The goal-gradient hypothesis denotes the classic finding from behaviorism that animals expend more effort as they approach a reward. Building on this hypothesis, the authors generate new propositions for the human psychology of rewards. They test these propositions using a field experiment, secondary customer data, paper-and-pencil problems, and Tobit and logit models. The key finding indicate that (1) participants in a real cafe reward program purchase coffee more frequently the closer they are to earning a free coffee; (2) Internet users who rate songs in return for reward certificates visit the rating Web site more often, rate more songs per visit, and persist longer in the rating effort as they approach the reward goal; (3) the illusion of progress toward the goal induces purchase acceleration (e.g., customers who receive a 12-stamp coffee card with 2 preexisting "bonus" stamps complete the 10 required purchases faster than customers who receive a "regular" 10-stamp card) and (4) a stronger tendency to accelerate toward the goal predicts greater retention and faster reengagement in the program. The conceptualization and empirical findings are captured by a parsimonious goal distance model, in which effort investment is a function of the proportion of original distance remaining to the goal. In addition, using statistical and experimental controls, the authors rule out alternative explanations for the observed goal gradients. They discuss the theoretical significance of their findings and the managerial implications for incentive systems, promotions, and customer retention.

The Goal-Gradient Hypothesis Resurrected: Purchase Acceleration, Illusionary Goal Progress, and Customer Retention

In the present article, we explore whether people’s mental representation of progress level can function as a self-regulation mechanism that helps motivate continued effort in the pursuit. We propose that when individuals have just started pursuing a goal and have accumulated only limited progress, they exaggerate the achieved progress level in their mental representation to signal a higher chance of eventual goal attainment and thus elicit greater effort. In contrast, when people have made substantial progress and are approaching the goal attainment, they downplay the achieved progress in their mental representation to create greater perceived discrepancy, hence eliciting greater effort. Empirical evidence from 4 studies supported the hypothesis.

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So Near and Yet So Far: the Mental Representation of Goal Progress

We examine the key factors that influence a firm's decision whether to use front-loaded or rear-loaded incentives. When using price packs, direct mail coupons, FSI coupons or peel-off coupons, consumers obtain an immediate benefit upon purchase or afront-loaded incentive. However, when buying products with in-pack coupons or products affiliated with loyalty programs, promotion incentives are obtained on the next purchase occasion or later, i.e., arear-loaded incentive. Our analysis shows that the innate choice process of consumers in a market (variety-seeking or inertia) is an important determinant of the relative impact of front-loaded and rear-loaded promotions. While in both variety-seeking and inertial markets, the sales impact and the sales on discount are higher for front-loaded promotions than for rear-loaded promotions, from a profitability perspective, rear-loaded promotions may be better than front-loaded promotions. We show that in markets with high variety-seeking it is more profitable for a firm to rear-load, and in markets with high inertia it is more profitable to front-load. Model implications are verified using two empirical studies: (a) a longitudinal experiment (simulating markets with variety-seeking consumers and inertial consumers) and (b) market data on promotion usage. The data in both studies are consistent with the model predictions.

The Optimal Choice of Promotional Vehicles: Front-Loaded or Rear-Loaded Incentives?: Front-Loaded or Rear-Loaded Incentives?

This study aimed to investigate the impacts of COVID-19 on the hospitality industry. We examined the interplay between consumers’ fear and uncertainty of COVID-19, their trust in green hotel brands, and their behavioral intentions in relation to staying at green hotels. Analysis of 613 completed responses to a survey instrument revealed that fear and uncertainty of COVID-19 have increased consumers’ environmental concerns and green hotel brand trust, which in turn have promoted their willingness to pay more and willingness to make sacrifices to stay at green hotels. The paper contributes to research on green consumption behavior in the hotel industry during the COVID-19 pandemic.

The Impacts of Fear and Uncertainty of COVID-19 on Environmental Concerns, Brand Trust, and Behavioral Intentions toward Green Hotels

We propose that consumers’ investment decisions involve processes of promotion and prevention regulation that are managed across separate mental accounts, with different financial products seen as representative of promotion versus prevention. Consistent with this hypothesis, we show that (a) investors are differentially sensitive to gains and losses and differentially risk seeking depending on the financial products being considered and (b) that these phenomena occur because of strong associations between financial products and promotion versus prevention. Therefore, investors’ goals may be determined by the investment opportunities under evaluation rather than being independent of these opportunities, as is assumed in standard finance theory.

Promotion and Prevention across Mental Accounts: When Financial Products Dictate Consumers" Investment Goals

Aided by the exponential rate of globalization and digitalization, reward or loyalty programs (LPs) have attained global reach. Paradoxically, however, dropout rates of LPs have averaged ov...

Consumer Motivation for Reward Pursuit: A Culture-Based and Progress-Based Model of Loyalty Program Effectiveness

Managing loyalty program communications in the digital era: Does culture matter?

This introductory article synthesizes the findings of the five subsequent articles and identifies a promising direction for research on how culture may impact electronic word of mouth (eWOM). The c...

Haksin Chan

Papers

Consumer Motivation for Reward Pursuit: A Culture-Based and Progress-Based Model of Loyalty Program Effectiveness

Managing loyalty program communications in the digital era: Does culture matter?

Culture and Electronic Word of Mouth: A Synthesis of Findings and an Agenda for Research

Retain or upgrade: The progress-framing effect in hierarchical loyalty programs

Promoting sustainable human resource management by reducing recruitment discrimination: A cross-cultural perspective