Why are we saving? The psychology behind savings programs
We Dutch people love savings programs: more than seven in ten Dutch people save points. That immediately raises the question of why consumers are such enthusiastic savers. To answer that question, we look at the motivation and the influencing principles behind successful savings programs. This enables us to discover the ingredients of a successful savings program that rewards loyal customers and stimulates (purchasing) behavior
We Dutch people love savings programs: more than seven in ten Dutch people save points. That immediately raises the question of why consumers are such enthusiastic savers. To answer that question, we look at the motivation and the influencing principles behind successful savings programs. This enables us to discover the ingredients of a successful savings program that rewards loyal customers and stimulates (purchasing) behavior.
Why are we saving?
According to research by inVotes, most Dutch people (58 percent) save on two to four savings programs and fifteen percent even on five to ten programs. Half of the Dutch think that saving is smart, because you have something extra to do with this (Ruigrok 2010).
The Dutch are also down-to-earth: 66 percent say 'Why not save when it's free?' and for 37 percent, free points saving has become "a habit." These are answers that consumers give themselves.
Save the psychology of points
What happens in our brain? Saving motivates, and an important reason for this is the dopamine that the brain produces in the experience of challenge and reward. Another important psychological element in saving points is the limited shelf life: at a certain moment the accumulated points lapse. The tendency to prevent this loss, the loss aversion, stimulates the drawing up of loyalty points and possibly associated buying behavior.
The limited preservation of loyalty points also helps to keep your brand top-of-mind. Loss aversion is linked to the endowment effect (Kahneman, Knetsch and Thaler 1990), which states that the emotion in case of loss is on average two times stronger than with something winning. Do you want to get your customers moving? Then a savings program works where the points usually go better than a match.
The researchers Smith and Sparks discovered that customers who actually cash in on their saved points then spend significantly more. According to the researchers, a savings program provides a form of reciprocity: consumers get something and feel therefore obliged to do something back. As a company, this gives you increased customer satisfaction and loyalty. Reason for American Express in Argentina to set up a marketing campaign that informed customers about their accumulated points and encouraged them to prepare them.
Binding with points
A good savings program therefore cleverly anticipates these psychological processes. Applying principles also apply when setting up a savings program. From the study 'The Endowed Progress Effect' (freely translated: The effect of the given lead, by Nunes and Drèze) shows that people are more motivated to finish something if there is already a beginning. Therefore, make sure that your customers immediately receive points when they create a savings account to give them a head start. Perception is important when designing a points system.
Another study by Virginia Tech professors showed that customers prefer to receive ten points per purchase at a target of 1, 000, than one point for a goal of 100. The ten points per purchase provide an accelerated perception of progress. Therefore, apply larger numbers in a savings program. When setting up a savings program, the same principles apply to a point system as with gamification.
Force of habit
The great strength of a savings program is to drive repeat purchases: unconscious buying behavior. According to Daniel Kahneman, we take more than 600 decisions a day of which 99 percent are unaware. Certain situations are easier to process through self-conditioning in the form of habits. Previously made choices are decisive in this. Once a habit has been formed, the rational decision-making that has ever helped to create this habit becomes largely irrelevant.
Adjusting a habit takes time, between 15 and 254 days. A decent period. It is therefore often the stumbling block of failing diets, good intentions and savings programs with too high thresholds. Creating customer loyalty with a savings program is therefore easier if you take good account of the psychology of the consumer. The desired buying behavior then creeps in as a habit.