How are Rewards Viewed?

Recognize good behavior: Promotional currencies have higher perceived value than cold cash. While we often spend our cash on what we need, like food and shelter, we almost always spend points and miles on what we want, like vacations and family gifts. This elevated emotional value explains why cash-back and discount-based loyalty programs have a much lower historical success rate. Discounts and rebates certainly represent value to consumers—at the outset. But cash-based rewards quickly become viewed as entitlements, and whatever competitive differentiation they provide evaporates entirely when your competitor meets or beats your easily copied offer.

COLLOQUY contributing editor Caroline Papadatos is Chief Knowledge Officer of Alliance Data Loyalty Services.