Tariffs, Tarts, and Tracker Funds: Finding the Flow in Loyalty

Ms Chan

Hey everyone! Welcome back to Loyalty Unlocked. As always, I've got Mark Sage here with me and today, we're diving into why loyalty programmes need just the right mix of challenge and simplicity... It sounds like a juggling act, but stick with us, it’s worth it. Mark, do you remember the story about the UK bank with the complicated investment fund?

Mark Sage

Yeah, I do. They had this fund which had a guaranteed, high-yield return - so you'd assume it would be easy to sell, right? But the rules to access it were, well, a labyrinth. When I asked them why not just keep it simple, the banker told me, “If it’s too simple, customers don’t buy it. They need to feel smart.” Honestly, that floored me.

Ms Chan

It’s fascinating, right? I think a lot of us, myself included, would rather something be straightforward. But it’s almost like people want to feel like they’re solving a puzzle, not just being handed something.

Mark Sage

Yeah, exactly. For some, a simple tracker fund feels too easy. They want to be challenged, and not just take the “obvious” path. And it’s not always about risk appetite—it’s more about engagement appetite.

Mark Sage

It reminds me a little of how my dad used to manage me when I was younger! Like any kid, I always wanted something and if he'd just bought it for me there'd have been no challenge and I ultimately wouldn't have appreciated it. So he never did - he always said, if you pay half, I'll pay half - he was forcing me to save my pocket money and to put in a little effort. I distinctly remember a Coke-can-shaped branded radio I wanted...

Ms Chan

Wait, a radio shaped like a Coke can? That’s so retro it probably belongs in a museum!

Mark Sage

Yeah, this was well before streaming or TikTok—back when you actually had to tune into things instead of scroll past them. But thanks for the reminder!

Mark Sage

So... that Coke can radio - I did save for it and I did unlock my dad's half towards it... given I still remember it today, I'm guessing it worked well as a reward.

Ms Chan

So you're saying people need to feel like they've put in a little effort to appreciate the reward?

Mark Sage

Exactly - it's a balance. If it's too hard, people just give up. If it’s too easy, they check out mentally. The trick is pitching it right in the middle, just like...uh, what’s the Goldilocks thing? Not too hot, not too cold?

Ms Chan

Goldilocks zone, yeah! And that’s where behavioural psychology comes in. Like we talked about in one of our early episodes, Skinner showed us how to use rewards to get people engaged—but he didn’t really say how much challenge you needed. And then there’s Csikszentmihalyi... Wait, Mark, did I say his name right?

Mark Sage

Close enough! Csikszentmihalyi, yeah. He’s the “flow” guy. His work is all about how you keep people in that sweet spot—challenge high enough to matter, but not so high that it causes anxiety, or so low that it’s just plain old boring. Game designers use this all the time, calibrating just enough challenge to keep us invested. That’s flow—where effort and reward are in, well, harmony.

Ms Chan

Totally! And in loyalty design, holding that line is everything. It's not about putting unnecessary hurdles in front of people or making it so easy it loses all meaning. It’s all about evaluating every change, every tweak, through this “flow” lens. If you go too far in either direction, you just lose people.

Mark Sage

And that might mean saying no when someone asks to make things simpler just for the sake of it, or pushing back when there’s a temptation to overcomplicate things to look smart. It’s always about: what keeps people engaged and moving forward?

Ms Chan

So, this brings us to that “value exchange”—which is just a fancy way of saying you get out what you put in. Loyalty is all about give and take: you do what the brand wants, and, eventually, you get something back. But it’s all future-focused—the next visit, the next reward, right?

Mark Sage

Exactly. But there’s a real danger if you mess up the balance. If it’s too tough to earn or redeem, people drift away. Make it too easy, and it’s just another discount—you lose any sense of achievement. And that’s counterintuitive, isn’t it? You’d think making rewards easier would hook people even more, but—

Ms Chan

I totally used to think that! But, no, it’s not how people work. There’s this study by Drèze and Nunes—shoutout to the researchers!—where they showed that when rewards took a moderate amount of effort, people kept coming back, like 57% repurchase. But when rewards were super easy, only 11% came back. If it’s too easy, people just tune out completely.

Mark Sage

Yeah—the lesson is, too easy is actually worse than too hard. You want just enough stretch—so people are striving, but still winning. It’s like when you're playing a game, right? If you’re always winning, it gets boring. If you’re always losing, you rage-quit. But when you’re just on the edge, working for it, that’s when it feels best.

Ms Chan

That sounds a lot like Trumps tariff strategy!

Mark Sage

Well, he definitely seems to have a little of the flow concept going on there - trying to keep countries in that Goldilocks zone!

