The preference between reward choice and reward specificity in repeated purchase incentives

This paper seeks to examine individuals’ preference between reward choice and reward specificity under different requirements (number of purchases) for rewards. The main goal is thus to contribute to the understanding of how to design effective incentives. More generally our study also adds to the growing body of studies on situations when individuals prefer less choice over more choice. Methodology: We conducted an empirical field study in a fictive setting whereby students (N=99) rated their preference for three kinds of rewards that differ in terms of specificity and choice; cash, rebate coupon and product in-kind. One-tailed t-tests were performed to test two hypothesis formulated on how number of purchases required for rewards matters for preference of kind of reward. More specifically, we hypothesized that in general customers prefer more choice over less choice but that a certain threshold level in terms of number of purchases required for a reward, specificity becomes more highly valued than choice. Findings: We found reward choice to be preferred over reward specificity irrespective of the size of the spending requirement. In other words, individuals’ rated a preference for cash over rebate coupon over product in-kind as reward irrespective of number of purchases required for rewards. Surprisingly though, we found that the preference for cash over rebate coupon decreased in magnitude while the preference for cash over rebate coupon increased in magnitude as the spending requirement was changed from low to high. Potential explanations to our findings are discussed. Originality: Individuals preference between reward choice and reward specificity is an aspect of incentive design that has received sparse attention in previous studies. In this regard we draw on goal-setting theory, which previously has been used mainly within a principal-agent context