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Science Behind Why Surprise Rewards Work

March 25, 2014

In 2000 Neil Gussman was making frequent business trips to Asia. He was flying with Cathay Pacific, a partner to American Airlines, and was enjoying business class tickets courtesy of his employer.

“One day I got a blue slip in the mail that entitled me to a class upgrade on any trip on any partner airline,” recalls Gussman, who is a strategic communications manager for the Chemical Heritage Foundation, a non-profit focused on the history of sciences.

He cashed in the surprise reward for an upgrade to first class – his first time in first – during an 18-hour trip to Hong Kong. “It was lie-flat bed wonderful!” he said.

Customers are beginning to expect the unexpected rewards like the one Gussman received. In fact, more companies including Expedia, Caribou Coffee and MasterCard are using what industry experts have termed “surprise-and-delight” tactics to thank their loyal customers. But do the tactics really foster a deeper level of engagement and can other companies mimic their successes? Science says yes.

Science of Surprise 

A 2013 study by digital agency Citrus and marketing company Directivity found that customers are highly responsive to surprise-and-delight rewards. In fact, 67% of those surveyed said surprise gifts are very important for loyalty programs.

“The more a program can find ways to provide unexpected benefits, the more likely their members will spend more, and most importantly, talk more,” said Adam Posner, CEO of Australia-based Directivity, in an email.

Next generation programs need to move from transaction to interaction. They need to be relevant and deliver unexpected and delightful rewards, Posner said.

Scientific research backs him up. The brain’s pleasure centers react more strongly to unexpected pleasure substances versus expected ones, according to a 2001 study by scientists with Emory University and the Baylor College of Medicine.

Researchers used functional magnetic resonance imaging (fMRI) to measure changes in human brain activity following exposure to pleasurable stimuli. In the study, a computer-controlled device squirted fruit juice and water into the mouths of research participants. The patterns of juice and water squirts were either predictable or completely unpredictable.

The human reward pathways in the brain responded most strongly to the unpredictable sequence of squirts. The area of the brain called the nucleus accumbens – a pleasure center of the brain – recorded a particularly strong response to the unexpectedness of a sequence of stimuli.

"We find that so-called pleasure centers in the brain do not react equally to any pleasurable substance, but instead react more strongly when the pleasures are unexpected," Dr. Gregory Berns, assistance professor of biomedical engineering at Emory and a coauthor of the study, said in a press release. "This mean that the brain find unexpected pleasures more rewarding than expected ones."

Following are three examples of how major brands bring unexpected pleasures to their loyalty members, some with surprising results.

Expedia Inspects the Unexpected 

In January 2010, Expedia conducted a surprise-and-delight campaign to reward its Elite Plus members – those who book and complete at least $10,000 of travel or book and stay at least 15 hotel nights within a calendar year. The travel company wanted to test the effectiveness of the promotion and offered a $100 coupon to members in a control group.

“What was interesting was that only 10% of those we sent the coupon to actually used it, but even those who didn’t use it still traveled more with us,” said Edward Nevraumont, Expedia’s former vice president of loyalty and database marketing.

Overall, the entire group that received the coupon increased its transaction with Expedia by nearly 10%, said Nevraumont, now chief marketing officer at A Place for Mom, an organization that connects families to senior care resources.

This lesson came in handy in the fall of 2010, when Expedia experienced a problem with its call center that caters to its Elite customers. It turned to the surprise tactic it had previously used – and been successful with – to smooth over the situation.

“Wait times were atrocious,” Nevraumont said. “Our best customers were having to wait for hours.”

To apologize for the wait times, Expedia sent $100 coupons to 90% of Elite members and did nothing for the other 10%. Those who didn’t receive the coupon decreased their spending by between 10% and 20%. And those who received the coupon?

Their spending actually increased by 5% to 6%, despite the poor customer experience.

Caribou Coffee Bowls Over Customers With New Rewards Program

Since 1992, Minneapolis-based Caribou Coffee has been indulging customers with specialty coffee and shots of espresso. So when the Starbucks competitor unveiled its loyalty program at the beginning of 2014 – the shot of surprise was really just a nod to tradition.

