Understanding the True Definition of Customer Loyalty
Business Solutions In 2014, customer satisfaction, retention and loyalty are vital keys to a business' success.
It’s a deeply held belief in the United States and Canada that all men and women are created equal. The same cannot be said, however, for all customers.
In fact, it’s an open secret that many of the designers of customer rewards programs are disciples of something called the Pareto Principle, also known as the 80-20 rule. Eighty percent of a brand’s business comes from 20 percent of its customers.
That’s why rewards programs have tiers, you know — platinum, gold and silver.
Platinum, gold and silver
Marketers segment the members of their rewards programs based on their actual or potential value and place them in corresponding tiers or have them ‘earn’ their way into tiers. With each tier comesincremental benefits, the top tier being reserved for customers who deliver the highest value.
"Twenty-two percent specifically said they’ve bought products or services that are on promotion to get bonus points or miles. Nearly one out of five said they’ve purchased more frequently to obtain a higher tier status."
Americans and Canadians love their rewards programs, also called loyalty programs, and the vast majority of consumers in both countries appreciate the concept of tiering.
No less than 75 percent of American and Canadian consumers say it’s okay for businesses to give preferential treatment to their best customers.
How do we know that? To understand consumer sentiments about tiers in loyalty programs, LoyaltyOne surveyed in February of this year 3,077 U.S. and Canadian adults who belong to tiered loyalty programs.
Maximizing your rewards
The survey revealed that consumers have a bit of work to do understanding tiers – in order to maximize the rewards they earn. Nearly one out of three respondents said they weren’t sure about identifying the highest tier they had achieved in a rewards program.
Chances are you’ve considered spending more money or taking some other action for the express purpose of achieving a higher status in a program. Rest easy, you’re not alone. One out of two survey respondents admitted they’ve changed their behavior to gain a higher tier or more benefits.
For example, 22 percent specifically said they’ve bought products or services that are on promotion to get bonus points or miles. Nearly one out of five said they’ve purchased more frequently to obtain a higher tier status.
Not surprisingly, consumers in the highest tiers are the most avid players of the loyalty game. They scored higher for the following kind of activity: only purchasing products or services from affiliated businesses to maximize points (23 percent), most likely to change behavior by purchasing more frequently (31 percent), and buying products on bonus (36 percent).
And what about mid-tier program members? They scored highest on upward mobility – tiering-wise, that is. Among retail and travel program members, 61 percent of mid-tier members said they are likely to achieve a higher tier status by this time next year. That compares to just 24 percent of low-tier respondents.
More than money
True road warriors and some other loyalty players harbor a touch of resentment when they find out the person stretched out in a first-class airline seat next to them simply purchased the points or miles needed to achieve that luxury travel experience.
But the road warrior, and those of like mind, would be in a distinct minority. Fully 69 percent 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.
Consumers were even more open-minded when it comes to other demonstrable ways of showing their loyalty, and leveraging those actions to gain access to higher tiers. A resounding 77 percent said higher tiers should be more attainable for people who spend less, if they repost promotions on social media or by recommending products and services.
Investing a little time in understanding loyalty program tiering structures and the associated rewards, benefits and earning mechanisms will dramatically improve your ability to maximize your overall loyalty program experience.