Whether you just closed your rings on your Apple Watch, got a notification that someone liked your tweet, or went to buy yourself a hot chocolate because you worked hard all day on a spreadsheet model, we all rely on rewards (big and small) to motivate us to engage in technology products.
Personally, my favorite reward is a lavish shower of digital confetti!
A startup called Cardig rewards me with when I finish ordering a personalized gift card or greeting card (disclosure: I own stock in Cardly).
The technical term for these is “variable rewards” and they are useful for any product manager or growth marketer looking to drive positive behavior from their users.
But what 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 compensation is based on the idea that people are more likely to be motivated by unpredictable rewards than by predictable rewards. This is because the uncertainty of rewards creates a sense of anticipation and excitement that drives behavior.
For example, think about what a poker machine does (for non-Australian readers, a poker machine is what you might call a ‘slot machine’, as seen in Las Vegas).
The excitement you may have felt before playing a poker machine comes from the uncertainty of whether or not you will win a prize.
If the poker machine screen said, “You’ll definitely lose your money if you hit the button now,” you’d never press it.
If it said “you win $5 for sure if you press the button now” you would press it once but then you would get the other message and you would just look for another machine (or in my case wandering over to the all-you-can-eat buffet, but that’s a whole other addiction for another day). A slot machine can’t make a lot of money for mob bosses without the uncertainty of variable pay.
The same goes for user behavior at your startup: if you want to encourage certain behavior, 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 retains customers. They can even keep me away from the shrimp cocktails.
You are more likely to climb the mountain if the path to the first ridge is easy
Shaping is one of the most important techniques that can be used to apply variable compensation. The goal is to gradually guide user behavior 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 achievement and helps keep users motivated and engaged.
Keep this in mind when designing your user onboarding process: do you expect a new user to complete their onboarding all in one visit and do you expect them to fill out the required information in the order you want it stored in your user database?
Both expectations ignore user psychology – instead, try to redesign your flow so that in the first step you only capture the minimum necessary to be able to ask them to return to complete the next step later, if they want to. That can’t be anything more difficult than their first name and an email address.
Then rearrange the remaining steps in your onboarding process so that information that takes longer to create and enter (for example, a user biography or job posting text) and information that may not be readily available (such as a copy of ID with photo or the contact details of an emergency contact) comes at the end of the process. The user is more likely to complete the more difficult tasks than to waste the time spent reaching this point.
If a new user is unlikely to complete all the steps in your onboarding process in one session, make sure to let them know at the beginning of the process that you save their information and save it if they want to come back later, otherwise they may decide to delay starting the process and you will have to purchase them all over again. And if you have reason to believe they forgot to complete their partial onboarding, don’t forget to have a way to remind them to return.
Delighters are another important aspect of the variable pay principle. These are unexpected rewards designed to surprise and delight 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 buy a greeting card. The key to using delighters effectively is making sure they are surprising and unexpected – this creates a sense of excitement and anticipation that drives behavior.
Periodic events are another way to use the variable compensation principle. This could include using a series of events, such as sales, promotions or contests, to drive user behavior, but it could also include taking the time to thank the user for being a customer on the first anniversary of their onboarding, or wish him a happy birthday, or show them in a leaderboard of most engaged users. The key to using periodic events effectively is making sure they are spaced out appropriately so they aren’t annoying and the rewards are valuable and meaningful.
If I hear a startup founder complain that users sign up but don’t participate and never come back to the platform, I’ll see if they use period events first. If a startup founder says less than a few percent of users are really engaged enough, I want to know if they’re using delighters. If too few new users complete their onboarding, the most likely culprit is a lack of styling. And if the hoped-for social-sharing and user-get-user mechanisms don’t work, I’ll check to see if they deliver truly unpredictable rewards. These are not always the cause, but can often be part of the solution.
Using variable rewards can have a significant impact on the user experience and drive the growth of your business. But when you’re debating what goes in the MVP or first version of your product and what doesn’t, variable rewards are a set of features that often get left out. You might want to reconsider that if you’re counting on your first product to keep your users engaged, motivated, and coming back for more.