Guests enroll in the new Caribou Perks program simply by texting “ENROLL” to 65017 or via the caribouperks.com microsite and earn a free medium drink for registering. Caribou notifies members who opt-in to receive email or text messages each time they earn rewards, which Caribou says will always be a surprise.

Members then have seven days to redeem their rewards, which can range from a beverage size upgrade, an item from the bakery case or a favorite Caribou drink.

“We feel the ‘surprise and delight’ model aligns well with the personality of the Caribou brand, which focuses on making our coffeehouses feel comfortable and cozy, and doesn't take ourselves too seriously,” Michele Vig, Caribou’s vice president of marketing, said in an email.

"Additionally, we've found that not every guest wants the same reward, so offering a free latte when a guest reaches a certain amount of points isn't going to be attractive and rewarding by everyone," she said.

At the end of January, 150,000 people enrolled in Caribou Perks, with 75,000 signups in the first week alone.

MasterCard Enlists Justin Timberlake for Surprise Serenades 

MasterCard has also charged into surprise. In late January 2014 the company launched its Priceless

Surprises program with an assist from music icon Justin Timberlake. Under the program, MasterCard customers and those who tweet under #PricelessSurprises have the chance to be treated to an escalating tier of awards such as speakers, headphones, music downloads, free Uber transportation and a day with Justin Timberlake. As of February, the program had delivered 23,000 surprises.

“While we kicked off the platform in music, we’ve aligned Priceless Surprises with the passion areas we know are important to our cardholders – arts and entertainment, travel and sports – and you’ll see us executing within these various passions over the course of time,” said Lilian Tomovich, senior vice president of consumer marketing at MasterCard, in an email.

MasterCard selects surprises for customers based on their day-to-day card use and social media interaction. For example, a cardholder may tweet that she's a huge Justin Timberlake fan but couldn't get tickets to see him in her area. MasterCard can then reach out directly to the cardholder and surprise her with tickets to the show, Tomovich said.

"With a 'surprise' it truly becomes about the individual and his or her experience and that's where we want to play as a brand," she said. It’s not about one size fits all or reaching the masses, but rather how we touch our cardholders individually in a way that is meaningful to them."

So how has the program fared? Tomovich says response from cardholders has been “overwhelmingly positive with social engagement growing exponentially.” By mid February, the #PricelessSurprises hashtag had received more than 160,000 social media mentions.

Not all companies can have a Justin Timberlake in their surprise campaigns. But that doesn't mean they won't work.

Surprise rewards work for two reasons as long as two conditions are met, said Dr. Josh Klapow, chief behavioral scientist for ChipRewards, an incentive an engagement company. They work because they are novel to the individual and they are reinforcing and rewarding. This is important because surprises only do not necessarily engage.

"The effectiveness of surprise rewards is conditional to the degree to which they surprise and to which they're meaningful," he said.

Klapow offers five tips for companies looking to tap into the pleasure centers of customers' brains using surprise. (None of which calls for JT.)

1. Define purpose of surprise: The most important thing for companies to do is to first understand the intended purpose of this surprise. A company may want to simply make employees happy or encourage a specific behavior. The best plan would be to define the objective first, then use the surprise to reinforce the desired behavior.

2. Determine meaningfulness: Companies should then ask themselves how powerful or effective they think the surprise is going to be. Whoever is making the decision about what reward is being offered should poll members to find the best reward – the one that is most meaningful to the largest number of people.

3. Weigh other rewards: Organizations must also take into account the delivery of other types of rewards. For example, an employer may decide to reward employees with coupon books, but the surprise may be less meaningful if some of the employees have children who are selling the same coupon book. Be cognizant of other rewards or distractions that may diminish the potency of the surprise.

4. Maximize value: Combine hard and soft rewards. Companies should maximize the value of whatever surprise they are giving to customers with other reinforcements that don’t cost much but can deliver a big benefit. For instance, an airline could surprise a customer with a free class upgrade – like the one Gussman received – and could follow-up with an early check-in offer.

5. Apply science: Finally, it’s a good idea for those implementing the surprise to understand the science behind the practice. Companies should grasp the basic principles of behavior economics because the reality of surprise can follow a scientific method to achieve the greatest desired results. Test surprise campaigns and make adjustments accordingly.