Ms Chan

I think that's a whole different podcast topic!

Ms Chan

Back to loyalty though - that “earn and burn” balance you always talk about, Mark—rewarding people for the journey, not just the end goal. Like, it can’t be just about the outcome. You need those little wins along the way so people stay engaged. Otherwise, they’re gonna drop off before the finish line.

Mark Sage

And it’s not just academic. We saw this in the real world—I mean, with coalition programmes, with yuu Rewards, everywhere. If the incentives are set wrong—too easy or too hard—people’s behaviour just collapses. You have to experiment and tweak to find that exact point where effort feels meaningful, but not impossible.

Ms Chan

Let’s talk about how we actually keep people in flow over time—because it’s not just about setting up the right threshold and walking away. Like, Skinner taught us that variable rewards are super powerful at keeping behaviour going. Everyone loves a little surprise, right?

Mark Sage

Absolutely. The research on this is fascinating. Take that study where a running club gave fixed points to half its members and variable points to the other half. The variable group ran further—even though they earned fewer points overall! It’s because there’s something really satisfying about revealing a reward straight after the effort, not knowing which outcome you’ll get, then resolving that uncertainty. It’s like a mini celebration every time.

Ms Chan

Yeah - I can see that in the stock market too every time those tariff's change! Thats definitely a variable reward.

Mark Sage

Back to Trumps tariffs I see! Well, you're right, there's an interesting parallel there! It's funny how despite countries not wanting them at all, when they drop - seemingly randomly - that's celebrated as a small win.

Ms Chan

I love that. And it’s soooo true! Even when the reward’s technically smaller, the unpredictability makes it feel like a win.

Ms Chan

In that running study though, they showed that timing matters too, right? The reward has to come immediately after the action for that boost to kick in.

Mark Sage

It does. Delayed feedback and you lose the magic. And in loyalty, it keeps people progressing. That’s why programmes with instant progress bars or surprise bonuses do so well at keeping you in the game. But flow isn’t a one-and-done thing. As people get better or more familiar with the programme, what felt challenging at first becomes routine. So, if you don’t keep evolving the challenge—through tougher goals, new features, fresh rewards—people slip out of flow into boredom.

Ms Chan

And that’s exactly what happened with yuu Rewards, right? At first, it was super simple—just 1 point per $1, keep it easy for new digital users in Hong Kong. But once people got the hang of it, you guys started layering in things like promotions, challenges, even those famous KFC egg tart rewards...

Mark Sage

Oh yeah, the egg tarts were legendary! Seriously, they pulled people in. We also required app usage instead of just phone numbers at checkout. That little bit of extra effort nudged people into the flow channel. And as members got savvier, we raised the bar—added more challenges, gamified some elements, even brought in eCommerce. Always just enough stretch to keep things interesting, but never so much that it felt out of reach.

Ms Chan

I feel like that’s a lesson for every loyalty programme out there—simplicity at the start, but you have to keep evolving as your members do. Too easy or too hard, you risk breaking the flow. You gotta test, refine, and sometimes say no to things that might sound easier, but aren’t actually better in the long run.

Mark Sage

That’s exactly it. Flow is dynamic. Holding the line can mean resisting pressure to make things quicker or cheaper if it comes at the cost of engagement. You’re not just selling discounts; you’re helping people feel smart, capable, and recognised. And that’s what really sustains loyalty for the long term.

Ms Chan

So whether it’s tariffs, tarts, or tracker funds, the principle’s the same—people stay engaged when there’s just enough uncertainty to make the next move feel worth it.

Mark Sage

That’s the art of flow — if not the art of the deal! Even global economies run on that rhythm: too much pressure and people resist, too little and nothing moves. Loyalty’s just the micro-version of that same human instinct.

Ms Chan

Beautifully put. And somehow, we’ve gone from egg tarts to economics — not bad for one episode!

Ms Chan

Alright, I think that’s the perfect place to wrap for today. We’ve covered why challenge matters, how to balance effort and reward, and how to keep customers — and maybe even countries — in flow.

Ms Chan

Thanks for talking it through, Mark—always a pleasure.

Mark Sage

Thank you! I always enjoy these deep dives. Can’t wait for our next episode — so much more to unlock in loyalty. Have a great week, everyone.

Ms Chan

You too, Mark. And thanks for listening, everyone. Don’t forget to subscribe wherever you get your podcasts — and if you want more, check out the Loyalty Unlocked YouTube channel for Bitesize Loyalty shorts. Go on, you know you want it!

Ms Chan

See you next time on Loyalty Unlocked!