeans, one a study in which participants were asked to at a time, at the target. They were also told jump up and touch a touch pad repeatedly for they could repeat the task as many or as few two minutes. Participants were assigned to one times as they wished during the three-minute of three touchpad conditions: no sound when period. Participants were assigned to one of two touched, a contingent sound in which a sound conditions: one in which the target was made of was emitted once touched, and a noncontingent metal, and would emit a sound when hit by the sound condition in which the touchpad emitted bean, and the other, where the target was made a sound randomly (not tied to the jumps) 15 times of sponge, and gave off little to no sound when over the two minutes. As the results provided in hit. In a pre-test, the sound was rated as slightly figure 4 indicate, those in the contingent sound 23 negative. On average, the participants assigned group jumped and touched the touchpad 50 to pitch soybeans at the metal target (the “sound” percent more times than those in the noncon- condition) threw 36 percent more beans during tingent sound group. Not only did those in the the five minutes than those in the “no sound” contingent sound group, on average, jump more condition. There was no significant difference in than those in the noncontingent sound group, hit rate (72 percent vs. 70 percent). the noncontingent sound group only jumped, This finding was replicated in a “pay what you on average, the same amount as those in the want” experiment, where each participant was no-sound group. given two dollars: a one-dollar bill and 10 dimes, The researchers concluded that the repeated along with a pen with a retail value of $1.50. behavior was due to the contingent (or reactive) Participants were told that they could pay what nature of the sound, not just the presence of the they wanted for the pen by dropping the money

9 Loving the one you’re with

Figure 4. Jumping and touching touchpad

20 18.1

15 12.1 12.0

2 minute interval 5 Number of jumps during Number of jumps

0 No sound Contingent sound Noncontingent sound

Touchpad type

Source: Adapted from Christopher K. Hsee, Yang Yang, and Bowen Ruan, “The mere-reaction eﬀect: Even nonpositive and noninformative reactions can reinforce actions,” Journal of Consumer Research 42, no. 3 (2015): pp. 420-434.

Graphic: Deloitte University Press | DUPress.com

sound itself. Given that the noncontingent sound up reinforcement schedules, this suggests that group was, on average, exposed to the sound as tying the timing of rewards to desired behaviors much or more than the contingent sound group, is more important than the number of rewards it seems that it is not so much the presence of provided. It also suggests that fixed-ratio reward the sound, it is the timing of it that matters. The systems (timing rewards to immediately follow research conclusions imply that the timing of a desired consumer behaviors) may be more likely reward should be tied to the desired behavior as to bring success in encouraging repeat behavior, opposed to coming at a random or arbitrary time compared with fixed-interval systems (having (for example, annually). For practitioners setting the reward occur at a set date).

10 How behavioral factors influence responses to customer rewards and incentives

Managerial implications: Sustaining healthy customer relationships

1. Don’t diminish the If a financial reward is deemed necessary, consider giving to a charity vs. the customer— importance of the post- preferably a charity of the consumers’ choosing. purchase experience. There may also be other pro-social benefits associated with this alternative.25 Additionally, take So much emphasis is placed on providing time to understand what your customers deem customers with a positive customer experience. as appropriate incentive amounts by analyzing But what about after? Today, customers have the market environment and soliciting customer more power after the purchase than ever before, input. In situations where customers are new to not only in the form of repeat business (behav- the product category or there is no market norm ioral loyalty), but also word of mouth, reviews on for financial incentive expectations, there may 24 social media, and returns. How you acknowl- be opportunities to influence these expectations edge and treat customers after receiving their through anchoring and reference points. business is important for both attitudinal loyalty and behavioral loyalty. Cultivating a superior post-purchase experience is a key strategy to 3. Timing trumps frequency: inspire customers to keep coming back for more. Ensure your response is tied to desired behavior. 2. How to say thanks: When Customers want to be acknowledged for their in doubt, leave money out. actions. People like reactions and like to repeat Practitioners should err on the side of caution behaviors that generate reactions. The research when rewarding customers with money, both presented here suggests that any response is in the short term and long term. Small finan- better than no response—however, the response cial incentives can do more damage than good, must be perceived as a reaction to their desired generating a less positive feeling of appreciation behavior or effort. It is not just a matter of than that formed from the mere offering of a increasing frequency of responses. Practitioners genuine thank you without a financial incen- might consider thinking more about respon- tive. Leading with money in the relationship can siveness to consumer behaviors than to overall also set the stage for an unhealthy relationship frequency of rewards. moving forward. Too much can crowd out the Marketing implications related to this finding intrinsic value of the product and also set an include the timing of monthly newsletters, mail- (often unrealistic) expectation that the discount ings, and events. To encourage repeat behavior will always be there. by consumers, be sure to tie reinforcement to individual behavior and minimize adherence to a set calendar reinforcement schedule. Work with

