A while back, I was brainstorming ways to build an effective incentive model for digital products. We encounter these models daily—whether it’s a referral bonus from a mobile app, a digital medal for maintaining a streak, or a reward for engaging with a platform. These incentives are designed to keep us hooked. But what makes them work?

One of the best books I’ve read on this topic is Actionable Gamification by Yu-Kai Chou. It dives deep into how gamification goes beyond just badges and leaderboards, tapping into core human motivations. While the book provides great insights into retention strategies, I found myself thinking beyond digital rewards—specifically about how incentives shape human behavior at a fundamental level.

Historical Context

I found a historical piece from 1787:

The British government hired sea captains to transport convicted felons to Australia. The conditions on these ships were horrific—about one-third of the prisoners didn’t survive the journey due to starvation and disease. Despite public outcry and various regulations requiring better provisions, nothing changed. Captains had no real reason to improve conditions.

Then, an economist suggested a simple tweak: Instead of paying captains per voyage, the government would pay them for each prisoner who arrived in Australia alive. The results were staggering—death rates dropped to nearly zero. The incentive structure shifted, and with it, the captains’ behavior.

This principle applies everywhere. Uber drivers get paid only when a ride is completed, not at the start. Freelancers often earn performance-based bonuses rather than upfront payouts. But what happens when money isn’t involved? Do digital rewards—like streaks, leaderboards, or community status—drive behavior in the same way? If not, what’s different?

That’s what I’ve been pondering. If incentives drive human action so effectively, how can we leverage them beyond financial rewards? How do non-monetary incentives compare in shaping behavior? And what does this mean for the future of digital product design?

Beyond Monetary Rewards

One answer lies in status and social recognition. Non-monetary incentives work when they tap into intrinsic motivators—things like mastery, autonomy, or a sense of belonging. Platforms like Duolingo, for example, keep users engaged not just through streaks but also by ranking them in weekly leaderboards. People push themselves harder when they know their progress is visible to others.

Similarly, open-source communities thrive on non-monetary incentives. Developers contribute code to projects like Linux or React not for immediate financial gain but for reputation, learning, and the satisfaction of building something meaningful. LinkedIn endorsements, Twitter blue checkmarks (before they were monetized), and GitHub contributions all serve as powerful motivators.

Status, exclusivity, and recognition—when applied effectively—can be just as powerful in driving engagement and long-term loyalty.

For further study on how incentives work on humans, outside products, refer to this interesting case study by Harvard Business Review on How powerful people react more unethically to incentives.