Assessing the Merits of Stratification: Pondering over a Graduated Loyalty Scheme
In the realm of loyalty technology, Zsuzsa Kecsmar, as the Chief Strategy Officer of Antavo AI Loyalty Cloud, knows a thing or two about tier systems. While they may seem simple at first glance, these systems are actually complex and have a significant impact on how customers engage with a brand.
In this article, we're diving deep into the benefits of tier-based loyalty programs and the potential pitfalls that could arise from implementing them.
The Magic of Tiered Loyalty Programs
Eternal Motivation
Tiers can be highly motivating for loyal customers. The promise of moving up the ranks, unlocking exclusive benefits, and maintaining hard-earned status is a powerful incentive. Take, for instance, frequent flyers who are constantly reminded of their next level-up and the perks that come with it - priority check-in, better seats, or lounge access. The desire to maintain these privileges, and the possibility of securing even more, makes them more likely to book additional trips or spend a little extra at the airport.
Efficient Segmentation
Tier systems enable brands to categorize their customer base more efficiently, allowing for tailored communication, targeted offers, and customized experiences. Priority should be given to high-spending customers (sometimes referred to as "whales" in the business world), ensuring they feel valued with personalized rewards and tier benefits. But remember, newcomers and ambassadors should also receive appreciation and rewards.
Standing Out
Creating a realistic yet inspiring tier system can help a business stand out from competitors. By offering exclusive rewards and experiences that cater to the preferences of your audience, you can differentiate yourself from other loyalty programs. Partner offers can also play a significant role in helping brands achieve this. Luxury stores and hotels often excel in this area, providing experiences such as sightseeing tours, brand events, and workout classes to their highest-tier members.
The Dark Side of Tiered Programs
Complexity and Confusion
Despite the advantages, introducing tier systems can sometimes create complexity and confusion among customers. Brands must work diligently to ensure the rewards and requirements for each tier are clear, and the progression to higher tiers is gradual and achievable. Customers should be kept informed about the rules of the program.
Exclusivity Backlash
Tiers that focus solely on high-spending customers may be perceived as excluding others, potentially leading to churn or reduced engagement. Avoid putting all your eggs in one basket and make sure every customer, regardless of spending, feels valued.
Cost and Resource Management
The implementation of tier programs requires careful consideration of financial requirements, human resources, and internal and partner rewards. The costs associated with running a tiered program need to be weighed against the long-term benefits, and alternative solutions, such as a freemium model, may be worth considering.
In conclusion, tier-based loyalty programs can provide significant value to a business if implemented strategically. Research, collaboration, and careful budgeting can help businesses create unique, engaging programs for their customers while avoiding common pitfalls.
Zsuzsa Kecsmar, as the strategy expert in the field of loyalty technology, might suggest incorporating tiered loyalty programs into a company's customer engagement strategy, given their motivational power and potential for efficient segmentation. However, she might also caution against the complexity and confusion they can bring, as well as the possibility of an exclusivity backlash if not managed properly.
