Ran Kivetz

Earning the Right to Indulge: Effort as a Determinant of Customer Preferences Toward Frequency Program Rewards

Although frequency programs (FPs) have become ubiquitous in the marketplace and a key marketing-mix tool for promoting customer relationship and loyalty, little is known about the factors that determine how such programs are evaluated by consumers. The authors investigate the impact of the level of effort participants must invest to obtain the reward on the types of rewards they prefer and, consequently, on the decision to join the FP. In particular, the authors propose that higher required effort shifts consumer preferences from necessity to luxury rewards, because higher efforts reduce the guilt that is often associated with choosing luxuries over necessities. A series of studies with approximately 3100 consumers demonstrated that (1) higher program requirements shift preferences in favor of luxury rewards, (2) this effect is also observed when consumers choose between luxury and necessity rewards (of the same value) that they themselves proposed, and (3) the effect of program requirements on reward preferences is stronger among consumers who tend to feel guilty about luxury consumption and among those for whom the effort is invested in the context of work rather than pleasure. In addition, contrary to an alternative explanation based on the notion that higher requirements signal higher value of luxury rewards, the authors show that (1) when the program requirements are held constant but the individual consumers effort is higher, the shift in preference toward luxuries is still observed and (2) increasing the monetary cost of participating in the FP decreases consumer preferences for luxury rewards. The authors discuss the theoretical implications of this research and the practical implications with respect to the design, targeting, and promotion of FPs.

Self‐Control for the Righteous: Toward a Theory of Precommitment to Indulgence

Prior research has examined consumers’ use of self‐control to avoid hedonic (myopic) temptations, such as overspending and smoking. In this research we investigate the opposite form of self‐control, whereby consumers force themselves to indulge and avoid default forms of spending on utilitarian necessities and/or savings. In particular, consumers who have difficulty choosing items that are perceived as indulgences or luxuries (e.g., a cruise) over necessities (e.g., saving for college education) and cash in everyday decisions may use precommitments to indulgence, especially when the psychological cost of such commitments is less concrete. These propositions were tested in a series of studies involving real and hypothetical choices as well as process measures. The results indicate that a substantial segment of consumers choose hedonic luxury rewards over cash of equal or greater value; consumers typically explain such choices based on the need to precommit to indulgence, to make sure that the award does no...

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

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 field experiments, secondary customer data, paper-and-pencil problems, and Tobit and logit models. The key findings indicate that (1) participants in a real café 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.

Alternative Models for Capturing the Compromise Effect

The compromise effect denotes the finding that brands gain share when they become the intermediate rather than extreme option in a choice set. Despite the robustness and importance of this phenomenon, choice modelers have neglected to incorporate the compromise effect in formal choice models and to test whether such models outperform the standard value maximization model. In this article, the authors suggest four context-dependent choice models that can conceptually capture the compromise effect. Although the models are motivated by theory from economics and behavioral decision research, they differ with respect to the particular mechanism that underlies the compromise effect (e.g., contextual concavity versus loss aversion). Using two empirical applications, the authors (1) contrast the alternative models and show that incorporating the compromise effect by modeling the local choice context leads to superior predictions and fit compared with the traditional value maximization model and a stronger (naive) model that adjusts for possible biases in utility measurement, (2) generalize the compromise effect by demonstrating that it systematically affects choice in larger sets of products and attributes than has been previously shown, (3) show the theoretical and empirical equivalence of loss aversion and local (contextual) concavity and (4) demonstrate the superiority of models that use a single reference point over “tournament models” in which each option serves as a reference point. They discuss the theoretical and practical implications of this research as well as the ability of the proposed models to predict other behavioral context effects.

Repenting Hyperopia: An Analysis of Self-Control Regrets

This article proposes that supposedly farsighted (hyperopic) choices of virtue over vice evoke increasing regret over time. We demonstrate that greater temporal separation between a choice and its assessment enhances the regret (or anticipated regret) of virtuous decisions (e.g., choosing work over pleasure). We argue that this finding reflects the differential impact of time on the affective determinants of self-control regrets. In particular, we show that greater temporal perspective attenuates emotions of indulgence guilt but accentuates wistful feelings of missing out on the pleasures of life. We examine alternative explanations, including action versus inaction regrets and levels of construal.

