The psychology of the blended value proposition is simple. There is no better price to a customer than “free,” so the accrual of a hard-benefit promotional currency that eventually leads to a no-cost reward represents compelling, indisputable added value. Better yet, because the points or miles act as deferred, accumulated incentives rather than temporal price reductions, loyalty programs preserve margin and shift the consumer’s attention away from price.
Likewise, the soft elements of ego, status and self-importance can set unique emotional hooks into customers when delivered by a variety of special treatments, privileged access or differentiated experiences that allow for defined levels of relationship. By combining the hard and soft approaches, the loyalty marketer creates an aspirational ladder that invites customers to climb as high as they can.
When the loyalty program provides enough value, your customers will do the work. As long as the hard and soft benefits are sufficient, there’s no need to ping incessantly on your customers’ cell phones or blast away at their inboxes. Customers will actively seek out ways to buy more in order to earn more. Cognizant of the economic and emotional benefits that accrue to them for their patronage, customers actually raise their hands and say, “Hi, here I am. Track me, market to me — but always reward and recognize me.”
http://www.dmnews.com/pdffiles/valuetalk.pdf
