The IdeaAs participants in incentive systems perceive that they are getting closer to their goal, they intensify their efforts.
The goal-gradient hypothesis describes a 1934 finding in behaviorism: rats running toward a reward (cheese) move progressively faster as they approach their goal. Laboratory tests conducted over the years provided support for the original finding in animals, but until recently there was little empirical evidence of a goal-gradient effect in humans.
Ran Kivetz, Oleg Urminsky and Yuhuang Zheng tested the goal-gradient hypothesis in the context of consumer reward programs. They looked at the behavior of coffee drinkers participating in a café’s “buy 10 coffees, get 1 free” program and Internet users who rated songs in return for reward certificates. The results showed that the café customers purchased coffee more frequently as they got closer to earning a free coffee. Likewise, the Internet users visited the rating Web site more often, rated more songs per visit and were less likely to terminate a rating session as they approached the incentive threshold.
In both programs, participants reduced their level of engagement after achieving their first reward and then accelerated their efforts again as they approached their second reward. Individuals who more strongly accelerated toward their first reward were more likely to quickly reengage in the program. Moreover, the researchers found that illusionary goal progress also induces a higher level of engagement: customers who received a 12-stamp coffee card with two preexisting “bonus” stamps completed the 10 purchases more quickly than those who got a regular 10-stamp card (median completion times were 10 versus 15 days).
Marketing managers, sales directors and human resources managers
This research has implications not only for consumer reward programs but also for sales force incentives, employee motivational plans and other types of goal-based systems. You can use this research to design incentive systems that more effectively segment your constituents and motivate them to achieve goals and engage in desired behaviors.
Professor Kivetz’s research examines consumer and managerial decision making, the psychology of effort and reward (and its application to loyalty programs and other incentive systems), reverse self-control ("hyperopia"), and marketing high technology. Kivetz teaches courses on marketing high technology and entrepreneurship in the day and executive MBA programs and a Ph.D. course on bridging decision research with marketing science...
Read the Research
Ran Kivetz, Oleg Urminsky, Yuhuang Zheng
"The Goal-Gradient Hypothesis Resurrected: Purchase Acceleration, Illusionary Goal Progress, and Customer Retention"