How do words like "bonus" or "rewards" impact consumers’ buying decisions?

Consumers respond differently to promotions if those words lead consumers to see them as a gain (e.g., "bonus" and "rewards") or as the reduction of a loss (e.g., "savings" and "rebates"). Money coded as a gain feels like a windfall and is more likely to be used to make hedonic purchases, like a watch or a massage. These are goods and services whose purpose is to make the buyer feel good. Money coded as the reduction of a loss, by contrast, doesn't feel like extra money and is typically used for utilitarian purchases, like paying off debt or bills.

Do rewards and loyalty programs overcome customer service issues? Why or why not?

Rewards can help close the deal for price-sensitive consumers. They can attract new consumers to your products and services, and help make competing products and services less attractive to your current customers. They're also useful for countering service failures that weren't personal in nature. Retailers could offer consumers a discount for late delivery of a product, for example, but a discount is unlikely to appease a customer who felt insulted or discriminated against by a salesperson. In that case, a personal apology would be better.

Loyalty programs are useful for locking in customers in contexts where they make repeated purchases from a firm, particularly for firms susceptible to commodification, like airlines. Consumers are sensitive to the future benefits of points (e.g., a free flight) but also seem to enjoy earning points immediately, even if they can't cash them in right away.

That said, the real benefits of loyalty programs are hard to evaluate. The results are mixed. Loyalty programs seem to be ineffective in domains where it is cheap for consumers to belong to and benefit from many loyalty programs (e.g., grocers), but they seem to be effective where loyalty programs make more demanding requirements of consumers (e.g., airlines).

Do you feel that the brand naming of rewards (e.g., "gold elite status") creates an emotional impact on shoppers? Why or why not?

These kinds of status levels are likely to work well for high-identity products where consumers feel like they are in a relationship with the brand or use it to express to themselves and others important facets of their identity, but they are unlikely to work in cases where the consumer views the good as a commodity.

These kinds of names can strengthen the bond with the brand or make the consumer feel like they are in a more exclusive group than typical consumers ("insiders" versus "brand tourists"). One can predict these at a general level by product category (e.g., most people identify more with clothes than their paper products), but there can be substantial variation between segments and individual consumers.

Are loyalty programs and rewards enough to keep customers loyal to a brand? Why or why not?

Branding is intended to create and sustain loyalty. The best branding is the existence of lifetime commitment by a consumer to a brand (or company). Examples of enduring brand loyalty are achieved with companies such as Nike, McDonald's, Disney or Trek bikes. The corporations attempt to attract consumers as a child and then retain their purchasing behaviors through to senior years (either for themselves or their families as multigenerational).

Loyalty programs and rewards are one tool that brand marketers use to retain and incentivize purchasing. Many loyalty programs started with a loyalty card (I still have my Hilton and Marriott cards and account numbers), and today these programs are managed on websites or smartphone apps. Smartphones can cluster loyalty programs in wallet settings. If these programs are easy to use and convenient (which can vary by age and experience with technology), then they can prevent consumers from "wandering" off-brand.

Brand managers need to consider the number of communications they are sending to consumers. With email capture, marketers have a direct link to loyal and potentially new customers. But inappropriate e-communications can lead to consumer fatigue and backfire with "unsubscribing" behaviors. I personally see some e-brand loyalty programs returning to print direct mail and print advertising, which suggests that marketers need more than one channel to reach and be effective with consumers.

What role can social media engagement and advertising play in helping hotels expand their loyal customer base?

Brand marketers need to understand, via marketing research and data analytics on digital platforms, the channels that consumers use to learn about and purchase products. Social media engagement and advertising in a wide variety of placement options can help hotels expand their loyal customer base.

I just finished a doctoral student who conducted her dissertation on digital content that is effective with increasing purchase intent. With a proxy Instagram account for a fictitious hotel brand, the student found that leisure travelers engage more with an informational message than with an emotional message when they have limited information about a hotel. My own dissertation completed in 1993 found that functional information is more useful to travel decision-making than aesthetic (pictures) information.

Often social media or advertising is an initial channel of being exposed as a form of awareness of a brand and also linking a consumer with like social groups. A marketer needs to think about the next channels (after social media) to motivate a consumer to acquire more information that then leads to increased desire and interest, and eventually action or purchase. For social media and advertising to be effective as a sales channel, the inclusion of websites, booking platforms or e-commerce functions is critical.

A ValuePenguin study revealed that during the pandemic, 48% of millennials have booked multiple stays at Airbnbs, while only 24% have booked multiple stays at hotels. In your opinion, what can hotels do to appeal more to younger generations?

There are many choices in the accommodations industry. Airbnb is offering something different — something authentic. A person’s house in a neighborhood is considered more unique and genuine than a standard hotel room to many millennials.

