The Paradox of Choice in Today’s Loyalty Programs

Feb 15, 2023

Brands have shifted from telling the consumer what they want to let the consumer narrate. All industries have radically shifted to become hyper-consumer centric. This is great news – what better way to build a loyal customer base than to truly listen and act on what your consumer wants? Giving them the autonomy to make their own choices within loyalty programs has been one of the refreshing positives that have come out of the global pandemic. However, brands should be cognizant that they are using the voice of their customer to guide their loyalty program strategies and not overwhelm them by offering every single choice they ask for. 

There is a well-known study that examined choice and overall consumer satisfaction in which psychologists studied two different scenarios in a grocery store setting. In both scenarios, shoppers had the opportunity to taste at least one jam. If they tried a jam, they were rewarded with a $1 discount coupon to use to purchase any one of them. In the first scenario, the counter had 24 types of gourmet jam. In the second, the table had only six varieties. The researchers measured the number of individuals in each scenario that visited the jam counter and tried one and how many consumers in each made a purchase. 

The psychologists found that more shoppers that passed the counter with 24 jams stopped to try one when compared to the number of individuals who stopped at the counter with only six jams, yet people with limited choices were more likely to make a purchase. The researchers concluded that while an abundance of options might initially seem attractive to consumers, having too many options might cause someone not to make any decision at all.  

While freedom of choice is important, there is a fine line between having the ability to choose what you want and being paralyzed in the face of too many options. So, how do brands find the perfect balance between giving consumers the autonomy to make their own decision and overloading them with too many options? 

Focus on first-party data 

With third-party data soon going away, brands should focus on using first-party data to establish a loyalty program with a transparent value prop that is attractive to the consumer. Brands will have to push the boundaries when it comes to collecting, using, and drawing insight from their consumer data. 

Think about a company like Stitch Fix. If you are familiar with this brand, then you know that they ask you for a LOT of your personal data… including very personal information such as weight, size, height, and more. However, they do this in a transparent way that results in a curated, personalized value prop for the consumer as they get a box of clothing and accessories in the mail each month created specifically for them. They have mastered giving a consumer what THEY want, while also getting a goldmine of data to work with. 

Understand your consumers’ emotional connection to your brand 

According to Forbes, 91% of consumers say they are more likely to shop with brands that provide offers and recommendations that are relevant to them. So how do you do this? Using Kobie’s ELS (Emotional Loyalty Scoring) tool, brands can better understand whether their consumer is motivated to interact with them because of Status, Reciprocity, or Habit. 

Status-motivated members want choices that make them feel valued. Exclusivity is the name of the game here, so make them feel special by giving them access to a select number of options that are only available to an exclusive group. 

Members that feel they receive value from a brand are motivated by Reciprocity. You make them feel appreciated so that they will stay loyal to your brand. Using first-party data to understand this customer on a 1:1 level and offering personalized choices for them will be most impactful. 

Habit-motivated members do not want a ton of options; they want what they have gotten in the past and they want it to be easy. 

Let’s use Chipotle as an example. Hayley is a habit-based customer who has ordered the same burrito bowl for the past five years. When she opens her loyalty program app and sees twelve different options that she can redeem her points for, she gets overwhelmed. Hayley is lactose-intolerant, so when she gets emails prompting her to redeem her points for queso, she immediately dismisses the message. She’s only interested in redeeming her points for a burrito bowl. Understanding your consumers’ emotional ties and personalizing the program and interactions based on your segments matters. 

Use Triple Play Data to curate personalized offers  

Brands can collect and use Behavioral, Transactional, and Emotional data, (Kobie’s Triple Play Data strategy) to reduce the number of choices available and increase the level of personalization in the options provided. This will make the choices feel less overwhelming to the consumer (and push them to transact) and simultaneously create the impression that the brand understands them on a personal level. Collecting data points from each of these three categories will allow you to understand and drive engagement, experience, and value when considering what choices to offer in your loyalty program. 

After Hayley got her burrito bowl at Chipotle, she decided to buy her little brother a few golf accessories online for his birthday. Now, she is getting targeted ads all over her social media feed for more golf gear – but little do these companies know that she has never golfed a day and is not interested in buying a new driver cover or customized tee. They are looking at her transactionally due to her previous purchase. By using Kobie’s Triple Play Data tool, brands can learn how to layer in how she interacts emotionally and behaviorally as well to better understand Hayley and her true interests. 

Today’s consumer is in charge. They want a seat at the table when it comes to their favorite loyalty programs – and brands should give it to them. However, there is a paradox of choice to consider when it comes to loyalty program redemption opportunities, and more does not always equal better. Understanding your customer’s motivations with Kobie’s ELS tool, and employing triple-play data will deliver unique program variations for meaningful customer segments, ultimately driving incremental engagement and loyalty.