Promotion Reactance: The Role of Effort-Reward Congruity

Incentives may simultaneously entice consumers and arouse reactance. It is proposed that consumers reaffirm their autonomy by choosing rewards that are congruent with the promoted consumption effort (choosing reward x over reward y, given effort x). Such congruity allows consumers to construe their behavior as intrinsically motivated rather than externally induced, because the effort is its own reward. Supporting this conceptualization, the results indicate that preferences for effort-congruent rewards are attenuated among consumers with lower psychological reactance, after a reactance-reduction manipulation, when rewards are independent of personal effort, and when rewards are a by-product rather than the intention of effort. (c) 2005 by JOURNAL OF CONSUMER RESEARCH, Inc..

Determinants of justification and self-control

The authors propose that people use 2 routes in justifying self-gratification: 1st through hard work or excellence (entitlement) and the 2nd through the attainment of vices without depleting income. This framework was tested using real tasks and choices adopted from prior research on self-control. The results indicate that (a) higher effort and (bogus) excellence feedback increase preferences for vice rewards, but these effects are reversed or attenuated when the interchangeability of effort and income is implied; (b) willingness to pay in effort is greater for vices than virtues, but willingness to pay in income is higher for virtues; and (c) these effects are magnified among individuals with stronger (chronic or manipulated) guilt. The authors discuss the ability of the justification routes to explain the findings of prior self-control research.

Advances in Research on Mental Accounting and Reason-Based Choice

Research extending over twenty years in behavioral decision theory has led to the development of two important research streams — mental accounting and reason-based choice. This paper explores recent research on the role of mental accounting and reason-based choice in the construction of consumer preferences. Evidence suggests that the principles of mental accounting often regulate the purchase and consumption of luxuries and that reasons may play an important part in this process. In particular, buying and consuming luxury goods tends to call for reasons and justification and can evoke intra-personal conflict that might be resolved with the aid of mental accounting. Moreover, reasons can serve as important building blocks in the formation and grouping of mental accounts. The current paper also discusses the construction of preferences as a process where, in certain cases, consumers choose reasons rather than options. Among other things, focusing on reasons can lead to discrepancies between decisions and consumption experiences, preference intransitivity, and unconventional choices. Directions for future research are discussed.

Remedying Hyperopia: The Effects of Self-Control Regret on Consumer Behavior

The self-control literature is premised on the notion of myopia (shortsightedness or present-biased preferences) and assumes that choosing vices generates regret. An alternative perspective suggests that consumers often suffer from a reverse self-control problem—namely, excessive farsightedness and overcontrol, or “hyperopia.” This research examines whether consumers can foresee the detrimental long-term consequences of hyperopia. Five studies demonstrate that anticipating long-term regret relaxes self-control and motivates consumers to counteract their righteousness. Consumers are more likely to select indulgences and luxuries when they judge the longer-term regrets of others, anticipate their own regret in the distant future, and reflect on their regret regarding an actual decision made in the more distant past. The article concludes with two field experiments that examine the effect of anticipatory regret on real consumer purchases at a shopping mall and during Thanksgiving. These experiments demonstrate that anticipating long-term regret leads consumers to buy pleasurable products rather than practical necessities and to spend more on shopping. The implications for marketers and consumers are discussed.

Extending Compromise Effect Models to Complex Buying Situations and Other Context Effects

Building on the work of Dhar, Menon, and Maach (2004), this commentary describes how the compromise effect models developed in the work of Kivetz, Netzer, and Srinivasan (2004) can be extended to predict complex (business-to-business) purchase decisions and additional behavioral context effects. The authors clarify their general modeling approach and outline how it applies to choices among solutions (augmented products) and group decision making. They then hypothesize about the influence of business-to-business and technology markets on various context effects (e.g., compromise and asymmetric dominance). They show how the models incorporate various context effects and discuss ideas for further research.