Amy Webb

Strange as it may sound, one key to suc­cess is not giv­ing your cus­tomers what they want

Inc. (USA) - - DEPARTMENTS - Amy Webb

Grab—and keep—your cus­tomers with vari­able re­wards

ONE CUR­RENT DE­BATE in tech­nol­ogy cir­cles con­cerns whether mo­bile apps are still a must-have or on their way out. The cor­rect an­swer, of course, is that’s the wrong ques­tion to ask. To un­der­stand why, let’s talk about Texas hold ’em.

What makes play­ing that game so se­duc­tive and ad­dic­tive, in part, is that it trig­gers a re­sponse to what be­hav­ioral econ­o­mists call vari­able re­wards. Re­gard­less of how well you’re able to read peo­ple’s emo­tions or how good you are at math, there are too many pos­si­ble hands at any mo­ment to be cer­tain of any one hand’s out­come. If you get two pairs on the flop—the open­ing hand, for the unini­ti­ated—you still have only about a 17 per­cent chance of get­ting a full house by the time the fi­nal card is shown. And if you’re play­ing with peo­ple who don’t know how to bet, you could win big with a ter­ri­ble set of cards.

Vari­able re­wards are also why we can’t seem to stop us­ing our phones. The av­er­age smart­phone user now touches her phone thou­sands of times a day. Ev­ery new in­ter­ac­tion with our phones, like ev­ery new hand in poker, prom­ises a bit of the un­known: who liked your Face­book post, what song is up next on Spo­tify, if the new ven­dor meet­ing got sched­uled, whether your fa­vorite client re­newed its con­tract, and if traf­fic is jammed on the com­mute home. If our phones had lim­ited func­tion­al­ity, or if all the apps we down­loaded of­fered one stan­dard fea­ture set and ba­sic trans­ac­tional func­tions, we’d get bored and stop us­ing them. (If you don’t be­lieve me, well, how many Black­Ber­rys do you still see around?) So your com­pany’s fu­ture doesn’t nec­es­sar­ily in­volve apps. But if you want to keep your cus­tomers’ at­ten­tion, you have to cre­ate vari­able re­wards and learn how to play hard to get. The most suc­cess­ful com­pa­nies do this by tap­ping into our es­sen­tial hu­man needs. Twit­ter, Snapchat, Face­book, and Instagram play off our de­sire to be praised and ad­mired and stoke the re­lease of dopamine that fol­lows—while pur­posely with­hold­ing what we crave. Those plat­forms’ mes­sages, likes, retweets, and com­ments ap­pear hap­haz­ardly. That’s why we com­pul­sively click re­fresh, to see if there’s been a re­sponse—some­times ev­ery few sec­onds. It seems coun­ter­in­tu­itive, but not giv­ing cus­tomers what they crave is how the most suc­cess­ful Sil­i­con Val­ley com­pa­nies be­came multi­bil­lion- dol­lar jug­ger­nauts.

Vari­able re­wards work in the neg­a­tive, too. For all the out­cry about Uber’s busi­ness prac­tices, fare in­creases, and well- doc­u­mented sex­ual ha­rass­ment cases, the com­pany is still grow­ing and tens of mil­lions of peo­ple use Uber ev­ery month. In spite of seem­ingly ran­dom surge pric­ing—that’s when the com­pany sub­stan­tially jacks up the rates per mile—we con­tinue to en­gage the app. Un­cer­tainty about how much we might be charged, and then learn­ing that the rate is low, could trig­ger that same dopamine re­sponse, as though we’ve won some­thing.

In the ana­log world, cus­tomer loy­alty pro­grams are ex­per­i­ment­ing with vari­able re­wards. Ath­letic clubs are giv­ing ac­tive mem­bers a free month, but the perk isn’t doled out on any pre­dictable sched­ule. Star­bucks oc­ca­sion­ally gives Gold sta­tus to cus­tomers when they make just one pur­chase—a cushy re­ward that typ­i­cally re­quires them to spend $150. Am­trak of­fers deep dis­counts, travel points, and free travel—but the pri­mary way I, an Am­trak re­wards mem­ber, know they are avail­able is by go­ing to its re­wards web­site through­out the week.

It isn’t an app that ad­dicts but how in­for­ma­tion is pre­sented. That’s why, if you go all in on vari­able re­wards, you’ll find a cus­tomer base that just can’t stay away.

Amy Webb is an au­thor and fu­tur­ist and the founder of the Fu­ture To­day In­sti­tute, a lead­ing fore­cast­ing and strat­egy firm that re­searches tech­nol­ogy for a global client base. She is the au­thor of The Sig­nals Are Talk­ing: Why To­day’s Fringe Is...

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