When it comes to tier management in loyalty and rewards programs, Cheetah Digital’s Jon Siegal says the whole idea here is — to drive people to do certain behaviors and move up that hierarchy.
“You become the most valued customer, and you’re spending more, doing more with the brand,” says Siegal, the Senior Vice President for Global Loyalty Sales. “I think one of the great features of a tiered program is it’s there for everyone to see and — if you’re a goal-oriented person — you aspire to achieve the highest level that you can.”
Guy Cierzan, Managing Partner at ICF Next, says that traditional tier management, and some of the challenges or opportunities that exist within it, has been about treating your most valuable customers with a little bit more than you might be able to afford your core customers.
“Historically, it’s always been important, and over the years, there have been different structural aspects to how to ensure you properly manage the number of customers that attain tier status,” Cierzan says. “Brands properly manage the expense and the investment they make in what those benefits will be.”
Loyalty360 spoke with several subject matter experts on this subject that is top of mind for brand marketers, and they offer some words of wisdom on how to best integrate tiers into rewards programs.
Tiers Make A Ton Of Sense
David VanWiggeren, CEO of Drop Tank, is a fan of tiers. Beyond focusing reward value on the most profitable customers, he likes tiers because they provide brands with additional opportunities to communicate with customers.
“All that makes sense, but what tiers really do is they provide brands with opportunities to talk to members, authentically and in a meaningful way,” VanWiggeren says. “For example, ‘Only one more visit to hit Gold status,’ is a powerful motivator. It does add complexity, not only for messaging but also in terms of operations – segmentation, running the engine, marketing automation. But it is very worth it. You see material behavioral change due to it.”
He says the only reason he would advise against a tiered loyalty structure in the fuel industry and c-store industry, his area of expertise, is in an initial rollout when brands need to keep messaging simple.
“Not only for your members and potential members when you are rolling out something new, but for your cashiers to understand what this program is all about,” VanWiggeren says. “That’s really the only time we would advise against using tiers.”
Test and Learn About Customers
For brands who don’t have a tiered structure, Siegal says this is a great opportunity to actually test and learn with the brand’s existing members — and do it in an unpublished way. He says having customer data in one place, a brand can look at the groupings and clusters of those customers – their patterns, behaviors, frequency, and spend – and then can start to look at what tactics motivate people to move from one spend pattern to another.
“You can do that without having to go publish something,” Siegal says. “You can do it in a very targeted way by leveraging the same kinds of communications channels, but on a one-to-one or one-to-few basis. Then you have real-world learnings that help a brand understand what’s successful and what’s not.”
Cierzan advises starting first and foremost with the core principle that a brand wants the investment they make — and the value or benefits they can package up into the tier – to align relative to the customer value. That principle holds true even though one of the historical challenges with tiers is, oddly enough, that they are structured based on looking back at customer value.
“It’s almost a lagging indicator in the sense that I achieved tier status because I flew 150,000 miles or I stayed 150 nights in a hotel,” says Cierzan, who adds that doesn’t necessarily mean that’s what a customer is going to do in the next 12 months.
If a brand is constructing a new tier — or if they are trying to reimagine their tier structure completely – Cierzan says they should put a little more of a predictive view into it and give the proper incentives.
“It’s almost looking ahead and saying, ‘okay, what does that future value look like for this customer?’” he says. “And not just customers who have historically been at a threshold you would define appropriate for a tier level, but also those high potential customers that you could stretch up into that tier.”
Avoiding the Risks Associated with Tiers
When it comes to back-end tiers versus front-end tiers, there might be a slight risk to customer-facing tiers and certain members developing negative associations to being bucketed into tiers and levels. But our experts agree, the minimal risk is worth it.
“Loyalty is really a way to be very up-front and communicate offers,” says Kim Welther, Vice President at Baesman. “You have less negative customer connotation with that because it is a recognized tier, it is a recognized benefit, and they know that because they are part of the loyalty program and part of a specific tier, that’s what is going on.”
Siegal says, to the extent there are risks, he thinks it is worth it because there’s no expectation or entitlement if a brand is reaching out to people and saying, “Hey, we have an opportunity for you, or offer for you, based on your relationship with us – if you do these things, here’s the benefit for you.”
“I don’t think everyone else necessarily expects it,” he says. “I don’t think that is a risk; I think you can do it in a discreet way and then take those learnings, and if you want to go publish it and make it permanent, you can.”
Siegal does think it’s maybe riskier creating programs that are overly structured and thinking all customers are going to fit into certain buckets.
“There may not be four buckets that make sense for your business,” he says. “It could be 400; it could be two. Having that flexibility is an advantage, and you should take advantage of it if you can.”
Adding Premium Loyalty as a Higher Threshold
When it comes to adding premium loyalty as a higher threshold tier in an existing tier structure, Cierzan says he always encourages it.
“I say get as creative as you can,” he says. “Part of the construct or challenge is you may often have tiers that look like everybody else’s, and you have to ask yourself if it is compelling. Is it differentiated? Is it doing what you need it to do? Perhaps premium, for example, would be one way to make that more compelling.”
Siegel agrees and says brands need to work hard with their creative teams to rise above the noise to get noticed and stand out.
“Everything doesn’t need to fit into a nice, neat box of ‘here’s my tier and here’s my premium subscription tier,’” he says. “I think it can run alongside, so then maybe it has its own unique set of benefits that make sense for someone paying, and yet there’s still this other tiered program that runs separately.”
Monitor and Make Adjustments
Welther advises brands to keep a constant vigil on how their tier structures are doing and to make necessary adjustments.
“It’s not a set and forget it; we always need to be watching it,” she says. “When we launch, we do our best job at guessing what the customer behavior is going to be, but that can change. I think that’s the one thing – always monitor, always check, always watch that the tiers are doing what we expected them to do and make sure they are obtainable.”
Cierzan acknowledges that it is not easy — but it is important — to try and figure out how a brand should appropriately set the tiers so they are not just rewarding and giving benefits to the customers they already have at that level.
“Brands should be drawing up and migrating up customers that see it as a benefit,” Cierzan says. “And because they recognize that benefit, they are giving you more share, more frequency, more spend. It’s important to try to stretch and drive that incrementality.”
Thank you to our expert panel:
Kim Welther is Vice President at Baesman. To learn more, visit baesman.com.
Jon Siegal is SVP for Global Loyalty Sales at Cheetah Digital. Explore cheetahdigital.com.
David VanWiggeren is CEO at Drop Tank. Visit drop-tank.com
Guy Cierzan is Managing Partner at ICF Next. Learn more at icf.com/next.