Review of the theoretical underpinnings of loyalty programs

A review of the extant literature reveals that the theoretical underpinnings of the majority of loyalty program research rest on psychological mechanisms from three specific domains—status, habit, and relational. We propose that to understand how loyalty programs actually work, a broader, more holistic research perspective is needed to account for the simultaneous effects across these three theoretical domains as well as both cross-customer and temporal effects. The contribution of this approach is a fresh research agenda advanced in 15 research propositions.     

The empirical link between relationship marketing tools and consumer retention in retail marketing

This article focuses on the key relationship marketing tools of customer service, loyalty/rewards programs, brand/store community, personalization and customization, and their relationship with customer retention. The relationship between customer service, loyalty/rewards programs, customization, personalization, brand/store community and customer retention were examined via an empirical investigation of 450 loyalty/reward program members of three retail stores in Malaysia. The administration of the survey was personally administered but self‐completed. Four of the five relationship marketing tools, namely, customer service, loyalty/rewards programs, brand/store community and personalization, had a significant positive relationship with customer retention. The findings provided valuable insights into the loyalty program management practices of retail stores in a developing country context. Copyright © 2013 John Wiley & Sons, Ltd.     

Autonomic conditioning to monetary and social stimuli and aggression in children

Poor conditioning to punishment, such as loud tones or electric shock, has been proposed as an important factor involved in the etiology of aggressive and psychopathic behavior. However, it is not known whether the association holds when monetary or social stimulus is used as the unconditioned stimulus, and if aggressive individuals also have impaired conditioning to rewards. In this study, skin conductance responses in a conditioning task involving both monetary/social reward and punishment as unconditioned stimuli were assessed in 340 male and female 8‐ to 9‐year‐old children from the community. Children reported their reactive and proactive aggression using the Reactive and Proactive Aggression Questionnaire (RPQ; Raine et al., 2006). Results showed that monetary/social reward and punishment were effective in eliciting physiological classical conditioning in children, and that reduced reward conditioning was associated with high levels of proactive aggression in particular. Findings highlight the importance of distinguishing between reactive and proactive aggression when examining antisocial behavior in children, and suggest that reward‐oriented treatment programs may not be effective for children with more proactive, instrumental aggressive behavior.

     

Money enhances memory consolidation--but only for boring material

Money’s ability to enhance memory has received increased attention in recent research. However, previous studies have not directly addressed the time-dependent nature of monetary effects on memory, which are suggested to exist by research in cognitive neuroscience, and the possible detrimental effects of monetary rewards on learning interesting material, as indicated by studies in motivational psychology. By utilizing a trivia question paradigm, the current study incorporated these perspectives and examined the effect of monetary rewards on immediate and delayed memory performance for answers to uninteresting and interesting questions. Results showed that monetary rewards promote memory performance only after a delay. In addition, the memory enhancement effect of monetary rewards was only observed for uninteresting questions. These results are consistent with both the hippocampus-dependent memory consolidation model of reward learning and previous findings documenting the ineffectiveness of monetary rewards on tasks that have intrinsic value.     

Modeling Myopic Decisions: Evidence for Hyperbolic Delay-Discounting within Subjects and Amounts

Hyperbolic and exponential discounting functions were compared as models of subjects′ present valuations of delayed rewards. Previous comparisons have been limited by relying on the assumption that discounting rate is independent of reward size; we avoided this limitation by making all comparisons within reward sizes. In Experiment 1, using real rewards in a simulated auction, and in Experiment 2, using hypothetical rewards, we offered subjects five monetary rewards at six delays each and asked them to indicate the smallest amount that they would accept immediately in exchange for those rewards. Both discounting functions were then fit to the six reported amounts for each reward using nonlinear regressions. In both experiments, although both functions fit the data very well, the hyperbolic function fit better for all of the delayed rewards. Furthermore, the hyperbolic function better described the data for 20 of 21 and 14 of 18 subjects in Experiments 1 and 2, respectively.     

DISCOUNTING OF DELAYED FOOD REWARDS IN PIGEONS AND RATS: IS THERE A MAGNITUDE EFFECT?