Many hotel chains have prioritized travel convenience over authenticity by locating their properties along interstates and suburban commercial districts. Also, hospitality services were prioritized over tourism experiences by many hotel corporations. Millennials are recognizing this difference and are choosing Airbnb because of the product experience difference, sometimes pricing and more.

How do words like "bonus" or "rewards" impact consumers’ buying decisions?

A company communicates and structures words very carefully to influence the purchasing and buying decisions of consumers. Within the behavioral finance literature, this is known as the concept of framing. Framing is based on communicating words or phrases as a "positive frame" that results in positive outcomes.

For example, an advertisement for a new product or service will frame the positive attributes and avoid the potential disadvantages, resulting in a more positive impression and a lower perception of risk for a new item. This framing process will then result in more purchases by the consumer, in turn, producing higher sales and profits for the company.

Do rewards and loyalty programs overcome customer service issues? Why or why not?

The answer is maybe. If the rewards and loyalty programs provide substantial benefits to the consumer experience, minor customer service issues might be overlooked in the short term, especially if the customer is saving substantial money — for example, if they are saving hundreds of dollars for a hotel room.

However, over the long term, even the best rewards and loyalty programs will lose customers with closed accounts or lower usage if customer service issues are always a problem. For many individuals, if they feel high levels of stress or frustration several times because of poor customer service, even the most loyal customers will start using other rewards and loyalty programs.

Do you feel that the brand naming of rewards (e.g., "gold elite status") creates an emotional impact on shoppers? Why or why not?

Yes, the branding of rewards, especially with a "positive frame," creates a positive influence on consumers. However, there are several factors that must prevail over the long term for this customer experience to be everlasting.

The consumer must believe that the rewards level (e.g., "gold elite status") provides great benefits and value after the purchase of an item or service. Also, the customer must have a positive experience and impression of the actual service or product.

Lastly, it is essential there are no customer service issues with the rewards program or the specific product or service. For companies, it is a long process to build client trust, and that loyalty or credibility can be lost very quickly if the consumer experience turns negative.

How do words like "bonus" or "rewards" impact consumers’ buying decisions?

These types of words excite customers and make them feel more motivated to make additional purchases. Additionally, when redeeming "bonuses" or "rewards," consumers feel that they can "treat themselves" more. For example, it may be an excuse to get a sugary frappuccino rather than someone's traditional black coffee order. These words have the biggest influence on the marginal customer. It is unlikely to attract new consumers or influence very loyal consumers, but rather, it helps push those medium-usage consumers to make that one additional purchase.

Do rewards and loyalty programs overcome customer service issues? Why or why not?

Not much research has been done on this topic. If anything, if the reward or loyalty programs face customer service issues themselves, it might backfire. Those consumers who are involved in the reward and loyalty programs might be slightly more patient when facing service issues, as they have a greater sense of loyalty, but it is not enough to overcome them.

Do you feel that the brand naming of rewards (e.g., "gold elite status") creates an emotional impact on shoppers? Why or why not?

Yes, it does create an emotional impact. Consumers feel appreciated and special. However, if the reward is too easy to obtain, it might not have the same emotional impact.

How do words like "bonus" or "rewards" impact consumers’ buying decisions?

When customers hear the terms "bonus" and "rewards," they may instinctively be attracted to a program due to a choice heuristic. Heuristics, or mental shortcuts, help customers make a decision while reducing their cognitive load. In this case, a promotion rule heuristic may be applied where customers are attracted to a product or service that is incentivizing them.

Do rewards and loyalty programs overcome customer service issues? Why or why not?

Rewards and loyalty programs are far too commonplace to overcome customer service issues. Rewards and loyalty programs are used to attract and engage customers while also strengthening customer retention.

Companies must be cognizant that service issues will happen. Though service issues and failures can create blockades between a customer and provider, they also present a viable opportunity for the provider to strengthen their relationship with the customer. Rather than relying on "fringe benefits," when an issue or failure presents itself a company should first and foremost acknowledge the customer’s concern, apologize and find a way to ensure the customer’s concerns are being met.

Do you feel that the brand naming of rewards (e.g., "gold elite status") creates an emotional impact on shoppers? Why or why not?

Perception is a powerful tool in marketing and has been shown to influence customers. The use of color — bronze, silver, gold and platinum — is a proven way to acknowledge status. When a customer attains the next level (i.e., moving from silver to gold), they are being rewarded, which could trigger an emotional response. Also, the term elite may make the customer feel special as well as important to the company. In terms of emotion, research shows that when consumers evaluate brands, they tend to be more receptive to ads that appeal to their emotions (e.g., personal feelings) rather than ads that appeal to their cognition (e.g., brand features and facts).