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Psyched to Succeed: How Customer Loyalty Drives Profit

CTM Design Services Ltd: The "Car Wash Study" provides curious insights into consumer behaviour.

Loyalty Image for Carwacs Content

The "Car Wash Study" provides curious insights into consumer behaviour.

As a business owner, you’d love to get inside the heads of your customers in order to see what motivates them.

That’s exactly what consumer research is all about. Researchers devise psychological studies to test how consumers respond to certain offers and marketing approaches. Often the results are surprising... and even counterintuitive.

Would you believe one of the most fascinating marketing studies of all time actually took place at a carwash?

The now famous study by Nunes & Dreze compared two versions of a "loyalty card" where customers could received a free car wash by collecting eight stamps (similar to a coffee card). The goal was to see which was more effective.

The first card had eight blank boxes, which were stamped following each purchase. Once all eight were filled, the customer could claim his or her reward.

The second version of the card required the customer to make 10 purchases before receiving the prize. However, the first two boxes were pre-stamped – leaving eight boxes to fill.

Can you guess which was more effective?

Only 19% of those who received the first card returned enough times to redeem it for a free car wash. Amazingly, 34% of those with the second card came back to claim their free wash.

By giving customers a perceived head start, they were able to nearly double the redemption rate. The study showed that when it comes to loyalty, it pays to make people feel like they’re special – and you’re looking out for them.

If you have this type of program in place, you could pre-stamp a bunch of cards in advance. Or, to make it even more personal for the customer, you could add the free stamps right in front of their eyes.

The goal of these types of giveaway programs is to increase the frequency of purchases as a way of building (and rewarding) loyalty.

You could argue that perhaps it is best that someone DOES NOT redeem a freebie (thus saving you money!!!) But then, you’d be missing the point. By having your customer return eight times, you have made more than enough in repeat sales to justify the free giveaway – which is merely a hook to keep customers coming back again and again.

Do you have any sales strategies that have proven successful for you (and you’d be willing to share)? We’d love to publish them and recognize your marketing savvy.

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