Loyalty cards 'change our brain chemistry' and make us less rational shoppers

MAKE no mistake, Australia loves a loyalty card. Nine out of 10 of us have at least one stashed away in our wallets.

Yet, the rewards are so negligible, some of us collect but never claim them.

A psychologist has cracked the reason why we’re obsessed about sticking with programs that offer so little — it’s because they literally change the chemicals in our brain and make us less “rational”.

But, a few easy steps can help us wise up to rewards.

Loyalty programs are a huge deal. Research by comparison website Finder.com.au found 82 per cent of Australians were in a loyalty program.

Half of us choose to convert the points to money off vouchers to get instant savings at the register while one in eight have the programs connected to various airlines so we can accrue frequent flyer miles.

A mere 18 per cent of us are immune to the charms of loyalty cards and shun them altogether.

The most popular programs are Woolworths Rewards, Coles’ Flybuys, Myer One, the Priceline Sisterhood and Qantas’ Frequent Flyer program.

And they have an effect on us, with 60 per cent of Australians saying what program they are part of can influence where they shop.

Anybody who is in the Qantas program will admit to at least thinking about paying for what could be a higher priced flight if it gets us closer to the fabled next status level. Even if being “silver” rather than “bronze” means very little aside from a different coloured card.

Dr Rachel Grieve of the University of Tasmania told news.com.au that loyalty programs had a psychological effect on the brain that could lead us to chase rewards no matter how small they might be.

She said traditionally loyalty programs had been merely economic in nature — the more you spent the more freebies you got. While these sound good on paper, they were prone to failure, at least for the business.

“A simple example is coffee cards. A consumer might start off with a ‘buy nine get the 10th cup free’ loyalty card from one cafe. But then when another cafe offers a ‘buy eight get the ninth free’, then they will start purchasing their coffee at the second cafe.”

These purely economic loyalty programs were fallible as soon as some came along with a better deal or the lack of value was highlighted.

EMOTIONAL CONNECTION

Indeed, at their base level, both Flybuys and Woolworths Rewards return to the customer only about 0.5 per cent of the amount customers spend with them, although the supermarkets say they run regular promotions that can boost balances.

Rival Aldi has scoffed at that and said customers could save more by simply shopping elsewhere.

They may be right, but savvy marketers have gone beyond the purely economic and now try to build a relationship with the customer through their programs. This can be by personalised offers or charitable campaigns which align the views of the customer and retailer.

The Priceline Sisterhood, for example, encourages customers to buy certain products in store which will lead to a donation to a number of charities focused on issues that predominantly affect women.

“It’s emotional in nature and based on favourable attitudes towards the company itself,” said Dr Grieve.

“These are social rewards and the more rewards a customer gets, the more this strengthens their emotional bond with the company, which makes them more likely to continue purchasing.”

NEUROTRANSMITTERS

But there were also deep psychological connection in play.

Dr Grieve said most loyalty programs had many different types of rewards, from big to small and from a bronze tier, say, to a gold tier.

“The rewards are constant (points), intermittent (product), and social (status). It is a powerful combination. And in fact, our brains have particular neural networks that detect rewards including anticipating rewards,” she said.

“Receiving rewards actually changes our brain chemistry, with different neurotransmitters released in response to rewards. These are often pleasurable in nature. Getting a reward feels good.

“This means that we are more likely to engage in the behaviour that got us the reward in the first place, and then the cycle gets reinforced and begins again. It doesn’t matter that the reward might be very small.

“With these strong neurological processes in place, it is unsurprising that people will stick with a program once they sign up.”

It’ll come as no surprise that this isn’t how the firms that run loyalty programs see it. Coles and Woolies insist they are simply rewarding customers for doing the shopping they were already doing. It’s effectively something for nothing.

But many programs are open about what’s known as “spend stretch” offers, that is an inducement, such as extra points, to spend more than a customer usually would.

And as Woolworths learned the hard way, customers are attached to the programs and don’t reward you when you change their rewards.

BREAK FREE FROM LOYALTY

In 2016, Woolies altered its connection to the Qantas Frequent Flyer program. It was replaced with “Woolworths Dollars”, a scheme that was rubbished as over-complicated and under-rewarding.

Nine months, and many angry customers later, Woolies did a backflip and reinstated the Qantas tie up as an option for customers.

If you want to end your dependence on loyalty programs, Dr Grieve has some strategies.

Firstly, she said, it was important to remember there was no such thing as a free toaster.

“You are, in fact, paying for the rewards you receive. The money companies make from you is what pays for your reward.

“So why not cut out the company and just make your own purchase? You’ll certainly get it quicker.”

Dr Grieve said recognising you were addicted to the chase was also a good wake-up call.

“Once you are in a reward program, and as you get emotionally closer to each goal like the new item or status level, it can make you less rational about purchasing decisions.

“For some people, that may mean that avoiding these programs in the first instance might be the best bet.”

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