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The Role of Effort Advantage in Consumer Response to Loyalty Programs: The Idiosyncratic Fit Heuristic

Kivetz, Ran; Simonson, Itamar

Over the past few years, customer relationship management and loyalty programs (LPs) have been widely adopted by companies and have received a great deal of attention from marketers, consultants, and, to a lesser degree, academics. In this research, we examine the effect of the level of effort required to obtain a LP's reward on consumers' perception of the LP's attractiveness. We propose that, under certain conditions, increasing the program requirements can enhance consumers' likelihood of joining the program, thus leading consumers to prefer a dominated option. Specifically, we hypothesize that consumers often evaluate LPs based on their individual effort to obtain the reward relative to the relevant reference effort (e.g., the effort of typical other consumers). When consumers believe they have an effort advantage relative to typical others (i.e., an idiosyncratic fit with the LP), higher program requirements magnify this perception of advantage and can therefore increase the overall perceived value of the program. This proposition was supported in a series of studies in which the perceived idiosyncratic fit was manipulated either by reducing the individual effort or by raising the reference effort. The findings also indicate that (a) idiosyncratic fit considerations are elicited spontaneously, (b) idiosyncratic fit mediates the effect of effort on consumer response to LPs, and (c) an alternative account for the results based on signaling is not supported. We conclude that these findings are part of a broader phenomenon, which we term the idiosyncratic fit heuristic, whereby a key factor that affects consumers' response to marketing programs and promotional offers is the perceived relative advantage or fit with the individual's idiosyncratic conditions and preferences.

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Academic Units
Institute for Social and Economic Research and Policy
Publisher
Institute for Social and Economic Research and Policy, Columbia University
Series
ISERP Working Papers, 02-08
Published Here
August 23, 2010

Notes

December 2002.

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