Motivating Minds: The Psychology of Incentives and Rewards

Motivating Minds: The Psychology of Incentives and Rewards
Date: November 13, 2023
Author: Related's Team

Sarah, the owner of a struggling spa was trying her best to keep the wellness experience more engaging and to bring new customers to contribute to this community.  To revive it, she introduced a rewards program that incentivized and gave customers the chance to instantly redeem discounts, enjoy exclusive experiences, and benefit from multiple prizes. In less than two months, the impact was remarkable. Customers flocked to the spa, tried new services, and, started sharing it on social media and recommended it to their friends. The incentives sparked a renewed enthusiasm for Sarah’s spa and created a community around it. Sarah transformed her struggling business into a thriving and beloved wellness hub through the power of incentives.

Taking Sarah as an example, have you ever wondered why incentives are so effective in a marketing strategy as well as motivating people to take action? Whether it's a monetary bonus, a gift, or even public recognition, incentives have a powerful influence on our behavior. In this blog, we'll explore the psychology behind incentives and why/how they work to motivate us.

The Science Behind Incentives: Brain's Reward System 

When we receive an incentive or reward, our brain releases dopamine, a neurotransmitter that plays a crucial role in motivation and pleasure. This surge of dopamine creates a positive feeling that we want to experience again, leading us to seek out more rewards in the future. 

Incentives can activate the brain's reward system by providing the anticipation or promise of a reward. The prospect of receiving a desirable outcome triggers dopamine release in the brain, leading to feelings of motivation and pleasure. This reward system activation encourages individuals to engage in behaviors associated with the incentive.

Incentives that Trigger the Reward System

Instant Gratification: One of the most powerful incentives that can trigger the reward system in customers. It refers to the immediate satisfaction or pleasure that customers experience when they obtain or consume a product or service. Example: having a kid choose between having one candy now or a bag of candy tomorrow. The kid will instantly choose the immediate and instant reward which is one candy now since this gives him instant gratification and a boost of adrenaline. 

Monetary Rewards: Money is an important incentive that activates the brain's reward system. Whether receiving a cashback, a bonus, or a financial prize, the anticipation and acquisition of money can motivate individuals to buy more frequently and become more loyal to the same business.

Exclusive Experiences: Whether it's an invitation to an early sales event, exclusive access to a VIP event, or a personalized service like a personal shopper or lounge access, these experiences tap into customers' desire for uniqueness and can generate a strong sense of gratification and reward. 

Gamification: Gamification incorporates game-like elements into non-game contexts to motivate and engage individuals. Incentives such as spin the wheel, scratch and win, points, and referrals activate the brain's reward system and provide a sense of achievement and progress. This incentive proved its huge success among younger and more tech-savvy audience

How to forge all of this in the Customer’s Mind

Do you think bringing traffic to your business is enough? No. What matters more is retaining your old and frequent customers and gaining new potential customers. How should a business forge this in their customers’ minds?

Personalization and Exclusivity: Personalized incentives create a sense of exclusivity and relevance. Rayan went to his favorite hotel for a staycation. Right when he arrived, he was served his favorite coffee with his favorite creamer. Rayan was delighted to have been remembered with the small details he loves. Customers feel valued and special when they perceive that the incentives are specifically customized to their preferences. This personal connection increases their loyalty and likelihood of engaging with the business. 

Communication Timing: Communicating with your customer through the brand touchpoints and at the right moment of truth makes his whole experience more seamless, engaging, and desirable. Nathalie was ordering from her frequent go-to clothing brand and was heading to check her cart out. Surprisingly and to her luck, she got free delivery plus 20% off. This brand took her loyalty gracefully and gave her a desirable experience that was engaging and seamless at the same time.  

The Recap

The brain's reward system, triggered by incentives, releases dopamine and creates a desire for future rewards. Monetary rewards, recognition, intrinsic rewards, gamification, and social rewards are all powerful incentives that activate this system. By utilizing incentives effectively, whether it's offering choices, recognition, progress-based rewards, or fostering a sense of community, individuals and businesses can drive motivation, satisfaction, and long-term success.