Self-Determination Theory at the Till
A loyalty scheme can leave customers feeling capable, free and connected, or it can leave them feeling managed, and decades of motivation research suggest they notice which.
Answer to the question
Do loyalty rewards make customers less loyal?
They can, when customers feel steered. Self-determination theory says people stay with what leaves them feeling capable, free to choose and connected. In Utpal Dholakia's 2006 field studies, customers who joined a firm by choice showed more loyal behaviour, but a reminder coupon they saw as controlling had negative effects on them.
Key takeaways
- Self-determination theory, from Edward Deci and Richard Ryan, holds that people have three innate needs, competence, autonomy and relatedness, which Ryan and Deci set out in a 2000 paper.
- In Utpal Dholakia's 2006 field studies, a reminder coupon that customers saw as controlling had negative effects on customers who had joined by their own choice, while automatic enrolment in a rewards programme had positive ones.
- A 1999 meta-analysis of 128 experiments by Deci, Koestner and Ryan found expected tangible rewards reduced free-choice motivation, while Cameron and Pierce's 1994 analysis of 96 experiments found the harm small and limited to rewards given merely for doing a task.
Self-determination theory is one of the sturdier ideas a marketer can borrow from psychology, provided the firm is prepared to hand over some control. The theory says people keep doing what leaves them feeling capable, free to choose and connected to others. Customers attach themselves to a product for those reasons, and they drift once a firm starts steering them. Prizes work when they tell people something about their own progress, and they fail when people experience them as pressure.
Measure competence by the progress customers make, not by prizes
Edward Deci and Richard Ryan, at the University of Rochester, built self-determination theory on one distinction: doing something because the activity satisfies in itself, and doing it for a reward or under pressure. Ryan and Deci later named three innate psychological needs underneath that distinction, competence, autonomy and relatedness. When those needs are met, they argued, people show more self-motivation and better mental health. When they are thwarted, motivation and wellbeing fall.
Competence is the sense of getting better at something, and it is the cheapest of the three for a firm to supply, because feedback costs almost nothing to send. Take a language app that tells a learner that she now understands twice as many words as she did last month. The message reports progress instead of dangling a prize, and the theory predicts it will make her keener to open the app tomorrow.
Nir Eyal's Hooked reaches for the theory at this point. Its chapter on variable reward grounds what it calls rewards of the self in Deci and Ryan's work, saying that people "desire, among other things, to gain a sense of competency."
The experimental record for feedback is strong. In a 1999 meta-analysis of 128 experiments, Edward Deci, Richard Koestner and Richard Ryan found that positive feedback increased both the time people chose to spend on an activity and how interesting they said it was.
| Need | Marketing example | Evidence |
|---|---|---|
| Competence | Badges, progress graphs, useful feedback | Sailer and colleagues; Deci, Koestner and Ryan |
| Autonomy | Joining by choice, no pushy reminders | Dholakia |
| Relatedness | Teammates, shared stories, a community | Sailer and colleagues |
The theory grew up in classrooms, clinics and workplaces, not shops, so every marketing use is an application. A 2019 review in the European Management Journal covered two decades of empirical marketing studies and identified several clusters where it looked promising. Evidence from interventions is more measured. A 2021 meta-analysis of 73 health interventions designed around self-determination theory found gains in motivation and behaviour, and its authors called the effects modest and varied.
Test whether a badge informs the customer or merely pays
Game elements are the commercial shortcut to competence, and the two best-known experiments on them disagree. In a randomised online experiment published in 2017, Michael Sailer and colleagues at the University of Munich found that badges, leaderboards and performance graphs raised people's sense of competence and their sense that the task was meaningful.
Elisa Mekler and colleagues at the University of Basel ran a separate test, also published in 2017. They gave 273 participants an image-tagging task with points, levels, a leaderboard or none of these. The game elements did not change felt competence or intrinsic motivation, yet levels and the leaderboard in particular produced more tags. Mekler's team concluded that in their study the elements worked as extrinsic incentives, effective only for the quantity of work.
