This is an article by Diarmaid Byrne, Editor, Social Technology Quarterly. This article was published in issue 06 of STQ. Summary: Loyalty programs have undergone a transformation with a shift from only rewards-based programs to well-designed, gamified structures created based on models of motivation and of behaviour.

1. 24
Commerce
Making
Loyalty
Programs
Work

2. 25
Loyalty programs rule our lives. They determine the airline we fly with.
Sometimes even the schedule we take. They influence where we meet,
drink coffee or have lunch. They determine the products we buy in
supermarkets. They have the power to influence us to spend more than
we need to on items that we would view as otherwise unnecessary.
And they do this because companies understand that by giving
their customers a membership number and a plastic card, they can
seemingly satisfy people’s basic psychological aspirations and needs.
Providing these types of symbols work at a psychological level to
target and trigger actions and behaviours that engender repeat
purchase and advocacy. That is, they create loyalty. As much as all
companies want to distinguish themselves with a uniquely branded
loyalty program for their customers, the elements of each program are
often indistinguishable. American Airlines launched the first air miles
program in 1981 that seemingly every other airline has since copied;
ditto with supermarkets, hotels, and cafés. It is hardly their fault as
there are a limited number of elements that can be employed in their
loyalty programs:
• Points: calculated by the amount a member spends
• Levels: based on how much a member spends during a specific
period of time
• Badges: awarded based on what level the member has reached.
It signifies, particularly to other people, the rewards and benefits
the member receives
• Rewards: offers, discounts, and benefits that a member receives
Loyalty programs have undergone a
transformation with a shift from only
rewards-based programs to well-
designed, gamified structures created
based on models of motivation and of
behaviour.
by Diarmaid Byrne
Photo Credit: Onigiri-kun

3. Kuliza
In the last few years, these elements have been used by game
designers to create environments that lead to longer-lasting and
more in-depth participation, replicating the experience people have
while playing traditional video games. This has become known as
gamification. Game designers applied these elements to insights
from psychology and motivation theories to create immersive and
engaging experiences that ensure people continue to participate to a
greater extent than in traditional loyalty programs. The best of these
gamified loyalty programs not only add points, levels, and badges, but
also combine great game designs with an understanding of behaviour
and motivation theories. To understand why and how loyalty programs
work it is important to understand how people behave. This is best
done by looking at psychology models of motivation and behaviour.
From a perspective based on psychology, loyalty programs aim to
drive behaviours of different types of participants, at specific times,
based on triggers that the program provides. Loyalty programs draw
on the work of Abraham Maslow and his Hierarchy of Needs. The
purpose was to identify the basic types of human motivations and the
order in which they generally progress. There are five needs:
• Physiological: air, food, water, sex, sleep
• Safety: health, employment and financial security
• Belonging: friendship, family, love, intimacy
• Esteem: confidence, achievement, respect, self-esteem
• Self-actualization: the desire to become everything that one is
capable of becoming
Maslow believed that these needs motivate people to act. Their
behaviours are driven by their desire to satisfy their needs, starting
with fundamental physiological and safety needs, to higher-level
needs of achievement and self-esteem. Once the needs at each level
are satisfied a person is motivated to satisfy needs at the next level.
Michael Wu notes that Dan Pink expanded on Maslow’s self-
actualization needs in his book Drive: The Surprising Truth About
What Motivates Us. His view is that once many of the basic levels
of needs have been satisfied, people are more motivated by intrinsic
motivators. Pink identified three needs that provide intrinsic motivation:
• Autonomy: people want to have control over their work
• Mastery: people want to get better at what they do
• Purpose: people want to be part of something that is bigger than
they are
Both Maslow’s Hierarchy of Needs and Dan Pink’s Three Intrinsic
Motivators provide an explanation about why people are motivated
to act. However, a loyalty program still needs to trigger desired
behaviours at a specific time to ensure member participation.
The key to triggering behaviours is to make sure that loyalty programs
work as intended. B.J. Fogg developed a behavioural model - Fogg’s

