The Psychology of Why Consumer Rewards Programs Suck You In – Discover Magazine

If the urge to punch the final hole in your coffee shop rewards card has you rerouting your walks, you’ve fallen for a loyalty program.

The drive to reach a small “gift” — a free latte, a seat upgrade on a flight — is why businesses offer rewards programs in the first place. Luring people into coming back repeatedly means a company can bank on returning customers, and we like those tiny achievements. “We are often trying to reach goals. And if they’re complementary to what we carry out in day to day life, they become attainable,” says Vijay Viswanathan, a marketing researcher at Northwestern University. At least, that’s the classic philosophy behind our love of loyalty programs. But over the years, it’s become clear that we like rewards not just because of the gifts themselves, but because of who gets to see us receive them. 

Eyes On the Prize

Companies have an ideal customer in mind: It’s the person who repeatedly buys items with a high profit margin, Viswanathan says. Rewards programs do the work of locking in the “repeat” part of the perfect shopper. It’s less expensive to have buyers that come back than it is to recruit and tempt new ones, Viswanathan says, and helps businesses build an idea of what future revenue will look like when there’s a stable of returning shoppers.

How the program tempts you depends on how easy it is to switch to