11 Loving the one you’re with

the customer’s preferred timing as opposed to Over time, once the program’s participation level trying to dictate a schedule. and the sustainability of resources are better known, you can consider increasing the size of the offering and or the frequency. Aim to start 4. Be conservative when small, and build it slowly. launching an acknowledgment program. COGNITIVE BIASES TO KEEP IN MIND WHEN DEVELOPING CUSTOMER When launching a new acknowledgement ACKNOWLEDGMENT STRATEGIES program, take a long view. Know that at all costs, you want to avoid eventually having to pull back Figure 5 below synthesizes the relevant cogni- and give customers less. So be sure to crawl tive biases to keep in mind as you develop your before you walk. Start off conservatively in terms customer acknowledgment strategies.

Figure 5. Cognitive biases at play

Cognitive bias Practical context Considerations

Low financial incentives as Trivialization effect/ acknowledgments can backfire in When in doubt, leave financial social norms vs. instances where social norms might incentives out market norms have been just fine

Setting incentive amounts and Look for opportunities to capitalize on Anchoring expectations; incentive degree and incentive reference points sustainability

Understand long-term resource Expectancy— requirements and anticipate customer disconfirmation Sustainability of chosen participation rates acknowledgment methods (type, amount, timing) Err on the conservative side Loss aversion when launching a customer acknowledgement program

Reciprocity theory Setting the stage on fair exchanges Pricing discount cycle If you lead with money, money will likely always be a factor in the Adding financial incentives causes relationship Crowding out effect customers to lose sight of intrinsic product benefits

Illusion of control Any response—even a negative one— Timing trumps frequency is better than no response Mere-reaction effect

Graphic: Deloitte University Press

of acknowledgment type, size, and frequency. How behavioral factors influence responses to customer rewards and incentives

ENDNOTES

1. Alison Kenney Paul and Susan K. Hogan, On the couch: Understanding consumer shopping behavior, Deloitte University Press, September 2015, http://dupress.com/articles/ understanding-consumer-behavior-shopping-trends/.

2. Susan K. Hogan and Timothy Murphy, Breaking up is hard to do: How behavioral factors affect consumer decisions to stay in business relationships, Deloitte University Press, June 2015, http://dupress.com/articles/ how-behavioral-principles-affect-consumer-loyalty/.

3. B. F. Skinner, Contingencies of Reinforcement: A Theoretical Analysis (New York: Appleton-Century-Crofts, 1969).

4. Alvin W. Gouldner, “The norm of reciprocity: A preliminary statement,” American Sociological Review 25, no. 2 (1960): pp. 161–178, http://www.jstor.org/stable/2092623.

5. Richard Oliver, “A cognitive model of the antecedents and consequences of satisfaction decisions,” Journal of Marketing Research 17, no. 4 (1980): pp. 460–469.

6. Ibid.

7. Amos Tversky and Daniel Kahneman, “Advances in prospect theory: Cumulative representation of uncertainty,” Journal of Risk and Uncertainty 5, no. 4 (1992): pp. 297–323.

8. Jan Wieseke, Sascha Alavi, and Johannes Habel, “Willing to pay more, eager to pay less: The role of customer loyalty in price negotiations,” Journal of Marketing 78, no. 6 (2014): pp. 17–37.

9. Bruno S. Frey and Reto Jegen, “Motivation crowding theory,” Journal of Economic Surveys 15, no. 5 (2001): pp. 589–611, DOI: 10.1111/1467-6419.00150.

