All of us see friction designed into our customer experience every day, we just may not recognise it as such.

When you try to send money to someone, your bank will likely ask you to confirm this. When you try to delete something, many systems will prompt to ask ‘are you sure?’. This is essentially designed in friction and it’s there to help prompt the user to verify their course of action or change it.

This confirmation of action friction exists in other areas too.

When you change your password or email address, Netflix will let you know. When you spend on your American Express card, you’ll get a mobile notification. These can be reassuring in that you know it’s happened and, in the case of card spend, you know it happened correctly.

There is another type of friction though which is to sign post the ‘right way’ of doing things. This type of friction is also referred to as a ‘nudge’ and is a psychological approach that gained mainstream attention and traction back in 2008 alongside the release of the book of the same name, by behavioural economist Richard Thaler and legal scholar Cass Sunstein.

In the book they describe a nudge as:-

[..] any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives. To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. Putting fruit at eye level counts as a nudge. Banning junk food does not.

So, when adding friction as a nudge, we’re not looking to stop a specific activity, but are simply changing the choice architecture — the way options are presented — to try and alter someone’s default behaviour.

One of the examples they use in the book is of putting fruit at eye level (or pretty much anything else) such that it will influence more people to select that option more often. In the same way, asking people if they want to redeem their points on their current basket will cause more people to do that — and consequently we would see many more points redeemed at the checkout.

Points redemption is good (it really is!) so that sounds like a great piece of choice architecture — except it isn’t.

This is one of the first pieces of friction we put into the programme design — within yuu Rewards you cannot redeem your points at checkout via the till.

We we’re ultimately making redemption (a little) harder for the customer

That decision (or initially suggestion) to not allow points redemption at till was something that generated a lot of discussion and disagreement both within the team and within the banners. There were those who were keen to make it as easy as possible and part of the customer purchase flow and those — like me — who felt that redemption was too valuable an activity to be potentially squandered without due consideration.

A research study conducted by Engage People, a technology provider that specialises in ‘pay with points’ solutions, showed that “62% of loyalty members would rather have the ability to use their points on the spot, just like a credit or debit card, rather than receiving a gift card or cash-back”.

So, the argument of ‘the customer demands it’ is typically rolled out to support ‘pay with points’ or ‘redemption at till’. Surely, if customers think it’s the right thing to do, then it is the right thing… isn’t it?

Indeed, the existing loyalty programme for the pharmacy banner who was joining yuu Rewards, at the time called MannCard, allowed points redemption at checkout, and so the argument was that customers liked it, wouldn’t like to lose it and would likely react negatively to the new programme if it was removed.

There was also the argument internally that points redemption was good for business. Given we could only recognise revenues as an organisation when points were redeemed, if something could speed up redemption, why wouldn’t we do this.

These arguments seem reasonable. Make it easier for customers to redeem and in the process, make it easier for the loyalty P&L to recognise redemption revenues earlier. A win-win for all!

Except, instant redemption at point of sale may be more of a lose-lose scenario than a win-win. As the saying goes, if it feels to good to be true, it probably is.

The challenge is that points redemption at checkout can ultimately be value destroying. You may get some short-term value from it — increased sales or revenue recognition — but ultimately, you’d be losing longer term value within the whole programme.

Of course, during the programme design phase, it’s a little harder to evidence this, and during 2019 when we were still designing and building yuu Rewards, I was trying to convince people of something which was yet to manifest itself. There was no hard evidence that redemption at POS for yuu Rewards would reduce overall member value, but I knew two things which helped inform my decision.

Firstly, in loyalty programmes that used cash vouchers (typically paper for those older schemes), we would always see an uplift on baskets where a voucher was used — people would spend more as they felt they had more cash to spend. This is generally around 20–30% uplift from a normal basket, so certainly not an insignificant amount. My hypothesis here was that, if points were redeemed when standing at the till, it was less likely we’d see any of that uplift, especially where this action was prompted by the sales assistant.

Secondly, what we’d seen within the Nectar programme in the UK was that real-time redemption at POS didn’t change behaviour, and instead people simply used points, almost on auto-pilot, on their groceries. Great if you wanted a simple discount scheme, not great if you wanted to use loyalty to lift longer term sales.

So I held the line and managed to convince all the stakeholders that it was worth making the process of redemption something that was planned and given thought upfront — a process I called ‘Considered Redemption’ — and that’s what we launched with.

Essentially, members wanting to redeem, whether it’s a free coffee or a $100 cash voucher must do that redemption in the app first.

This would be real-time and so the coupon was issued to their app instantly, but they’d then need to scan this coupon at checkout to get the reward. In actual fact, this double redemption flow can be all carried out whilst standing at the checkout — so in nudge terms, redemption at checkout was still possible — but the reality is that given the additional step — that friction or nudge — the member actually thinks about their redemption before that.

Having launched this capability, it came up in conversation 12 months later when the new Digital CEO joined DFI and in the process, picked up responsibility for the yuu Rewards loyalty programme. On first review of the scheme he questioned the redemption process and so I explained our approach to ‘considered redemption’ and how we’d actively designed friction in to the process. He just looked at me… paused… and then said…

“Why would you want to make it harder for members?”

A common question to be fair, but one we could now answer with real data points.

Post-launch, it was shown that through the friction of considered redemption, members planned it 2–3 days before even going into the store and then typically spent 25% more on that basket. That’s an additional visit and additional spend and ultimately incremental sales — something redemption at checkout would never give.

It also shows that members were clearly thinking about making a purchase and that the Category Entry Point (CEP) of ‘grocery shop’ was closely linked to yuu Rewards and points redemption.

Overall, this incremental lift from points redemption — the gap between normal basket spend and redemption basket spend — was also a significant part of the incremental sales lift that could be attributed to loyalty, and so formed a key part of the loyalty measurement framework that I term ROMA.

By removing the option for most customers to simply decide to discount their next basket with points — a decision made at the till and after they’d already made their purchase choices — we allowed customers instead to plan ahead. With the coupon they could decide when to use it and plan what to use it for. Most importantly, they could plan to shop with us — and that’s mental availability you just can’t buy.