Rewarding Money or Time? The Sunk Cost Effects of Customized Rewards in Loyalty Programs.

This article investigates the effects of rewarding consumer temporal efforts (RTE)—time spent on firm activities—versus rewarding consumer monetary efforts (RME)—money spent on products—in loyalty programs. Across six studies, the research finds that consumers tend to undervalue their time investment compared to money, leading to lower redemption rates for RTE rewards, which are perceived as easily earned windfalls. When consumers redeem RTE rewards, they are more likely to purchase novel products and exhibit higher repurchase rates due to increased gratitude. However, reminding consumers of the opportunity costs of their time investments increases RTE redemption rates to levels comparable with RME. These findings suggest that firms can enhance loyalty programs by incorporating unexpected, customized rewards for consumer time, while also considering strategies to highlight the value of consumers' temporal efforts.