10. Mary P. Harrison et al., “Why consumers feel locked into relationships: Using qualitative research to uncover the lock-in factors,” Journal of Marketing Theory and Practice 20, no. 4 (2012): pp. 391–406.

11. Peggy J. Liu, Cait Lamberton, and Kelly L. Haws, “Should firms use small financial benefits to express appreciation to consumers? Understanding and avoiding trivialization effects,” Journal of Marketing 79, no. 3 (2015): pp. 74–90.

12. Dan Ariely, Predictably Irrational: The Hidden Forces That Shape Our Decisions (New York: Harper Perennial, 2009).

13. Margaret S. Clarke, “Record keeping in two types of relationships,” Journal of Personality and Social Psychology 47, no. 3 (1984): pp. 549–557.

14. Specific discount amounts provided were: 5%, 10%, 15%, 20%, 25%, 30%, 35%, and 40%. Source: Liu, Lamberton, and Haws, “Should firms use small financial benefits to express appreciation to consumers?”

15. Amos Tversky and Daniel Kahneman, “Judgment under uncertainty: Heuristics and biases,” Science 185, no. 4157 (1974): pp. 1124–1131.

16. Liu, Lamberton, and Haws, “Should firms use small financial benefits to express appreciation to consumers?”

17. Ibid.

18. Referenced from an aggregated listing of new automobile incentives provided on cars.com, http://www.cars. com/go/advice/incentives/incentivesAll.jsp?zc=53221, accessed March 1, 2016.

19. Referenced from Subaru’s national website, http://www.subaru.com/share-the-love.html, accessed March 1, 2016.

13 Loving the one you’re with

20. Christopher K. Hsee, Yang Yang, and Bowen Ruan, “The mere-reaction effect: Even nonpositive and noninformative reactions can reinforce actions,” Journal of Consumer Research 42, no. 3 (2015): pp. 420–434.

21. Ellen J. Langer, “The illusion of control,” Journal of Personality and Social Psychology 32, no. 2 (1975): pp. 311–328.

22. J.M. Burger and H.M. Cooper, “The desirability of control,” Motivation and Emotion 3, no. 4 (1979): pp. 381–393.

23. A pre-test was conducted to test the sound made when the bean hit the metal. On a seven-point scale, with endpoints of “very negative” and “very positive,” the sound was rated significantly below the midpoint, near the “very negative” endpoint anchor. From Hsee, Yang, and Ruan, “The mere-reaction effect.”

24. Ibid.

25. P. Rajan Varadarajan and Anil Menon, “Cause-related marketing: A coalignment of marketing strategy and corporate philanthropy,” Journal of Marketing 52, no. 3 (1988): pp. 58–74.

14 How behavioral factors influence responses to customer rewards and incentives

ABOUT THE AUTHORS

SUSAN K. HOGAN

Susan K. Hogan is a market insights manager with Deloitte Services LP. Prior to joining Deloitte, Hogan was a marketing faculty member at Emory’s Goizueta Business School. Her research focuses on customer and business growth, decision processes, and how these issues impact the customer experience and loyalty.

TIMOTHY MURPHY

Timothy Murphy is a research manager with Deloitte Services LP. His research focuses on issues related to advanced technologies as well as the behavioral sciences and their impact on business management.

15 Loving the one you’re with

ACKNOWLEDGEMENTS

The authors would like to thank Mark Cotteleer, director, Center for Integrated Research, Deloitte Services LP; Karen Edelman, manager, US eminence, Deloitte Services LP; Geri Gibbons, senior manager, Deloitte Services LP; Mike Lewis, professor, Goizueta Business School, Emory University; Emily Koteff Moreano, manager, Deloitte Services LP; and Sarah Thomas, director, Center for Health Solutions, Deloitte Services, LP.

16 CONTACTS

Susan K. Hogan Tim Murphy Center for Integrated Research Center for Integrated Research Deloitte Services LP Deloitte Services LP 191 Peachtree Street NE Ste 2000 555 East Wells Street Atlanta, GA 30303-1749 Milwaukee, WI, 53202 Tel/Direct: +1 404 822 3957 Tel/Direct: +1 414 977 2252

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