Tuesday, December 7, 2010

Endowed Progress

Have you ever heard of "endowed progress"? If you never have, you might want to read a research paper by authors Nunes and Dreze entitled "The Endowed Progress Effect: How Artificial Advancement Increases Effort." These researchers uncovered another people trait that improves sales, profit and (probably) loyalty. Endowed progress means that people who are given an artificial advancement toward a goal (such as a free trip) show greater persistence toward reaching the goal than they otherwise would. Artificial advancement is a way of appearing to give a customer a head start toward a goal even though it still takes the same effort to reach the goal. The example they use is an offer of a free airline ticket after 8 trips will not have as many people reaching the goal of 8 trips as when the offer is for a free trip after 10 trips but with a two trip head start. While both offers are the same, these researchers proved that customers were more likely to complete the 8 trips in a 10 trip program with a two trip head start than just doing 8 trips.

What is happening is that the task is reframed as a program that is already started. The customer tends to increase the chance that 8 trips will be taken and in a shorter period of time. They found that as people progress toward a goal, their effort will increase to get completion and as a result completion time will decrease given the head start.

Another finding from the research is that customer persistence depends on the relative progress made by the customer but NOT on the amount of the reward points or miles or other goal. thus, we might expect the customer will work harder as the goal comes into sight.

Their third finding was that endowed progress appears to be more effective when the customers are provided with a reason for the endowment. The customers want to know that there is a reason you are giving them a head start. The reason may be as simple as "we are starting a new loyalty program and are offering you this incentive to join our rewards program".

While I have never been a proponent of rewards programs, if you must use them, you might want to take advantage of this research. Although it suggests we are like sheep, their research is compelling. Try it, it just might provide a way of increasing sales, profit and loyalty.

1 comment:

sample said...

Was really amazed to know the Endowed progress..the free airline ticket example was simply superb! thanks a lot for sharing this with me!


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