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As popular as customer loyalty programs are, it’s interesting to see that nearly one-third (32%) of U.S. and Canadian consumers can’t identify which tier they belong to in their favorite customer loyalty rewards programs, according to a study released by COLLOQUY.
This startling statistic is among the key finding in Fears for Tiers: 2014 COLLOQUY Study on Membership Status In Loyalty Programs. The study findings are based on a February 2014 survey of 3,077 U.S. and Canadian consumers. COLLOQUY is a leading provider of loyalty marketing publishing, research and education.
According to the study, the familiar gold, silver and bronze tiering system no longer works. The study shows the three-tiered structure is outdated as a way for brands to keep their customers engaged–sometimes creating confusion rather than inspiring loyalty.
COLLOQUY Research Director Jeff Berry, who authored the study, told Loyalty360 that brands attempting to spark consumer engagement simply by updating rewards can lead to confusion about tier levels and can impose so many limitations that upward movement is perceived as unattainable.
“I didn’t expect to see that a third of customers had no sense where they are at all within tiers of loyalty programs and these are active participants,” Berry said. “Another surprise was the extent to which consumers actively change behavior to reach the next tier. There is a significant opportunity to engage those customers and create the right value at the next tier level to move people up.”
What’s more, the study points to the chasm between those able to reach the highest tiers and those trapped in the bottom tier–due to economic status– is widening. Consumers with incomes below $50,000 a year are more than 50% less likely than those with incomes more than $100,000 to make it to the high tier of a program. Astonishingly, 42% never make it out of the low tier.
“Another surprise is the willingness from consumers to buy their way into the next tier,” Berry said. “That option is not widely available, but three-quarters of consumers thought that was acceptable if businesses offered that. That is counter to the fact that people within higher tiers feel better about having earned it. It’s a badge of honor. For consumers to say it’s OK to buy their way into a higher tier was an interesting statistic and creates a unique revenue opportunity for businesses.”
Berry said he believes tiered loyalty programs are excellent ways for companies to spark customer engagement.
“We wanted to understand the consumer perspective on that,” he said. “If consumers move down a tier, there aren’t many strategies around that as far as how to keep them engaged. It’s a broader opportunity for companies to think about downward migration.”
Berry offered some advice for marketers based on the new research:
There needs to be more clarity around how consumers are tracking their tier goals. There needs to be ongoing and clear communication on this to keep customers aware of their tier levels
There is a real opportunity for behavior change in the second to top tier. Focus on understanding consumers in the second tier and target the right people to move them up to the top tier
There is a risk in any tier of assuming everybody is identical. Know who your consumers are and what they are doing. Microsegment within tiers
Here are some key takeaways from the study:
Nearly 70% of survey respondents said it’s fair for customers to purchase a higher tier membership if they want to receive the same benefits as those who earned their status through program participation
Hard benefits, such as monetary or cash rewards, are more likely to motivate women (84%) than men (81%). The positive feeling of reaching a higher tier status is stronger for men (39%) than women (33%)
50% of survey respondents said they have increased their spending or changed other purchasing behavior in order to achieve a higher tier status in a rewards program
33% of low tier members do not think they are properly acknowledged for their participation in a program, even though they participate whenever possible
Non-travel program members are almost twice as likely as those in travel programs to be unsure of their tier level (34% to 16%)
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