Are loyalty program tiers overly confusing?
According to a recent study by COLLOQUY, instead of fostering loyalty, the traditional three-tier loyalty structure is creating confusion, particularly with lower-tier members.
The report, Fears for Tiers: 2014 COLLOQUY Study on Membership Status In Loyalty Programs, was based on a survey of 3,077 U.S. and Canadian consumers.
Included in the findings are that almost one-third of consumers do not know which tier they belong to in the loyalty program they use most. Of those who do, 42 percent never make it out of the lowest tier.
Moreover, 80 percent of those members in the bottom tiers are discouraged by the requirements needed to achieve top-tier status. One-third of lower-tier members do not think they are properly acknowledged, even though they participate in their programs often. Overall, only half of respondents said they increased spending or changed purchasing behavior to achieve a higher tier status.
"The traditional tiered rewards system is an outdated solution to the ongoing challenge of maintaining customer engagement," the report states.
Among the recommendations:
- Clear the clutter: Benefits need to be "simple and clear cut." Successful loyalty operators focus on a "few memorable benefits at each tier level," such as complimentary upgrades for lower- and mid-tier members or access to exclusive events such as fashion shows and celebrity chef dinners for top-tier members. Lower-cost benefits across tiers can also "have value and impact."
- Stop changing lanes: Part of the problem around engagement is that tier structures keep getting tweaked, working against the member’s motivation to pursue a higher tier.
- Continued education: Many programs are only explained in the sign-up stage to encourage short-term sales.
- Recognize motivations within tiers: Tiers that group customers based their transactional value are "too broad" and "not sufficiently aspirational or attainable for customers." An internal segment strategy can find other motivators to support an organization’s tier structure.
- Segment out the middle: Successful loyalty programs are "setting up smaller, incremental goals between tier thresholds and then rewarding members for completing them. Today’s technology easily enables this type of micro-segmentation."
Do you agree that tiered loyalty program have become confusing and less motivating? What solutions do you see to make them more effective?