4. Social Technology Quarterly 06

5. Kuliza
Behavioural Model or FBM - to help designers and marketers ensure
that all psychological elements are present to trigger behaviour. He
posits that there are three factors with subcomponents that lead to
certain behaviours:
• Motivation: pleasure / pain, hope / fear, social acceptance /
rejection
• Ability: time, money, physical effort
• Triggers: facilitator, spark, signal
Fogg argues that in order to trigger desired behaviours, all three
factors need to converge at the same time. Thus, the loyalty
program needs to be crafted in a way that these three factors occur
at the same time. It must provide a trigger to initiate the behaviours
it wants from its members. It then needs to ensure that they are
motivated and have the ability to complete those behaviours. That
is, the loyalty program should offer sufficient rewards to the person
to be motivated enough to do the action, and the person should have
the ability to complete the action.
Along with understanding motivation, designers of loyalty programs
need to understand how their members would engage with the loyalty
program. When conceptualizing a program, designers need to ensure
it appeals to as many people as possible. Richard Bartle developed a
simple player typology with four basic player types to understand the
motivations that drive people to play:
• Achievers: people who are motivated to achieve points and other
rewards for the prestige of having them
• Explorers: people who prefer to discover and learn about the
game, often at their own pace
• Socializers: people who play for the social aspect rather than
the game itself
• Killers: people who enjoy competing against others
By understanding that there are different types of players, designers
and marketers are better able to ensure that aspects of the loyalty
program appeal and motivate as broad a range of people as possible.
Loyalty programs are designed to meet the needs of people in a way that
motivates them to behave in a specific manner. They need to be broad
enough to attract different types of people, whether they are achievement
orientated or socializers. When we apply Maslow’s Hierarchy of Needs,
Dan Pink’s focus on factors that provide intrinsic motivation, Fogg’s
Behavioural Model and Bartle’s player typology, we can see why loyalty
programs are successful in motivating specific behaviours. Maslow and
Pink explain what people need, and in order to satisfy these needs people
are motivated into action. The belonging needs in Maslow’s Hierarchy
correspond to the social aspect of participating in loyalty programs. The
esteem needs correspond to status, achievements and leaderboards.
In the case of Dan Pink’s three factors, mastery corresponds to points,
progression and levels, and purpose corresponds to goals and targets.
For loyalty programs to be successful, they need to meet these needs
to motivate member behaviour. However, to trigger this behaviour,
according to Fogg, the program’s mechanics must ensure that these
three factors all occur at precisely the same time.
Credit: Dijle

6. Social Technology Quarterly 06
By examining airline loyalty programs, it is possible to see how these
apply insights from psychology and motivation theories. They appeal
especially to Bartle’s achievers and killers typography. People are
motivated to achieve a certain level of status from their membership
program so that it satisfies their belonging and esteem needs. They
are part of a (possibly) small percentage who are platinum members
and who receive platinum-level benefits. As such, they also have the
symbols to reflect this status - platinum membership card, dedicated
check-in lane, lounge access.
Another example of a loyalty program that applies insights from
psychology and motivation theories is Nike+. It is not a traditional
loyalty program; in fact it gamifies running. However, by aligning with
people’s goal - improving their athletic performance - Nike ensures it
shares a common purpose with people. Nike helps them achieve their
goal with their runners, clothing, and Nike+ apps, while increasing the
switching costs from Nike to one of their competitors.
The Nike+ fitness tool uses game elements to encourage people to
improve their fitness. A device is fitted into Nike runners and then
synchs with an iPhone or iPod. Users can track their activities,
performance - distance, time, pace, calories burned - and their
progression, set challenges, and compete with their friends. They can
post their run on Facebook and Path and hear real-time cheers for
every comment or like they receive.
Nike+ has been extremely successful, and looking at how it works it
is easy to see why. It appeals to all four of Bartle’s player typologies
by allowing people to interact in different ways with the tool:
compete against others, work to achieve goals, meet other exercise
enthusiasts, or work on fitness at their own pace. It also satisfies the
safety, belonging and esteem needs of Maslow’s hierarchy, and the
intrinsic motivators that Dan Pink identified. Nike+ also shows Fogg’s
Behavioural Model in action: users have targets and challenges
based on their ability and the app motivates them while running to
achieve them, triggering behaviours.
Loyalty programs will evolve to being a constant partner in their
members’ lives through smart phone apps, and not just thought of
when queuing to purchase products in a store. Nike+ is one such
example of where loyalty programs are heading. They will be gamified
to create more engagement from members. To do this well they need
to be cognizant of the psychology of motivation and behaviour. Loyalty
programs will have a clear purpose that is shared by their members
and they will help their members achieve it.
References
“Abraham Maslow.”Wikipedia,The Free Encyclopedia.17 Sep 2012.
Wu, Michael. “Gamification 101: The Psychology of Motivation.”
Lithosphere.03 Jan 2011.
Fogg, BJ.“Fogg’s Behavioural Model.” Online Posting to Twitter.Web.
30 Oct.2012.