A likely reason for the split lies in what a badge tells the person who earns it. A badge that marks a real skill reports progress, which is what self-determination theory means by competence. A badge that marks a login is a prize for turning up, and a customer can collect a drawer full of them without getting better at anything. Mekler's points and levels rewarded volume, so volume is what they bought.
For a firm, the practical difference sits in the design brief. A fitness app that awards a badge for a first five-kilometre run is telling the user something true about her body. One that awards a badge for opening the app seven days in a row is telling her only that she opened it, and self-determination theory gives no reason to expect that kind of badge to deepen her interest in running.
Start communities around recognition from peers, not cash bounties
Relatedness is the need to feel connected to other people, and self-determination theory ranks it alongside the other two. In Sailer's experiment, avatars, meaningful stories and teammates raised participants' sense of social relatedness. That supports a habit marketers already have, putting customers next to other customers.
Hooked gives a sharper case on pages 115 to 117. Mahalo, a question-and-answer site launched in 2007, paid users bounties in a currency that could be turned into real money. Quora, launched in 2010, paid nothing and grew. The book's explanation is that "people did not want to use a Q&A site to make money," and that recognition from peers proved a more frequent and salient motivator.
If a running app pairs each new user with a small club of people at her level instead of ranking her against everyone in the country. The club gives her people to answer to on a cold morning. The national ranking gives her a number. The theory favours the club.
Of the three needs, relatedness has the least marketing evidence behind it: a single controlled result on teammates and stories, and a company history told from the outside. A firm building a community feature on the strength of the theory is acting ahead of the evidence, and the cheapest way to settle it is to run the feature for one group of customers and withhold it from another before rolling it out.
Ask what a loyalty reward is actually paying for
The longest argument in this field is whether rewards damage the motivation they are meant to build. The 1999 meta-analysis by Deci, Koestner and Ryan found that rewards given for taking part in a task, completing it or performing at a level all reduced how much people went on doing it freely once the reward stopped. Tangible and expected rewards also reduced it, and tangible rewards tended to do more harm to children than to college students.
Judy Cameron and W. David Pierce, at the University of Alberta, read the experimental record differently. Their 1994 meta-analysis of 96 experiments in the Review of Educational Research concluded that reward does not, overall, decrease intrinsic motivation, that verbal praise increases it, and that the only negative effect, a small one, appears when expected tangible rewards are given merely for doing a task.
Cameron returned to the question with Katherine Banko and Pierce in 2001. That analysis found that rewards for low-interest tasks raised free-choice motivation, and that harm appeared on high-interest tasks when rewards were tangible, expected and only loosely tied to performance. On this account, what matters is less whether a firm pays than what it pays for.
On this account, what matters is less whether a firm pays than what it pays for.
Applied to a loyalty scheme, the two readings sort cases differently. A stamp card for coffee a customer would buy anyway rewards a routine purchase that few people make for its own sake, the low-interest case where Cameron's analysis found that rewards helped. A cash bounty for answers people would have written for pleasure is the high-interest case. Mahalo's bounties paid people for the kind of writing they would otherwise have done for its own sake.
Stop steering the customers who joined your programme by choice
Autonomy is the feeling that a choice was yours. Hooked turns to it on pages 118 to 120, with Quora's Views feature of August 2012, which by the book's account opted users in automatically and showed others which questions and answers they had viewed. Users revolted, and within weeks the company made the feature opt-in. Eyal's verdict is that "the change felt forced and bordered on coercion."
Advertising research finds a similar sensitivity. Five studies published in the Journal of Consumer Research in 2014 found that messages telling consumers outright that a brand expressed who they were lowered purchase likelihood, compared with messages that only referred to that identity, because the blunt version weakened the sense that the choice was the consumer's own. Autonomy is also the hardest need to design for. Sailer's experiment tried to raise perceived decision freedom through game design, and the attempt did not work.
