By Jonny Lupsha, Wondrium Staff Writer
Business loyalty programs often involve stamp cards or points systems. Working toward free meals or major coupon deals both incentivize repeat business, enticing consumers to save money doing something they enjoy. Nebraska will launch a reward system for the meat industry.
Anyone who has a partially stamped card for a frozen yogurt or fast food establishment is familiar with customer loyalty programs, but Nebraska will soon launch one for the entire meat industry.
Nebraska Governor Pete Ricketts endorsed and detailed the program recently, saying that the Nebraska Beef Passport program will feature 40 restaurants throughout the state that serve meat. As customers order beef from the menus, they can earn stamps for their passports. They can then send completed passports to the Nebraska Beef Council for the chance to win prizes, like a high-end cooler of meat.
Sometimes incentives work and other times they don’t. In his video series Behavioral Economics: When Psychology and Economics Collide, Dr. Scott Huettel, the Jerry G. and Patricia Crawford Hubbard Professor of Psychology and Neuroscience at Duke University, said four guidelines make incentives work.
Social Norms and Good Outcomes
“Incentives work when they establish social norms,” Dr. Huettel said. “We’ve all seen the pro-conservation messages in hotel rooms—things like ‘Help save the environment by reusing your towels.’ Those messages work best when they say something that suggests a social norm, something like ‘Eighty percent of guests in this hotel were willing to reuse their towels.'”
According to Dr. Huettel, similar incentives like adding small taxes on disposable plastic bags have mixed results, since they focus on a financial transaction. When they can establish a social norm such as implying that good people avoid using disposable plastic bags, they get better results. Incentives also work when they expose us to good outcomes.
“Researchers created a randomized trial in which they varied whether or not kids were paid for eating their vegetables,” he said. “The kids who were paid were more likely to try their vegetables, and they ate them whenever they were paid for eating them. And guess what happened? The kids started liking the vegetables, and they ate more vegetables after the payments ended.”
Dr. Huettel said this was because the incentive broke down their initial resistance to eating the vegetables, and upon repeated exposure, the kids developed a taste for them.
Gamification and Encouragement of Performance
The remaining two guidelines that shape effective incentives are a bit more abstract. Dr. Huettel said that the next criterion for making incentives work comes when internal motivation is absent or somehow crowded out.
“People are willing to pay money to ride their bikes, to read novels, or to work in their gardens—many people find those all interesting tasks,” he said. “But people must be paid to work as a bicycle courier, to proofread magazine articles, or to clear other people’s gardens. These tasks aren’t interesting or personally relevant and so incentives are critical.”
Many companies have circumnavigated this with gamification, or offering micro-rewards like taking note of milestones or providing positive feedback that make the activity seem like a game.
The final guideline, which falls along similar lines as gamification, is that incentives work better when they encourage better performance rather than trying to shape a decision. It’s easiest to illustrate this guideline by taking a look at examples that don’t work.
“Research indicates that incentives [do less well for] motivating people to engage in an action when they have free choice,” Dr. Huettel said. “Think [of] what is common when donating blood [or showing support] for a nuclear storage site. In these cases, there’s a free choice to take one action or the other. What economics can undermine is our motivation [to choose] specific choices, for better or worse.”
When offered money to donate blood, Dr. Huettel said, fewer people do so. However, when told they can donate their payment to charity, donation rates go back up. Nebraska will soon find out whether its meat-eating incentive works or not.