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Why Tiers No Longer Rank: New COLLOQUY Research

5-5-2014 9-43-58 AMFor a lot of loyalty program members today, getting to gold is a treasure hunt, and only the program operator holds the map.

Almost one-third of consumers do not know which tier they belong to in the loyalty program they use most, according to a recent study by COLLOQUY. Of those who do, 42 percent never make it out of the lowest tier.

These are among the findings of the April report Fears for Tiers: 2014 COLLOQUY Study on Membership Status In Loyalty Programs. Based on a February survey of 3,077 U.S. and Canadian consumers, the study finds that the traditional three-tier loyalty structure is actually creating confusion among some members, not fostering loyalty.

For example, 80 percent of those members in the bottom tiers are discouraged by the requirements needed to achieve top-tier status; it just seems too difficult. One-third of lower-tier members do not think they are properly acknowledged, even though they participate in their programs often.

“The traditional tiered rewards system is an outdated solution to the ongoing challenge of maintaining customer engagement,” the report states.

Among the other findings:

• 50 percent of respondents said they increased spending or changed purchasing behavior to achieve a higher tier status.

• Non-travel program members are more than twice as likely as those in travel programs to be unsure of their tier level (34 percent to 16 percent).

• The positive feeling associated with reaching a higher tier status is stronger among men (39 percent) than women (33 percent).

Why the lack of engagement? In part it’s because loyalty operators, in their effort to be relevant, keep tweaking their tier structures. These changes threaten the member’s motivation to pursue a higher tier, and results in less participation. Sure, half of those surveyed said they spent more to reach a higher tier, but half of them have not done anything. Of the 50 percent who did, the most likely method was purchasing products or services that offered “bonus” points or miles (22 percent).

Fortunately, loyalty marketers do have a map to their own brass ring – the highly engaged consumer – and it follows a pretty straightforward path. According to the report:

1. Keep the benefits simple and clear cut;

2. Stop changing lanes – choose an earnings structure and stick with it;

3. Educate members with easy-to-understand guidelines of program requirements and what they need to do to reach the next tier;

4. Recognize consumers based on what motivates them, not on transaction values; and

5. Set short goals within tiers, to step members through to the next threshold.

All of this adds up to one key takeaway: share the journey. If we want consumers to get to that gold or platinum level, we should be guiding them. Otherwise, everyone is lost.

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