[ Music ] ^M00:00:04 >> Ah-ha! Cookies! >> Teri Gault has one rule when she shops. >> I just can't stand to pay full price and I won't. >> She describes herself as the queen of cheap. She took us along to Ralph's Supermarket. >> Nice to see you again. >> Where she saved a bundle. >> So it was $49. >> Yeah, it's $49.60 and it's now $11.61 is your total today. >> Yay! >> Then she hits Staples. >> Out of 50? >> Yeah. >> That's out of 50 cents. She paid 44 cents for $28 worth of office supplies. >> Thank you. >> And who says there's no such thing... >> Do you have any hot peppers? >> ...As a free lunch? >> Have a great day. >> At Toys R Us, she got a whole bike for free. ^M00:00:52 How did she do it? As the founder of an Internet shopping site called The Grocery Game, she knows her way around coupons. >> I want to give you my Club Card. >> Of course. >> But the real bang for the buck came from joining customer loyalty and reward programs which nowadays seem to be everywhere. >> I think that we've been programmed to expect loyalty or reward of some sort because it's a huge marketing trend right now. Everybody's doing it. And if you're not doing it, you're probably not up to speed. ^M00:01:22 >> So holiday shoppers now expect not only to give, but to receive something in return. Three quarters of us have joined loyalty programs. Racking up airline miles, getting free shipping, free dog food, clothing discounts, all efforts by businesses to keep customers coming back. >> These are the original stamp books. >> You can trace it all back to programs like Gold Bond Stamps which started in 1938. >> People licked the stamps and put them in here. >> Grocery stores gave out stamps based on how much you spent, then you redeemed the stamps for free stuff. >> I remember wanting ice skates for some reason. And got ice skates from the Gold Bond Stamps, so- >> Marilyn Carlson Nelson is the daughter of the founder of Gold Bond Stamps, Curtis Carlson. Now she's the CEO. And Gold Bond Stamps have turned into the Gold Points Program with 11 million members. The concept hasn't changed. Build up points, get free stuff. >> Sometimes people think that if they offer cash discounts, that that's very powerful. But there's something inspirational about saving for things that you particularly want. >> So do points have more power than cash? More power than discounts? >> We actually believe they do. >> Do you have a Petco card? >> At Petco pet stores, they believe that discounts will keep members of their P.A.L.S. program loyal. But there's something else that brought us here. Because if you really want to understand the psychology of rewards programs, you might want to take a look at rats. >> So all of these reward programs, coupons, incentives, all of these can be traced back to fundamental work that any psych 101 student will know from BF Skinner. >> Behavioral psychologist BF Skinner studied rewards systems by putting pigeons and rats in so-called Skinner boxes. When the animals pulled levers, they got rewards or not. The rat who got food every time he pulled a lever is a lot like the shopper who gets free shipping every time he buys something from Amazon.com or points every time he sits down to eat at TGI Fridays. He goes back again and again, expecting a reward. But take that reward away and eventually the person or the rat changes behavior. Jack Aronson advises companies how to set up loyalty programs. >> What that means is when I say there's no longer free shipping January 1st, everybody who was attracted to your company because of free shipping is going to be alienated. Much the same way when the point systems stop, people don't want to interact with the companies anymore. Because you attracted them because of that offer, not because of who you were or what your company did.