Psychology and Effective Reward Systems

When Reward Systems Fail to Reward

On a recent trip, I used rewards to pay for part of a hotel stay, purchase a quick lunch at McDonalds, and pay for my wife’s jacket at Sam’s Club. Some reward systems work better than others.

We also stopped at a place X for hot drinks. Alas, my reward had expired. Yesterday I stopped by my local X and was told I was one visit away from a reward. I smiled and thought they don’t know how to do rewards. It’s not just that the rewards expired too soon but they don't always offer rewards on items I particularly like. Give me points toward things I like and I will come more often.

Effective reward systems must actually reward someone for their loyalty. 

That’s hard to do when people have different tastes. However, companies like McDonalds, Subway, and Firehouse Subs get it right. Loyal customers earn points on a tier system. You can select from a variety of low cost items or save points for better items--things you would actually buy there like sandwiches or subs.

Psychologists know that effective reward systems (actually, positive reinforcement systems) increase specific behavior. In the case of loyalty programs, rewards ought to increase return visits to purchase more items like the ones you bought before.

Rewards are in the eye of the beholder not the provider (or parents and teachers).

Offering something people don’t care for works as a punisher. 

Punishers are things we get after exerting effort toward a goal. When we fail to get what we expect or get something we do not like, we decrease our behavior toward future goals.

When in doubt, offer a discount like hotel chains and airline reward programs. Psychologists and educators know that point or token systems are effective ways to increase the behavior of most people.

I know a lot of people want to help children learn and do other things for intrinsic reasons. That’s a good idea.

However, a lot of human behavior is governed by reward systems. A "Well done" is nice to hear. Trophies and certificates are appreciated. But so many of us want more money and more benefits. CEOs must share the wealth with employees and customers.

It seems I wasn’t the only one thinking about rewards in the past week. Washington Post (2022) has a story about rewards at Dunkin’.

https://www.washingtonpost.com/business/2022/10/11/dunkin-loyalty-points-customers/

 Note, avoid confusing negative reinforcement with punishment.

I'm a retired psychologist and professor of psychology.

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