I have a love/hate relationship with loyalty programs. I love the rewards, but I hate the program specific terms.
One annoying thing about them is the different point systems. Let's compare two of my credit cards which offer 1% cash back. Card A uses dollars as points, and I get $0.01 of rewards for every dollar I spend, redeemable after $50 in rewards. Card B, on the other hand, works with a point system. I get 1 point for every dollar I spend, and once I reach 5,000 points I can get a check for $50. Mathematically, both cards offer the same 1% cash back. So the question remains: Why did card B invent a point system for the rewards?
One possible answer lies in psychology. There are times when people are sensitive to how options are presented, a cognitive bias known as "framing." For instance, studies have shown people will drive a few minutes to another store to save $3 on a $10 purchase, but they won't do this to save $3 on a $100 purchase. Although both options are about saving the same $3, how the choices were framed made a difference.
It turns out framing matters for point systems in reward programs too. In a study that will be published in the Journal of Consumer Research, researchers considered which point systems people preferred. In one experiment, the authors set up a situation where people ordered meals from a restaurant. In one rewards program, as described in Psychology Today, subjects got 1 point per dollar and needed 10 points for a reward. In the other, subjects got 10 points per dollar and needed 100 points for a reward. While the programs were the same mathematically, people viewed them differently. As people got to 80% of their goal — either 8 points out of 10, or 80 points out of 100 — the people reported preferring the large point system. They were more likely to say they liked the program and more likely to recommend it to others.