Utpal Dholakia, then at Rice University, ran longitudinal field studies published in the Journal of Marketing Research in 2006. He separated customers who had joined a firm on their own initiative from those the firm had induced to join, and found that the self-determined group showed more of the repeat, relationship behaviour firms want and reported more motivation to buy. Two ordinary marketing actions then split the groups.
He separated customers who had joined a firm on their own initiative from those the firm had induced to join.
Dholakia found that customers who had joined of their own accord responded badly to a reminder coupon they read as controlling and well to automatic enrolment in a rewards programme they read as a sign of their value to the firm, while customers who had been induced to join were less influenced by either.
Common questions
Do loyalty rewards make customers less loyal?
They can, when the reward feels controlling. A 1999 meta-analysis of 128 experiments found that expected, tangible rewards reduced how long people chose to keep doing an activity, while positive feedback increased it. Judy Cameron and W. David Pierce's 1994 meta-analysis of 96 experiments found the harm limited to expected tangible rewards given merely for doing a task.
How is self-determination theory used in marketing?
By making customers feel capable, free and connected. In Utpal Dholakia's 2006 field studies, customers who joined a firm on their own initiative showed more relational behaviour, and a controlling reminder coupon had negative effects on them. A 2017 experiment found that badges, leaderboards and progress graphs raised people's sense of competence.
What are the three needs in self-determination theory?
Competence, autonomy and relatedness. Richard Ryan and Edward Deci set them out as innate psychological needs in a 2000 paper in American Psychologist, building on their 1985 book. When the needs are met, people show more self-motivation and better wellbeing, and when they are thwarted, motivation falls.
Does gamification satisfy psychological needs?
Sometimes. Michael Sailer's 2017 experiment found badges, leaderboards and performance graphs raised felt competence, and teammates and stories raised relatedness. Elisa Mekler's 2017 study of 273 people found points, levels and leaderboards increased output without changing felt competence or intrinsic motivation.
Sources
Deci, E. L., & Ryan, R. M. (1985). Intrinsic Motivation and Self-Determination in Human Behavior. Plenum Press. doi:10.1007/978-1-4899-2271-7. Abstract read: Springer bibliographic record only; the book itself was not read and is cited only for its authorship, date and the intrinsic and extrinsic distinction, which the vault concept note verified on 2026-09-01.
Ryan, R. M., & Deci, E. L. (2000). 'Self-determination theory and the facilitation of intrinsic motivation, social development, and well-being.' American Psychologist, 55(1), 68-78. doi:10.1037/0003-066X.55.1.68. Abstract read: three innate psychological needs, competence, autonomy and relatedness, which when satisfied yield enhanced self-motivation and mental health and when thwarted lead to diminished motivation and well-being.
Deci, E. L., Koestner, R., & Ryan, R. M. (1999). 'A meta-analytic review of experiments examining the effects of extrinsic rewards on intrinsic motivation.' Psychological Bulletin, 125(6), 627-668. doi:10.1037/0033-2909.125.6.627. Abstract read: 128 studies; engagement-, completion- and performance-contingent rewards undermined free-choice intrinsic motivation (d = -0.40, -0.36, -0.28), as did all tangible and all expected rewards; positive feedback enhanced free-choice behaviour (d = 0.33) and self-reported interest (d = 0.31); tangible rewards more detrimental for children than college students.
Cameron, J., & Pierce, W. D. (1994). 'Reinforcement, reward, and intrinsic motivation: a meta-analysis.' Review of Educational Research, 64(3), 363-423. doi:10.3102/00346543064003363. Abstract read: 96 between-groups experiments; overall, reward does not decrease intrinsic motivation; verbal praise increases it; the only negative effect, minimal, appears when expected tangible rewards are given for simply doing a task, measured as time on task after reward removal.