Temporal discounting refers to the decrease in the present, subjective value of a reward as the time to its receipt increases. Results from humans have shown that a hyperbola-like function describes the form of the discounting function when choices involve hypothetical monetary rewards. In addition, magnitude effects have been reported in which smaller reward amounts are discounted more steeply than larger amounts. The present research examines the cross-species generality of these findings using real rewards, namely food pellets, with both pigeons and rats. As with humans, an adjusting amount procedure was used to estimate the amount of immediate reward judged equal in value to a delayed reward. Different amounts of delayed food rewards (ranging from 5 to 32 pellets in pigeons and from 5 to 20 pellets in rats) were studied at delays varying from 1 s to 32 s. A simple hyperbola, similar to the hyperbola-like mathematical function that describes the discounting of hypothetical monetary rewards in humans, described the discounting of food rewards in both pigeons and rats. These results extend the generality of the mathematical model of discounting. Rates of discounting delayed food rewards were higher for pigeons than for rats. Unlike humans, however, neither pigeons nor rats showed a reliable magnitude effect: Rate of discounting did not vary systematically as a function of the amount of the delayed reward.     

Effort discounting in human nucleus accumbens

A great deal of behavioral and economic research suggests that the value attached to a reward stands in inverse relation to the amount of effort required to obtain it, a principle known as effort discounting. In the present article, we present the first direct evidence for a neural analogue of effort discounting. We used fMRI to measure neural responses to monetary rewards in the human nucleus accumbens (NAcc), a structure previously demonstrated to encode reference-dependent reward information. The magnitude of accumbens activation was found to vary with both reward outcome and the degree of mental effort demanded to obtain individual rewards. For a fixed level of reward, the NAcc was less strongly activated following a high-demand for effort than following a low demand. The magnitude of this effect was noted to correlate with preceding activation in the dorsal anterior cingulate cortex, a region that has been proposed to monitor information-processing demands and to mediate in the subjective experience of effort.     

Cueing task goals and earning money: Relatively high monetary rewards reduce failures to act on goals in a Stroop task

We examined the role of monetary rewards in failures to act on goals in a Stroop task. Based on recent developments in theorizing on the interplay between rewards and cognitive control, we hypothesized that relatively high monetary rewards enhance the focus and stability of a cued task goal compared to low monetary rewards, and hence cause a reduction in failures to act on current task goals under circumstances that warrant top–down goal implementation. To test this, participants received a modified version of the Stroop task, in which they were either briefly cued with the goal of naming the color or meaning of targets on a trial-by-trial basis. After goal cuing, but before presenting the target, either a low or high reward cue was presented. Results showed that higher rewards produced a general speed-up. More importantly, Stroop interference on error rates was lower in the high reward condition compared to the low reward condition, revealing that the rewards enhanced focus and stability of the cued goal. These results provide support for theorizing that reward processing modulates utility assessment of current goals by affecting attention to facilitate goal-directed behavior.     

Effects of reward magnitude frames on measures of delay discounting in a hypothetical money scenario

The current study analyzed the effects of three frames of reward magnitude—quantity, volume, and duration—on the rate at which college students discounted hypothetical, delayed monetary rewards. Hypothetical scenarios were presented using the fill-in-the-blank discounting questionnaire and participants made choices between immediate and delayed hypothetical monetary rewards. Scenarios framed the monetary choices as (a) quantity of dollar bills, (b) height (inches) of a stack of dollar bills, and (c) duration of time spent in a hypothetical cash machine to collect dollar bills. For each scenario, participants' subjective values were used to calculate the area under the curve (AuC). Framing resulted in a moderate effect size: The duration frame yielded significantly smaller AuC values compared to the quantity and volume frames. Thus, the framing of reward magnitude was a significant variable in controlling discounting rates for hypothetical, delayed monetary rewards. Subsequent investigations should be aware of the independent effects of the reward magnitude frames on delay discounting rates.     

High temporal discounters overvalue immediate rewards rather than undervalue future rewards: An event-related brain potential study

Impulsivity is characterized in part by heightened sensitivity to immediate relative to future rewards. Although previous research has suggested that “high discounters” in intertemporal choice tasks tend to prefer immediate over future rewards because they devalue the latter, it remains possible that they instead overvalue immediate rewards. To investigate this question, we recorded the reward positivity, a component of the event-related brain potential (ERP) associated with reward processing, with participants engaged in a task in which they received both immediate and future rewards and nonrewards. The participants also completed a temporal discounting task without ERP recording. We found that immediate but not future rewards elicited the reward positivity. High discounters also produced larger reward positivities to immediate rewards than did low discounters, indicating that high discounters relatively overvalued immediate rewards. These findings suggest that high discounters may be more motivated than low discounters to work for monetary rewards, irrespective of the time of arrival of the incentives.     

Discounting of monetary and directly consumable rewards

We compared temporal and probability discounting of a nonconsumable reward (money) and three directly consumable rewards (candy, soda, and beer). When rewards were delayed, monetary rewards were discounted less steeply than directly consumable rewards, all three of which were discounted at equivalent rates. When rewards were probabilistic, however, there was no difference between the discounting of monetary and directly consumable rewards. It has been reported that substance abusers discount delayed drug rewards more steeply than delayed money, but this difference may reflect special characteristics of drugs or drug abusers, or it may reflect a general property of consumable rewards. The present findings suggest that abused substances (like beer) share the properties of other directly consumable rewards, whereas delayed monetary rewards are special because they are fungible, generalized (conditioned) reinforcers.     

