The Behavioral Science Behind Uber’s Rewards Programs

Uber

With the launch of Uber’s loyalty program, Editor-in-Chief of PeopleScience, Jeff Kreisler, and his team of behavioral science experts share their take on the success of loyalty programs in business.

According to experts in the fields of behavioral science and consumer loyalty, starting a loyalty and rewards programs is a smart move by Uber.

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Q3 hedge fund letters, conference, scoops etc

“The goal of loyalty is to create an emotional bond between the brand and consumer which will supersede the brain’s default desire to undergo a thorough rational analysis,” Evan Snively, Loyalty Strategist at Maritz Loyalty points out on PeopleScience.

Snively adds, “The result: your brand’s product is always the right decision in the mind of the consumer. No further discussion necessary.” It’s also a great way to overcome any negatives associated with a brand, an issue that continues to plague Uber.

So, when given the choice between a traditional taxi service and an Uber, the loyalty program creates an emotional shortcut for the consumer who, feeling connected, may choose the loyalty over other services.

In order to really drive that emotion connection home, Uber has chosen to de-emphasize the financial rewards in their program. They exist, but they don’t appear to be the driver of the campaign. Numerous studies show that non-monetary rewards have much greater incentivizing impact than monetary ones. This is because, they trigger a sense of identity, they validate our sense of intrinsic value, our sense of belonging to something special. “Diamond level Uber,” “Executive Premiere” and “Super Duper Global Extra Special First Class” are all great ways to make us feel special, like kings of a very specific castle, the one that houses our brand.

JR Slubowski, Sr. Marketing Strategy Director at Maritz Loyalty, believes the shift to loyalty is a choice made to combat new entrants and existing direct competitors. Traditional taxi companies are improving the experience of using their services, which was a big differentiator for Uber & Lyft. Now, with that gap closing, Uber and Lyft are shifting from the experience to the reward.

Snively also notes that this is a great opportunity for Uber to cross-sell and keep customers within their growing universe, which now includes UberEats. He also highlights in an exclusive PeopleScience piece that this type of program can create loyalty among younger consumers, who usually tend to be less brand loyal:

“I wouldn’t say that younger generations are any less loyal than previous generations, they are just different. In fact, Maritz research has found that younger generations actually have a higher propensity for loyalty than their older counterparts and are more likely to be resolutes in their consumption behavior. This stems from their tendency to create deeper personal connections with the select brands they choose to engage with.

Launching a rewards program that satisfies customers and fulfills their emotional needs which are key principles of behavioral design.

Uber has positioned itself well to increase engagement and loyalty among existing riders, attract new, younger riders and fend off competition.

There may be reasons not to like Uber, but, as this move shows, you cannot deny that they’re good at business.



About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver