Did Pavlov’s dogs give the bell a 10 in their NPS survey responses?
Ellipsis constantly seeks to explain why some loyalty marketing initiatives produce outstanding results and others do not.
Our goal is a descriptive model that guides and reliably increases customer lifetime value for marketers. It is not a neurological map of customers but a helpful framework to make sense of observed behaviour and improve success rates in our program designs and operations.
The framework stands on the shoulders of giants who proposed explanations for why customers react, behave, think, feel and shop the way they do: B.F. Skinner, D. Kahneman and B. Sharp.
Brand loyalty safely reduces the number of decisions needed while increasing customer satisfaction. Unravelling this process is like assembling a jigsaw puzzle, challenging us to piece it together without the picture on the top of the box.
Skinner's Operant Conditioning Principles1 are one corner piece of the puzzle.
His work illuminates the necessity for frequent interactions in marketing programs, how rewards reinforce behaviour, and how 'habits' are formed and decay. The cycle is ‘Stimulus – Response – Reward’ (S-R-R), repeat.
Skinner's work outlines a practical approach to dealing with the overwhelming volume of stimuli that bombard our senses. A stimulus invokes a response; if the result is a reward, we are likely to repeat that response next time. Do this often enough, and the response becomes a habit; every time this stimulus arrives, respond this way for the reward, and there is no need to think too much about what to do.
It's a straightforward process that we can confidently apply to our marketing programs.
Skinner’s empirical studies used primary rewards, such as food treats, but Skinner also described the role of secondary reinforcers linked to primary rewards by consistent juxtaposition, e.g., a bell became a reward for animal subjects after being consistently associated with food. Money and loyalty points can be related to purchases in the same way.
Establishing a stimulus-response-reward habit is a critical program onboarding objective. Reliably reward the desired customer behaviour early in their membership so your points are more readily accepted as secondary reinforcers, allowing ‘points pressure’ to maintain member engagement with the program propositions.
This S-R-R circuit influences the way we think and make judgements. We decide quickly when the stimulus-response link is familiar, with no need to consider choices, and we ponder when it is unfamiliar2.
We have found another corner piece of the puzzle, Nobel Laureate Kahneman, published insights into our decision-making strategies.
To deal with too much data, we seek cause-effect links that simplify decisions and reduce our need to think everything through. We think fast because we see correlations as causation.
Kahneman defines two cognitive systems we use to navigate the world and explains why we feel emotional about brands we buy habitually. He labelled these,
- System 1: Fast, automatic, frequent, emotional, stereotypic, unconscious.
- System 2: Slow, effortful, infrequent, logical, calculating, and conscious.
Marketers must make it easy to be selected by (new) customers using System 2 and then move the brand to System 1. Reliably delivering your brand promise of quality and experience facilitates this move, so do good loyalty program rewards: S-R-R.
With his models of mental and physical availability, Sharp can be considered the third corner piece of the puzzle.
If your customers buy the brand often enough, encounter it often enough, see advertising often enough, and have a rewarding experience, you will grow customer loyalty faster than your competitors3.
Sharp attributes this to the availability of a dominant mental model for a brand and the physical availability of the brand when the customer looks to buy. Mental availability reflects the default, often unconscious customer choice of a brand, a fast choice. Loyalty rewards should be designed to strengthen the customer’s mental model.
Skinner and Kahneman would nod, "That's what we said”.
We are still searching for straight-edge pieces of the puzzle. As consumers, we can be unaware that our decision-making is shaped by S-R-R, System 1 Thinking, and Mental Availability. So, we dress it up with brand love, advocacy, and other emotionally charged concepts that are much harder for marketers to automate and scale.
Management Implications
Effective program design acknowledges this layered framework and starts with corner pieces before jumping into the middle of the puzzle. Automate and scale these, and the customer will complete the puzzle themselves.
- Establish Skinner’s Stimulus-Response-Reward (S-R-R) link early in the customer onboarding. Reward as quickly and often as possible, as the Response-Reward link is time-sensitive, and do all you can to establish the habit of buying your brand.
- Simultaneously (and obsessively) establish the value of your secondary reinforcer, your points, Stars, stamps, etc., so receiving them is rewarding for the customer, and you avoid simply becoming a discounter. The program should build ‘points pressure’ so customers feel rewarded as they accumulate rewards.