Delay of gratification in psychopathic and nonpsychopathic offenders.

Delay of gratification is a prototypical measure of self-control that merits systematic investigation in psychopaths. White male prisoners were provided with repeated opportunities to select an immediate response with uncertain reward or a delayed response with a higher rate of reward under one of three incentive conditions. Psychopaths' performance depended on their level of trait anxiety and incentive condition: Whereas low-anxious psychopaths were relatively unwilling to delay when omission of expected rewards also incurred monetary punishments, they displayed relatively superior performance when the task involved rewards only. Findings complement those for passive avoidance learning in psychopaths and suggest that inhibitory self-control in low-anxious psychopaths is somewhat impaired under conditions involving a combination of monetary rewards and punishments.     

The absence of numbers to express the amount may affect delay discounting with humans

Human delay discounting is usually studied with experimental protocols that use symbols to express delay and amount. In order to further understand discounting, we evaluated whether the absence of numbers to represent reward amounts affects discount rate in general, and whether the magnitude effect is generalized to nonsymbolic situations in particular. In Experiment 1, human participants were exposed to a delay‐discounting task in which rewards were presented using dots to represent monetary rewards (nonsymbolic); under this condition the magnitude effect did not occur. Nevertheless, the magnitude effect was observed when equivalent reward amounts were presented using numbers (symbolic). Moreover, in estimation tasks, magnitude increments produced underestimation of large amounts. In Experiment 2, participants were exposed only to the nonsymbolic discounting task and were required to estimate reward amounts in each trial. Consistent with Experiment 1, the absence of numbers representing reward amounts produced similar discount rates of small and large rewards. These results suggest that value of nonsymbolic rewards is a nonlinear function of amount and that value attribution depends on perceived difference between the immediate and the delayed nonsymbolic rewards.     

Are people really more patient than other animals? Evidence from human discounting of real liquid rewards

In previous studies, researchers have found that humans discount delayed rewards orders of magnitude less steeply than do other animals. Humans also discount smaller delayed reward amounts more steeply than larger amounts, whereas animals apparently do not. These differences between humans and animals might reflect differences in the types of rewards studied and/or the fact that animals actually had to wait for their rewards. In the present article, we report the results of three experiments in which people made choices involving liquid rewards delivered and consumed after actual delays, thereby bridging the gap between animal and human studies. Under these circumstances, humans, like animals, discounted the value of rewards delayed by seconds; however, unlike animals, they still showed an effect of reward amount. Human discounting was well described by the same hyperboloid function that has previously been shown to describe animal discounting of delayed food and water rewards, as well as human discounting of real and hypothetical monetary rewards.     

Reward-driven modulation of adaptive control: How prospective monetary gains interact with unpredictable control demands

Shifting attention is an effortful control process and incurs a cost on the cognitive system. Previous research suggests that rewards, such as monetary gains, will selectively enhance the ability to shift attention when this demand for control is explicitly cued. Here, we hypothesized that prospective monetary gains will selectively enhance the ability to shift attention even when control demand is unpredictable and not cued beforehand in a modality shift paradigm. In two experiments we found that target detection was indeed facilitated by reward signals when an unpredictable shift of attention was required. In these crossmodal trials the target stimulus was preceded by an unpredictive stimulus directing attention to the opposite modality (i.e., visual–auditory or auditory–visual). Importantly, there was no reward effect in ipsimodal trials (i.e., visual–visual or auditory–auditory). Furthermore, the absence of the latter effect could not be explained in terms of physical limits in speed of responding. Potential motivation of monetary rewards thus selectively translates into motivational intensity when control (i.e., switching) is demanded in unpredictable ways.     

Comparing rapid assessments of delay discounting with real and hypothetical rewards in children

Recent advances in assessment methodology have resulted in a highly efficient procedure for obtaining delay discounting rates for adults: a 5‐trial adjusting delay task (ADT‐5) examining intertemporal choice for hypothetical rewards. The low participant burden of this task makes it potentially useful for children, with whom delay discounting research is relatively limited. However, it is unknown whether results from this task match choice for real rewards. The present study assessed delay discounting for real and hypothetical monetary rewards using a modified ADT‐5 with 9 children admitted to a psychiatric day treatment program. Participants completed up to 3 tasks with each reward type in alternating order. No difference in discounting rate, via log(k), was observed between the first task of each reward type. This finding was replicated across subsequent tasks for the subset of participants (n = 6) who completed all 6 tasks. However, delay discounting of real and hypothetical rewards was not found to be statistically equivalent. These results suggest that a modified ADT‐5 using hypothetical rewards may be a viable option for assessing delay discounting in children with psychiatric diagnoses, but additional research is needed to explicitly examine whether hypothetical and real rewards are discounted equivalently in this population.     

