What do consumers love about loyalty cards? It's not what you think
Tuesday, July 25, 2023

By Tom Snee

Everyone loves free stuff.  But a new study from the Tippie College of Business finds that if we get the free stuff from a punch card, we might actually like it less.

The study, from Bowen Ruan, assistant professor of marketing, studied consumer responses to loyalty cards—those paper cards we carry in our wallets that get stamped or punched or otherwise marked every time we buy things like a coffee or sandwich. Fill the whole card and get a free coffee, sandwich, oil change, etc.

bowen ruan portrait
Bowen Ruan

But Ruan’s study finds that for many consumers, the quest to complete the punch card has value in itself and can lead consumers to overvalue the free coffee or sandwich or oil change. What Ruan calls a “one-away effect” is when consumers see as much utility in merely completing the card as getting the reward. He said the consumers psychological response to loyalty cards seems to be that the journey is its own reward.

“The process actively matters,” he said, so much so that people can get so into the process of collecting punches or stamps that they form biased judgments about the value of whatever it is they’ll get for free.

“The findings suggest that consumers are motivated to complete goals not only to obtain their reward, but because merely completing things is intrinsically motivating and a goal itself,” said Ruan, who has dozens of loyalty cards himself, many from businesses he rarely goes to.

He said it’s similar to the anticipation people feel in the days leading up to Christmas or a birthday, or waiting for something to arrive in the mail after ordering it online. The anticipation is as much a thrill as actually getting something.  

And then we’re disappointed because no free ham sandwich can live up to that anticipation.

In a series of lab experiments with more than 6,000 participants—mostly students and online focus group members—Ruan and his research team found consumers more greatly valued a nearly complete loyalty card than a full card that would actually get them something for free. In one experiment, consumers were given a 12-punch card and were told they would get a free reward after only six punches and a second free reward after filling the rest of the card.

Ruan found that consumers were not interested in a card like that because they would feel no satisfaction after filling only half the card, since the other half was still empty. Filling the card completely seemed to be the consumers’ prime motivator, he said, not getting the reward.

There are exceptions, of course. Consumers are less interested in cards with an expiration date because they don’t know if they’ll be able to fill it in time, or if they have to work too hard to earn it (a requirement that they get stamps from multiple stores, for instance).

Ruan’s study, “The One-Away Effect: The Pursuit of Mere Completion,” was co-authored by Evan Polman and Robin Tanner and published in the Journal of Consumer Research.

Media contact: Tom Snee, 319-384-0010 (o); 319-541-8434 (c); tom-snee@uiowa.edu