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Business strategy

From confetti showers to milestone gifts: the art of variable rewards

- February 15, 2023 4 MIN READ
Photo: AdobeStock
Whether you just closed your rings on your Apple Watch, got an alert saying someone liked your tweet, or stepped out to buy yourself a hot chocolate because you’ve worked hard on a spreadsheet model all day, we all rely on rewards (big and small) to motivate us to engage with technology products.

Personally, my favourite reward is an exuberant shower of digital confetti!

A startup called Cardly rewards me with when I finish ordering a personalised gift card or greeting card (disclosure: I own shares in Cardly).

The technical term for these is “variable rewards” and they are useful for any product manager or growth marketer who wants to encourage positive behaviour from their users. 

But the thing that surprises me the most (and may be holding your startup back from faster growth) is how rare it is to see them used in Aussie startups. Let me explain how many of them work, and why that’s so important to understand.

At its core, the principle of variable rewards is based on the idea that people are more likely to be motivated by unpredictable rewards than by predictable ones. This is because the uncertainty of rewards creates a sense of anticipation and excitement that drives behaviour. 

For example, think about what a poker machine does (for non-Australian readers, a poker machine is what you might call a “slot machine” like you’d see in Las Vegas). 

The thrill you might have felt before playing a poker machine comes from the uncertainty of whether or not you’ll win a prize.

If the poker machine’s screen said “you’ll definitely lose your money if you push the button now”, you’d never push it.

If it said “you’ll definitely win $5 if you push the button now” you’d push it once, but then you’d get the other message, and you’d just go looking for another machine (or in my case wander over to the all-you-can-eat buffet but that’s a whole other addiction for another day). A slot machine couldn’t make mob bosses lots of money without the uncertainty of a variable reward.

The same is true for user behaviour at your startup – if you want to encourage a certain behaviour, it’s important to use rewards that are unpredictable, exciting, and motivating. Used properly, they can have a significant impact on the user experience, drive customer growth and build engagement that locks customers in. They might even keep me away from the shrimp cocktails.

 

You’re more likely to climb the mountain if the path to the first ridge is easy 

‘Shaping’ is one of the key techniques that can be used to apply variable rewards. The goal is to gradually shape user behaviour towards a desired outcome by gradually increasing the difficulty of tasks and rewarding users for each step along the way. This creates a sense of progress and accomplishment, and helps to keep users motivated and engaged.

Keep this in mind when you’re designing your user onboarding flow — do you expect a new user to complete their onboarding all in one visit, and do you expect them to complete the required information in the order in which you want it stored in your user database? 

Both these expectations ignore user psychology — instead, try to redesign your flow so that, in the first step, you only capture the minimum required to be able to ask them to return to complete the next step later, if they wish. That might comprise nothing more onerous than their first name and an email address. 

Next, re-order the remaining steps in your onboarding process so that information that takes longer to create and enter (e.g. a user bio, or the text of a job ad) and information that might not be readily available (such as a copy of photo ID or the contact details of an emergency contact) comes towards the end of the process. The user is more likely to complete the more difficult tasks rather than waste the time they’ve spent getting to this point.

If it’s unlikely that a new user will complete all the steps in your onboarding process in one session, make sure you let them know at the beginning of the process that you’ll store and save their information if they want to come back later, otherwise they may decide to postpone starting the process and you’ll have to acquire them all over again. And if you have reason to believe they’ve forgotten to complete their partial onboarding, don’t forget to have a means of reminding them to return. 

‘Delighters’ are another important aspect of the principle of variable rewards. These are unexpected rewards that are designed to delight and surprise the user. Delighters can take many forms, including exclusive content, special promotions, early access to new features, or a shower of virtual confetti when you’re buying a greeting card. The key to using delighters effectively is to make sure they are surprising and unexpected – this creates a sense of excitement and anticipation that drives behaviour.

Periodic events are another way to use the principle of variable rewards. This might involve using a series of events, such as sales, promotions, or contests, to drive user behaviour, but it might also be taking the time to thank the user for being a customer on the first anniversary of their onboarding, or wishing them a happy birthday, or featuring them in a leaderboard of most engaged users. The key to using periodic events effectively is to make sure they are spaced out appropriately so they’re not annoying, and that the rewards are valuable and meaningful.

When I hear a startup founder complain that users sign up but fail to engage and never come back to the platform, the first place I’ll look is at whether they’re using period events. When a startup founder says less than a few percent of users really engage sufficiently, I’ll want to know whether they’re using delighters. If too few new users complete their onboarding, the most likely culprit is a lack of shaping. And if the hoped-for social sharing and user-get-user mechanisms aren’t working, I’ll dig into whether they’re doing any truly unpredictable rewards. These aren’t always the cause, but they can often be part of the solution.

Using variable rewards can have a significant impact on the user experience and drive growth for your business. But when you’re debating what goes into the MVP or first version of your product and what doesn’t, variable rewards are one set of features that commonly get left out. You might want to reconsider that if you are counting on your first product keeping your users engaged, motivated, and coming back for more.

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