Physical and cognitive effort discounting of hypothetical monetary rewards

Effort discounting refers to the decrease in the subjective value of a reward as the effort required to obtain the reward increases. The main aims of this study were to ascertain whether the amount of the reward affects the steepness of the effort discounting process for hypothetical monetary rewards, to identify whether this steepness depends on the type of effort that is required, and to determine whether the steepness of different types of effort covary at the individual level. Two types of effort were studied under hypothetical choice situations: physical effort and cognitive effort. Both physical and cognitive effort discounting were well described by the hyperbolic model. Large rewards were discounted less steeply than small rewards for both types of effort. This finding agrees with the results of prior studies which have found that larger rewards have greater motivational power. In addition, the steepness of physical effort discounting was positively correlated with the steepness of cognitive effort discounting, which suggests that the effort discounting process is a trait‐like characteristic within an individual.     

Modeling the effect of reward amount on probability discounting

The present study with college students examined the effect of amount on the discounting of probabilistic monetary rewards. A hyperboloid function accurately described the discounting of hypothetical rewards ranging in amount from $20 to $10,000,000. The degree of discounting increased continuously with amount of probabilistic reward. This effect of amount was not due to changes in the rate parameter of the discounting function, but rather was due to increases in the exponent. These results stand in contrast to those observed with the discounting of delayed monetary rewards, in which the degree of discounting decreases with reward amount due to amount-dependent decreases in the rate parameter. Taken together, this pattern of results suggests that delay and probability discounting reflect different underlying mechanisms. That is, the fact that the exponent in the delay discounting function is independent of amount is consistent with a psychophysical scaling interpretation, whereas the finding that the exponent of the probability-discounting function is amount-dependent is inconsistent with such an interpretation. Instead, the present results are consistent with the idea that the probability-discounting function is itself the product of a value function and a weighting function. This idea was first suggested by Kahneman and Tversky (1979), although their prospect theory does not predict amount effects like those observed. The effect of amount on probability discounting was parsimoniously incorporated into our hyperboloid discounting function by assuming that the exponent was proportional to the amount raised to a power. The amount-dependent exponent of the probability-discounting function may be viewed as reflecting the effect of amount on the weighting of the probability with which the reward will be received.     

Delay-discounting probabilistic rewards: Rates decrease as amounts increase

The independence of delay-discounting rate and monetary reward size was tested by offering subjects (N = 621) a series of choices between immediate rewards and larger, delayed rewards. In contrast to previous studies, in which hypothetical rewards have typically been employed, subjects in the present study were entered into a lottery in which they had a chance of actually receiving one of their choices. The delayed rewards were grouped into small ($30–$35), medium ($55–$65), and large amounts ($70–$85). Using a novel parameter estimation procedure, we estimated discounting rates for all three reward sizes for each subject on the basis of his/her pattern of choices. The data indicated that the discounting rate is a decreasing function of the size of the delayed reward (p < .0001), whether hyperbolic or exponential discounting functions are assumed. In addition, a reliable gender difference was found (p = .005), with males discounting at higher rates than females, on average.     

Temporal discounting of monetary rewards in children and adolescents with ADHD and autism spectrum disorders

It has been difficult to differentiate attention‐deficit/hyperactivity disorder (ADHD) and autism spectrum disorder (ASD) in terms of some aspects of their cognitive profile. While both show deficits in executive functions, it has been suggested that they may differ in their response to monetary reward. For instance, children with ADHD prefer small immediate over large delayed rewards more than typically developing controls. One explanation for this is that they discount the value of rewards to a higher degree as they are moved into the future. The current study investigated whether children with ADHD can be differentiated from those with ASD in terms of reward discounting. Thirty‐nine children (8–16 y) with ADHD, 34 children with ASD and 46 typically developing controls performed a hypothetical monetary temporal discounting task. Participants were instructed to make repeated choices between small variable rewards (0, 5, 10, 20, 30€) delivered immediately and large rewards delivered after a variable delay. Children with ADHD but not ASD discounted future rewards at a higher rate than typically developing controls. These data confirm steeper discounting of future rewards in ADHD and add to a small but growing literature showing that the psychological profile of ADHD can be distinguished from that of ASD in terms of disrupted motivational processes.