I'm Worth My Weight in Gold

We all know it: your best customers love it when they are made to feel special. New research that demonstrates just how important status tiers are in loyalty programs. The researchers ran a variety of tests to determine what resonated best with customers in terms of loyalty-status designations. For instance, one test asked potential frequent travelers to pick a preferred hotel among three choices. The only difference among the three "chains" was their loyalty programs:

• Chain A offered no elite status.
• Chain B offered one elite tier for frequent guests (Gold status).
• Chain C offered two elite tiers, one for guests who stayed at least 30 nights (Gold), and one for guests who stayed at least 20 nights (Silver).

The results? All opted for the hotels with rewards programs, and Chain C won big:

• Those who knew they'd qualify for Gold status vastly preferred Chain C, which included the Silver tier.
• Even the "non-elites" preferred Chain C with its two elite tiers.
• The actual benefits offered to the top tiers in Chain C seemed to resonate less than the Gold and Silver status designations.

The lesson for loyalty marketers here? Build in a gold-and-silver-plated snob factor. "A three-tier [loyalty] program [Gold, Silver and no status] is more satisfying to all involved," the authors say, even for customers who don't qualify for rewards—yet.

The Po!nt: Go heavy-metal. Consider using Gold, Silver and no-status designations in your loyalty program: it could boost enrollment.

Source: "Feeling Superior: The Impact of Loyalty Program Structure on Consumers' Perceptions of Status," by Xavier Drèze and Joseph C. Nunes. Journal of Consumer Research, 2009.

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