Cameron, J., Banko, K. M., & Pierce, W. D. (2001). 'Pervasive negative effects of rewards on intrinsic motivation: the myth continues.' The Behavior Analyst, 24(1), 1-44. doi:10.1007/BF03392017. Abstract read: rewards for low-interest tasks enhance free-choice intrinsic motivation; on high-interest tasks, negative effects when rewards are tangible, expected and loosely tied to level of performance; performance-linked rewards increase or do not change intrinsic motivation.
Sailer, M., Hense, J. U., Mayr, S. K., & Mandl, H. (2017). 'How gamification motivates: an experimental study of the effects of specific game design elements on psychological need satisfaction.' Computers in Human Behavior, 69, 371-380. doi:10.1016/j.chb.2016.12.033. Abstract read: randomised controlled study in an online simulation; badges, leaderboards and performance graphs raised competence need satisfaction and perceived task meaningfulness; avatars, meaningful stories and teammates raised social relatedness; perceived decision freedom could not be affected as intended. Sample size not read.
Mekler, E. D., Brühlmann, F., Tuch, A. N., & Opwis, K. (2017). 'Towards understanding the effects of individual gamification elements on intrinsic motivation and performance.' Computers in Human Behavior, 71, 525-534. doi:10.1016/j.chb.2015.08.048. Full text read: 2 x 4 online experiment, 273 participants, image annotation task, conditions control, points, levels, leaderboard; game elements did not significantly affect competence or intrinsic motivation; points, and especially levels and leaderboard, produced significantly more tags; the authors conclude the elements functioned as extrinsic incentives effective only for performance quantity.
Dholakia, U. M. (2006). 'How customer self-determination influences relational marketing outcomes: evidence from longitudinal field studies.' Journal of Marketing Research, 43(1), 109-120. doi:10.1509/jmkr.43.1.109. Abstract read: self-determined (versus firm-determined) customers showed more relational behaviours and higher purchase motivation; a stylised reminder coupon, viewed as controlling, had negative effects, and automatic enrolment in a relational rewards programme, viewed as informative of the customer's value to the firm, had positive effects on self-determined customers; firm-determined customers less influenced in both cases.
Bhattacharjee, A., Berger, J., & Menon, G. (2014). 'When identity marketing backfires: consumer agency in identity expression.' Journal of Consumer Research, 41(2), 294-309. doi:10.1086/676125. Abstract read: five studies; messages that explicitly connect a brand to consumer identity reduce perceived agency in identity expression and reduce purchase likelihood compared with messages that merely reference identity.
Gilal, F. G., Zhang, J., Paul, J., & Gilal, N. G. (2019). 'The role of self-determination theory in marketing science: an integrative review and agenda for research.' European Management Journal, 37(1), 29-44. doi:10.1016/j.emj.2018.10.004. Abstract read (RePEc record): reviews empirical studies on the subject over a 20-year period and identifies several clusters of research in which the theory appears more promising for marketing problems.
Ntoumanis, N., Ng, J. Y. Y., Prestwich, A., Quested, E., Hancox, J. E., Thøgersen-Ntoumani, C., Deci, E. L., Ryan, R. M., Lonsdale, C., & Williams, G. C. (2021). 'A meta-analysis of self-determination theory-informed intervention studies in the health domain.' Health Psychology Review, 15(2), 214-244. doi:10.1080/17437199.2020.1718529. Abstract read: 73 studies; small-to-medium changes in most SDT constructs and in health behaviour; the authors conclude effects are modest and heterogeneous.
Eyal, N., with Hoover, R. (2014). Hooked: How to Build Habit-Forming Products. Penguin Business, updated edition 2019. Read in full by this publication, with a reliability audit. p. 111 (rewards of the self anchored in Deci and Ryan); pp. 115-117 (Mahalo and Quora); pp. 118-120 (autonomy, reactance and the Quora Views episode of August 2012). The company stories are retrospective and self-reported.