What can we Learn from Loyalty Cards?


Open your wallet.

Go ahead. Open your wallet. Or your purse. I’m conducting an experiment.

I am prepared to wager that in there – along with the photograph of your children and the credit cards – are two or three loyalty cards. I don’t mean your Tesco Clubcard – I mean the ones that are stamped. The loyalty cards from coffee shops, bakeries and your enterprising local burger restaurant.

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…And I’m prepared to make a second wager: that all those loyalty cards – that need eight or ten stamps before you get your free bagel or burger – have just one or two stamps on them. That you thought, ‘hey, that’s a good idea, I’ll do that’ and then quickly lost interest.

You’re not alone: that’s archetypal human behaviour – but according to an article in the Harvard Business Review it’s behaviour that may offer business owners and managers an insight into how to improve results from their teams.

Interestingly, it flies in the face of most current business thinking, especially when it comes to setting and achieving goals.

The modern trend is towards flexible working. As I wrote recently, the evidence suggests that teams allowed to work flexibly are both happier and more productive. And unsurprisingly, the vast majority of people have a preference for flexibility when it comes to goals. As the HBR puts it, ‘Adopting a somewhat elastic approach to setting goals allows us some future wiggle room.’

But it you want to achieve a major goal, then the article suggests you’re much more likely to do so with a rigid and restrictive structure for the necessary steps.

And this is where loyalty cards – and yoghurt – come in.

Professor Szu-chi Huang and her colleagues in the marketing department at Stanford University conducted research on the effectiveness of loyalty cards at a local yoghurt shop. It was the standard offer: a free yoghurt after six purchases.

There were two separate offers – the ‘flexible’ one, where customers were free to buy any yoghurts they liked, and a far more restrictive one, where customers had to purchase specific yoghurts in a specific order.

Unsurprisingly, there was far more take-up of the ‘flexible’ offer. Rather more surprisingly, those customers opting for the restrictive offer were nearly twice as likely to complete six purchases and get the free yoghurt. (And before you think it’s just one yoghurt shop near Stanford University, YesMyWine, the largest imported wine platform in the world, has reported similar results with special offers.)

The academics at Stanford suggested that the result was because customers responded to not having to make a decision: that in our ‘information-overload, decision-fatigued’ society people will appreciate something that gives them the chance to make fewer decisions. They go on from that to draw a conclusion for business: that once a goal has been decided on, managers should be rigid in the steps needed to accomplish it – in effect, take any decisions away from the team.

I’m not so sure. First of all I’d argue that people who sign up for a ‘restrictive’ offer are more committed in the first place and therefore more likely to ‘see it through.’ Secondly, my experience of managing large teams suggests that the real answer is “it depends.”

Specifically, it depends on the experience and capabilities of your senior team. If you’re looking to achieve significant change and/or achieve a major goal then, yes, there needs to be a detailed, step-by-step approach with a list of actions and a series of deadlines.

But if you have a ‘details guy’ in the team, my advice is delegate it to the details guy: it’s almost always better to ‘trust and delegate.’ But if you don’t have a details guy, then the actions and deadlines become your job: what’s absolutely certain is that they cannot be left to chance.

So there I am, disagreeing with learned academics at the world’s third-ranked university. I’d be fascinated to hear your views on this: and yes, let’s discuss it over a coffee. I can’t miss a chance to double my number of stamps…

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2 comments

  1. Jo McBeath · February 3

    So should I introduce a loyalty scheme for my customers or not – thinking 1 free card after you’ve bought 10 (M&s used to do) or make them buy them in a specific order (valentines, Mother’s Day, Father’s Day, thank you teacher with a few birthday cards in between!)

    • edreidyork · February 4

      Hi Jo – both Dav and I like your second idea more, which fits with the yogurt example. Go for it!!

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