- Ellipsis calls these processes ‘Benefit Loops’ that can be automated to cater for scale and reliability.
- Simultaneously (and obsessively) establish the value of your secondary reinforcer, your points, Stars, stamps, etc., so receiving them is rewarding for the customer, and you avoid simply becoming a discounter. The program should build ‘points pressure’ so customers feel rewarded as they accumulate rewards.
- Remove friction from customer interactions so purchasing from you can safely be a System 1 decision. Acknowledge customers' cognitive biases towards brand selection, including Optimism and Loss Aversion, Framing, Availability and Sunk Cost and reflect these in your communications. At a minimum, remind them of the value they have accumulated in your program and how close they are to a reward.
- Reinforce these mental models with as wide a range of buyers as possible, and ensure you are on top of mind and available when the customer is ready to buy
Comments on Stimulus-Response-Reward Mechanism
Skinner documented the relationship between stimuli, response, and rewards/reinforcement. A stimulus, then a response that generates a repeated reward, creates a habit, a cause-and-effect connection that allows for 'fast thinking' when the stimulus is next encountered.
The S-R-R link is created with repetition events and can be remarkably persistent once established. Vary the size of the reward randomly and make its arrival uncertain, and you have the secret to habit and addictive behaviour. Add attractive lights, music, and distractions; you have 'entertainment' and the rationalisation of a gambling habit.
Secondary reinforcers are critical as they allow Stimulus-Response links to be rewarded by more than food, shelter, and sex, Maslow’s primary motivators. Secondary reinforcers are rewards that take on the function of primary rewards and cause habitual behaviour themselves. Money is, of course, a secondary reinforcer.
Once the conjunction of the two was established, Pavlov's4 dogs responded to the noise of his bell the same way they responded to food.
Money and reward points are two secondary reinforcers for humans. The bell without treats eventually stopped eliciting a response from the dogs, but it was surprisingly resilient. Humans sometimes hoard money and points, not spending on rewards for years.
- Best practice loyalty marketing follows this script.
- Onboarding members requires establishing S-R before the customer's openness to a new habit expires. Good programs reward desired customer behaviours early, with the #1 quoted reason for abandoning a program being "it took too long to get a reward."
- Low-frequency interactions make S-R pathways hard to maintain as habits decay without reinforcement. Larger rewards compensate for gaps in reward timing, and good programs exploit secondary reinforcers more frequently - points for purchases on a credit card are a common way to reduce inter-reward intervals. Operators want the effects to persist.
- Onboarding members requires establishing S-R before the customer's openness to a new habit expires. Good programs reward desired customer behaviours early, with the #1 quoted reason for abandoning a program being "it took too long to get a reward."
- Good programs reinforce the link between response and reward by reminding customers of their progress towards the next reward.
- Effective programs occasionally surprise habitual customers with an unexpected reward. This strengthens the mental model nicely.
- We rationalise irrational behaviour, so good programs praise the wisdom of customers who make the most of the loyalty offer.
Stimulus-Response-Reward in Practice: Benefit Loop
The S-R-R concept is fundamental to the reciprocal value exchange between a brand and its customers. It is the core of any well-designed loyalty program. Dear customer, we expect you to do X and will give you Y in return. We refer to this as a ‘Benefit Loop.’
A Benefit Loop is the outcome of customers acting in anticipation of a reward. Repeat interaction is typically at the core of that value exchange.
The beauty of Benefit Loops is that in a well-designed proposition, the stimulus will only need to be given once for the loop to run. A simple explanation of how the program works can suffice.
The better the underlying habit is established (system 1), the easier and more enticing it is to act for the customer (good program design), and the more front of mind the loyalty proposition is (Sharp’s mental availability), the fewer stimuli you need to create and maintain well-oiled Benefit Loops.
We are Ellipsis, the Loyalty Experts. We help you find, understand, measure, manage and grow customer loyalty. We’re here to help, please get in touch…
References:
1. B.F. Skinner’s Theory of Operant Conditioning
4. Ivan Pavlov (1849 – 1936) was a Russian research scientist who also studied Operant Conditioning; he famously used dogs and bells as subjects.
