If you’ve ever received a reward from a company for completing a survey or referring an employee, no doubt it’s led to a certain degree of satisfaction. However, that feeling is often dependent on how long it took you to receive that reward.
While many organizations have taken the time to introduce referral programs for employees or customers, they often forget just how important timing is to the process. For example, if you’re offering a store credit as a thank you, but don’t apply it for at least 30 days, this can often be a frustrating experience for customers that may not even lead to an additional purchase.
Reward delays are sometimes used to protect the business, but looking for ways to introduce instant gratification into your referral programs is much more effective long-term. And the reasons for this really come down to human psychology.
Below, we’ll look into the behavioral tendencies of individuals when exploring company reward programs and how you can play to these to increase the perceived value of the rewards you provide.
The Psychology of Delay Discounting in Reward Programs
When examining human psychology in relation to certain types of rewards, it’s important to understand the concept of “delay discounting.” This term suggests that individuals tend to place more value on rewards of any size when they can receive them sooner. For example, if left with the choice between a $50 reward now and a $100 reward 6 months from now, many would choose the former.
The concept suggests that the longer the wait, the more the incentive value declines. While the perceived value drop may differ for everyone, even a 48-hour delay can be enough for some individuals to see a significant drop in incentive value.
The Immediacy Bias
Referral incentives can directly impact the level of engagement customers or employees have based on the individual’s stats: hot or cold.
If a user sends a referral link to a friend and is waiting for the friend to follow up, the sender is typically in a “hot” state. This means they’re more likely to be helpful for the friend trying to sign up or make a purchase. If their friend or family member signs up and gets a reward immediately, it creates a powerful, positive feedback loop.
Delayed rewards, on the other hand, tend to put someone more in a cold state. Because there is no immediate reward for their efforts, they are less engaged and may not have the same level of excitement about getting a referral as in other programs.
Probability vs. Certainty
Many people don’t always take what they see at face value, especially when being constantly bombarded by less-than-credible advertising promises. While you may have built a great loyalty program for your customers, delays in receiving promised rewards make many people nervous that they’ll have to constantly follow up with the company, at risk of being forgotten about.
Too many stipulations attached to your reward programs keep customers from getting excited about referring others. Long reward waiting periods tend to kill motivation. Instant rewards, on the other hand, help build credibility in a reward program and help to reinforce more positive actions.
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Cognitive Load
One thing many businesses don’t consider when creating their reward programs is how increased cognitive load affects them. If a referrer needs to remember a lot of program details, track their eligibility, and regularly follow up with the business before they receive their reward, this “incentive” quickly becomes an extra “chore” that needs to be done.
Instant rewards help to avoid this cognitive load issue altogether. When rewards are received right away, the process is more straightforward for recipients and lowers the barrier to entry for individuals seeking recognition for their efforts.
Applying Operant Conditioning to Referrals
Operant conditioning is another element of psychology that can be used when creating referral programs. Operant conditioning refers to applying positive reinforcement methods after completing certain activities, such as referring friends and family, immediately after those activities occur.
Having the right schedule matters here:
- The Power of Fixed-Ratio Reinforcement: Immediate rewards work like a “Fixed-Ratio Schedule.” The user learns a simple pattern like Action = Reward. Do it once, get paid once. This consistency helps users quickly understand the program’s value, leading to high, sustained activity.
- The Pitfall of Variable/Delayed Schedules: When you compare a fixed-ration schedule to delayed rewards, programs can feel much more random and disconnected. If the time between the referral and the reward is too long, the brain fails to connect the two events. The behavior isn’t reinforced, so the user stops trying altogether.
Strengthening the Stimulus-Response Bond
The primary goal of your incentivization initiatives should be creation in the recipient’s mind. It should be easy for them to understand “If I share these links, I get a benefit.”
While there are many ways to build these types of connections, the strongest ones are when the gap between action and outcome is the shortest.
The Mechanics of Instant Reward Implementation
When trying to implement a more instant reward implementation process, it’s really important to create a path of least resistance. Focusing on seconds and minutes rather than hours and days is critical here to get the most benefits.
Getting to this point may require certain investments in infrastructure improvements to facilitate your reward programs. Your current tech stack may need to be modified to include webhooks or API calls to create a more seamless reward exchange. If your current process is a bit too reliant on human intervention, this can create unnecessary backlogs.
Looking for more ways to automate your rewards program will help to maintain the “instantaneous” nature of rewards and ensure it remains engaging enough for all participants.
Decoupling the Reward from the Purchase
When trying to entice customers to make additional purchases, the biggest shift is figuring out how to separate rewards from revenue. This means that instead of waiting for a sale, it’s essential to ensure rewards are given for specific triggers that the business can see and understand.
These triggers could be anything from signing friends up for a trial, verifying an email, or finishing onboarding. One of the best ways to make your reward program successful is to avoid waiting for a cleared payment or a 90-day retention mark before the customer can receive something tangible, like a gift card or another reward.
Rewarding the lead generation, not just a closed deal, can help you create a constant lead funnel you can rely on to help your business grow.
Psychological Value vs. Monetary Value
A business benefit of focusing on speed in your reward program is that this can often be used to help lower overall costs. Since customers and employees tend to respond more to “fast” rewards instead of larger, but more drawn-out incentives, you don’t have to break the bank in order to get the results you’re hoping for.
Even a small, instant reward (like $5 in credits or 10 loyalty points) can often outperform a larger, delayed reward (like $50 in three months). This can help you to create much more sustainable reward program budgets and see results quickly for the business.
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Balancing Immediate Incentives with Long-Term Value
As with most reward programs, there is always the issue of “gaming the system” to consider. Some individuals might use spammy tactics to gain access to quick rewards without actually referring others.
To stop this from happening while still keeping rewards instant, leverage technology protections like CAPTCHA or other verification techniques to filter out common spam tactics. If you’re going to offer a reward, make sure it’s triggered only after a new user confirms a phone number or completes profile setup for verification.
Creating a “Reward Stacking” Effect
For the best results, try combining instant wins with long-term goals. This is called “Reward Stacking.”
For example, you could use an instant reward, such as awarding points to users once they complete a profile. Consider offering a secondary, larger reward, such as a cash bonus or gift card, when one of their referrals converts to a paid account. This way, you reward the effort immediately while still aligning incentives with your business goals.
Measurable Impact
Anytime you’re introducing new initiatives to your reward programs, it’s really important to gauge the success of your implementations over time. This will help you calibrate your programs so you’re striking the right balance between speed and effectiveness.
Try starting with more minor changes at first and evaluating any changes you see in engagement levels, number of referrals, and your business ROI. Tracking and measuring these metrics over time will help you avoid unnecessary changes and ensure your business continues to achieve acceptable profit margins.
Start Getting Better Referral Results by Timing your Rewards
Incentive programs that wait too long for customers or employees to receive their rewards are often doomed to fail. Delay discounting can sap participants’ motivation and break the mental link between the efforts put in and the rewards received.
By following the advice above, you’ll ensure your referral programs deliver the results you’re looking for, helping you build more sustainable lead-generation sources for your business.
Growth Hackers is a top-tier growth agency helping businesses from all over the world grow. There is no fluff with Growth Hackers. We help entrepreneurs and business owners optimize reward timing in referral programs to drive faster engagement and conversions, optimize their conversion rate, gather and analyze data analytics, acquire and retain users and increase sales.
We go further than brand awareness and exposure. We make sure that the strategies we implement move the needle so your business grow, strive and succeed. If you too want your business to reach new heights, contact Growth Hackers today so we can discuss about your brand and create a custom growth plan for you. You’re just one click away to skyrocket your business.
