Reward Framing & Its Stunning Impact On Conversion Optimization: What You Need To Know
A rewarded customer is a happy customer, and columnist Jeremy Smith says presenting your rewards strategically is one simple way of improving your conversions.
When you put something up for sale on the internet, you enter a realm of powerful and compelling psychology. It can be complex; it can be confusing. But understanding this psychology is incredibly rewarding.
One such area is reward framing — and no, it’s not what you’re thinking.
What Is Reward Framing?
Reward framing is the way that a customer perceives a reward.
In the realm of online conversion, reward framing is giving a customer a reward that they will perceive as valuable, which then compels them to convert and become a returning customer.
Everyone seeks reward. Our minds are shaped in such a way that we can’t help but seek reward. The entire brain has a complex cycle structure that assesses risk, analyzes reward, experiences gain, assesses the value and repeats.
Today, the topic we’re focusing is not just reward broadly, but the specific aspect of how the reward is presented in an online setting.
You may not already have a rewards system as part of your e-commerce strategy, and I suggest you create one if you don’t.
This reward system may appear in your pricing structure, as a loyalty program, or as a means of motivating purchase behavior. The article proceeds with the assumption that you have a rewards system, focusing on how to present it most effectively.
First, Let’s Talk About The Framing Effect
We can’t really talk about framing without at least mentioning the framing effect.
The framing effect refers to the idea that the way a question or fact is presented (or “framed”) can influence how a person responds or reacts to it.
An example (PDF) is described in this academic paper by Shlomi Sher and Craig R. M. McKenzie:
[blockquote][I]n one study, beef described as “75% lean” was given higher ratings than beef described as “25% fat” (Levin and Gaeth 1988); similarly, research and development (R&D) teams are allocated more funds when their performance rates are framed in terms of successes rather than failures (Duchon et al., 1989).[/blockquote]
According to the findings of prospect theory (a related field) people react more strongly to loss than they do to gain. (This finding, known as loss aversion, is a psychological nugget all its own, and we’ll circle back to it in a section below.)
Loss aversion has been demonstrated in an experiment (PDF) by Simon Gächter et al., in which researchers sent emails to Ph.D. students reminding them to register for an economics conference. Some of the emails offered a discount for registering early while the others framed it as a penalty fee for registering late. In the end, 93% of the students registered early when a penalty fee for late registration was invoked, while only 67% did so when it was presented as a discount for earlier registration.
The framing effect gives us critical information regarding how people take risk, assess loss and (for our purposes) perceive reward.
When you’re dealing with reward framing, you have plenty of psychological research to draw from to develop a compelling and highly-converting reward. In the remainder of this article, I’m going to explain how exactly you should structure your rewards to maximize your conversions.
How To Think About Reward Framing
First, you need to choose how you’re going to reward your customers.
I’m referring to “reward” in a very general way here — this could be a visual reward for completing a checkout process, a loyalty program for rewarding repeat customers, or an app feature designed to elicit continual interaction.
The truth is this: it really doesn’t matter what reward you pick.
Really, it doesn’t. You can choose whatever reward you want. The critical thing is the way that you frame the reward — thus, the whole point of this article!
[blockquote]Instead of asking, “What rewards should we give away?” ask “How should we give away a reward?” It might not be the reward per se, but how the reward is framed, and the steps customers must take to obtain the reward, that matters [sic].[/blockquote]
Scientists refer to this as “description-dependent reward processing.” From a neurological perspective, the brain isn’t just stimulated by the reward; rather, the brain is stimulated by how the reward is presented.
As to what that reward is? It doesn’t matter much, researchers have found.
Let’s use an example from Joseph Nunes and Xavier Dreze (PDF). These guys tested a reward at a car wash. Some customers received a loyalty card that rewarded eight car washes with the ninth one free. Every time the customer came in, they would get an extra sticker on the card. Other customers, in the test group, received a similar loyalty card, but it had ten spots for stickers, and two stickers already placed on the card.
The offer was the same. The only difference was that on some of the cards, there was a sense of progress already built into the offer: the two stickers. The total number of purchases required to obtain the reward on each of the sets of cards was identical.
What happened? Merely 19% of the customers who received the eight-sticker car wash redeemed their reward, whereas 34% of the customers who had two stickers on a ten-sticker reward card came back for their reward.
On every level, the 10-car wash crowd was more eager and motivated to redeem their reward. Why? Because of the way the reward was framed.
Frame Your Reward (Or The Absence Of Your Reward) As A Loss
One option is to frame your reward as a loss rather than a gain, appealing to the consumer’s sense of loss aversion. As mentioned earlier, loss motivation is generally stronger than reward motivation.
Here is an excerpt from research on the subject by Ronald Friedman at the State University of New York: (PDF) [blockquote]However, it is also possible that non-gain framing of promised reward will instead yield an incremental effect on creativity, one equivalent or even stronger in magnitude than that produced by the gain framing employed by Eisenberger and Rhoades (2001). According to prospect theory (Kahneman & Tversky, 1979), people are generally loss-averse, suggesting that the absolute subjective value of a loss is greater than that of an objectively equivalent gain. Assuming that non-gains are psychologically akin to losses, individuals may therefore work harder to be creative in order to avert what they mentally construe as the loss of a promised reward than to attain what they construe as a prospective gain (see also, Baumeister, Bratslavsky, Finkenauer, & Vohs, 2001).[/blockquote]
Let’s break that paragraph out of its shackles of academic speak. What the author is saying is this: People are more opposed to losing something than they are in favor gaining something. In practical terms, the pain of losing fifty bucks is stronger than the pleasure of receiving fifty bucks.
You can use this principle to frame your rewards as avoiding a loss rather than gaining something desirable. Just remember the late penalty fee/early registration discount example above!
Feed The Positive Feedback Loop
In keeping with the psychological framework behind rewards, make sure you’re following the principles of a customer’s positive feedback preference.
When a customer performs an action and is rewarded, it triggers a desire to take that action again. When customers experience a certain level of satisfaction, that satisfaction is a sufficient motivator to cause them to repeat that same action.
The negative results of this tendency are evident in substance abuse and habitual gamblers. Tamer forms of the positive feedback loop are evident in those who exercise, create good habits and learn new skills or information.
Progress is one of the strongest motivators to completing an action. The most common form of progress reward online is the indicator for many checkout processes. An indication bar gives the user a clear sense of getting somewhere, which motivates them to complete the transaction.
On my LinkedIn profile, I see a small progress indicator. Oh, how I want to fill that circle with the blue color! By getting a sense of my progress, I’m motivated to spend more time on LinkedIn, cultivating my profile and connections.
Zynga’s game, Words With Friends, is rich with progress rewards that compel users to keep playing. I obsess over my scoring charts, trying to attain even higher levels. The progress is what keeps me coming back.
Rewards that we get without any effort aren’t as valuable as rewards that require some effort.
If the customer has to work for the reward, then they are more likely to appreciate and use that reward. It’s important to put some sort of barrier in the customer’s way, even if it’s something very small — providing an email address, for example.
You can even require some action in order to see some pricing information. Asana does this strategically with its pricing structure. Rather than provide the typical chart, it uses a slider widget.
You have to adjust the slider to see your price. The small barrier creates a level of effort and buy-in for merely seeing information. The information is the reward of the effort.
Give Rewards Immediately
With some exceptions, the best rewards are generally those that are experienced immediately.
Consider the concept of “delay discounting,” which refers to a reward losing value the longer it is delayed. Research proves that people like immediacy so much that they’re willing to forgo bigger rewards delivered after a delay in lieu of rewards given immediately.
Consider Fandango, a site that allows you to buy movie tickets. As you purchase your ticket, you’re given the option to join its reward program. I have no idea what rewards I get, other than the fact that I’ll get a point for my purchase right now. The immediacy of the reward is good enough.
Change Rewards Often
A reward that changes often is one that is more likely to invite feedback.
Zoës Kitchen, a fresh food restaurant, provides email rewards that are changing on a regular basis. The variety of the rewards is what makes them appealing.
Customers are intrigued and engaged by change. A successful reward program never remains static.
You already know that you should be rewarding your users. Now, you know how. A rewarded customer is a happy customer, a loyal customer, a returning customer and a conversion-happy customer.
Making your rewards strategic is an untapped way of improving your conversions.