Marketing and The Secret of Intrinsic Rewards

If we’ve learned anything in the last several years, it’s that the old marketing model is broken. We’ve witnessed the collapse of our advertising industrial complex, and we’ve watched the balance of marketing power shift from corporations and campaigns to consumers and content.

But despite the upheaval, there is hope for beleaguered and bewildered brands. In the aftermath of the social-local-mobile revolution, we’re seeing the dawn of a strange, new marketing partner—the social shopper. She has adapted to the alien economic landscape and emerged with new values, new behaviors, new tools, and, most importantly, new social systems. This segment, in all of her forms (consumer, buyer, user, loyal customer), is telling business she’s through with top-down marketing relationships. Her new world order is bottom up, inside out and sideways. And the marketer is no longer master of mass consumption.

As a result of this seismic shift in influence, marketing professionals are just now learning what management scholars have known about motivation for decades—that people respond more favorably to intrinsic rewards than extrinsic rewards. For many brands, however, that kind of talk is heresy—against nature, against culture, against history. Perhaps, then, it’s time to take a serious look at a classic theory of human motivation that many business schools teach, but few businesses practice.

Nearly 40 years ago, Douglas McGregor’s The Human Side of Enterprise introduced business to two different theories on worker motivation. The first, Theory X, assumes people inherently dislike work and try to avoid it when possible. The other, Theory Y, asserts people can, under the right conditions, enjoy work just as they enjoy play.

The main difference between these positions comes down to the satisfaction of personal needs. Think Maslow’s hierarchy. Under X, we work to satisfy lower needs (food, shelter, etc.) and we use leisure time to fulfill our higher needs (esteem and self-actualization). Y, on the other hand, suggests that work can address higher needs by allowing us to express our natural creativity and ingenuity.

When applied to management, these theories translate into two divergent styles. Theory X managers drive productivity through command-and-control environments with traditional carrot-and-stick incentives, while Theory Y managers stimulate performance through decentralized control, delegated responsibility and accountability. According to McGregor, the latter ultimately leads to greater satisfaction and productivity. After all, Theory X incentives have limited utility in a modern society where lower needs are easily satisfied.

In his book, Drive, author Daniel Pink updates McGregor’s ideas by introducing Theory I. Similar to Theory Y, this theory emphasizes the power of intrinsic motivation. Pink contends that the best motivators for today’s workforce are autonomy, mastery and purpose—not bonuses, benefits and penalties.

So how do McGregor and Pink’s theories connect with marketing and, specifically, shoppers? Whether you’re talking about employees in the workplace or shoppers in the marketplace, it all boils down to people exchanging value. And those exchanges require motivation.

Given this, I propose that marketers typically adopt one of two attitudes toward shopper motivation. Theory X brands see shoppers as inherently lazy creatures who respond best to extrinsic rewards, such as discounts, deals and promotions. Meanwhile, Theory I brands view shoppers as creative, social beings who respond best to intrinsic rewards, such as participative experiences, a sense of community and social responsibility.

Leading the charge in today’s Theory I marketing movement are brands like Huckberry, Threadless and Warby Parker. These companies have learned how to activate customers through meaningful, intrinsic rewards.

Huckberry engages shoppers by endeavoring “to be the most interesting email in your inbox,” and they pull this off through a strategy of curated products and original, lifestyle-forward content. Threadless goes a step further, giving customers the keys to its T-shirt shop via crowdsourced design and an online experience that emphasizes community over commerce. Lastly, eyewear company Warby Parker turns purchases into participation and involves customers in a common cause with its simple “buy a pair, give a pair” program.

Price promotion certainly plays a role in modern marketing, especially when it comes to attracting new shoppers to your brand. But extrinsic rewards stimulate only temporary lift, not sustainable lifetime customer value. Use Theory X-style incentives in combination with Theory I-style programs, however, and you’ll surprise, delight and, most importantly, motivate the social shopper.

To determine your brand’s marketing style, take this quick test:

  • True or False: Our brand often solicits customer feedback and responds quickly to customer requests.
  • True or False: Our brand’s retail experiences invite exploration, discovery and play.
  • True or False: Our brand makes every effort to connect with shoppers via social media.
  • True or False: Our brand partners with local or national causes that are important to our customers.
  • True or False: Our brand gives customers a sense of community and shared purpose.
  • True or False: Our brand inspires customers to become experts, connoisseurs or aficionados.

If you answered “True,” to all of the above, then congratulations! You’re a Theory I brand. Your approach will serve you well in the new age of shopper motivation.