How to Increase Customer Loyalty and Employee Retention

Fifty years ago, Stanford Psychologists Mark Lepper and David Greene ran an experiment to test a theory on intrinsic motivation. Intrinsic motivation makes us tick and keeps us doing what we’re supposed to do. The results of the experiment may surprise you.

The experiment: Extrinsic Rewards and Intrinsic Motivation in Children

They recruited 51 preschool kids across three experiments. The task for the kids was to perform an activity they naturally wanted to do anyway. In this case, drawing on a piece of paper. There were no rules; they just gave the kids drawing materials and set them loose. The experiment was to determine the effect of rewards on the activity. The awards came in three categories (thus three experiments): regular rewards, surprise rewards, and no rewards.

Methodology

Each kid in the trial was placed alone in a room and allowed to draw for six minutes. When six minutes were up, researchers gave the child one of three things: an expected reward (something they told them they were going to receive), a surprise reward (something different from what they were told), or nothing (they were allowed to draw).

The choice of reward was randomized and had nothing to do with the quality of the kids’ work. After the first round, they replicated the experiment again; this time, they did not put any parameters on the children. They set out the materials and watched.

Results

Children in the surprise and none groups spontaneously drew pictures for 15-20% of their time. Children in the expected group drew pictures for half that time (around 5-10% of their time).

The study’s conclusion: if they knew what they would get, they wanted to do the activity less. If they were surprised, they were more motivated and in a better mood. If they didn’t get anything, they continued with what they loved to do — draw.

Lesson 1: Increase customer loyalty with surprises

Try providing your potential customers with surprise promotions or discounts rather than a weekly ad. If they can predict it, the study tells us it will have less value for them. One reason for this is that they have already evaluated it. Another is that they know it will come around again, so there’s no urgency.

Ever order something from Amazon that arrives early? How did you feel about it? My guess is it felt great to get your package a day or two early. That was done on purpose. Amazon has a policy of offering conservative delivery estimates in an effort to delight its customers. It works.

Lesson 2: Employee retention and evaluation

Preschool or not, the psychology of the experiment is the same. The rewards themselves were insignificant, and the method in which the children were informed was very significant. People won’t work hard for a paycheck that regularly comes every week. They will, however, increase productivity for sales contests and random acts of kindness.

Want to build instant loyalty? Deliver an unexpected cash bonus. It doesn’t need to be much; sometimes, a $5 Starbucks card works wonders. The point is it’s an unexpected gift at an unexpected time. This means they could be surprised in the future. It also builds on the work of Robert Cialdini — giving a gift to get more in return. In this case, the surprise gift is small, but the return is increased morale, productivity, customer service, or a combination of all three.

Everything we need to know we learned in kindergarten

Humans really are simple animals. We understand balance, and we understand trade. When a company or an employer tips the balance (hopefully in a positive direction), there will be a reaction. A little extra on our order, a free coupon, or a surprise deal works more effectively than the best weekly ad promo ever would.

When we were kids, we always wanted to find out which houses gave out the biggest candy bars on Halloween. If your company develops a reputation for delighting its employees, those employees will delight your customers, and your business will grow accordingly — making it the best investment you’ll ever make.