Question

Topic: Other

Customer Loyalty

Posted by Anonymous on 9/20/2004 at 2:14 PM ET 125 Points
I'm in the process of evaluating and enhancing the customer loyalty program my company has in place. I work for a specialty retailer and I'm trying to find information on the pros and cons of implementing a tiered program within our current program. Tiers could identify spending levels for our silver, gold, and platinum customers. What are the pros and cons of establishing a tiered system? I don't want to spend money to reward platinum and gold customers who would have already spent high levels in our stores, but I feel they should be thanked and recognized.
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RESPONSES

  • Posted by Peter (henna gaijin) on 9/20/2004 at 2:31 PM Accepted
    Pro:
    - could bring in more business

    Con:
    - additional cost of tracking these additional levels

    You will undoubtedly have some customers who would spend just as much with or without the loyalty program, so there will be some added cost which doesn't correlate into added sales. You can't look at individual sales like that, but have to look at the total impact (and that hopefully you get enough additional sales from customers who do buy more to justify the program).

    I think you need to spend time designing a good program (which it seems you are) and then try it (perhaps with just a test market) and see if the results justify the cost.
  • Posted by Peter (henna gaijin) on 9/21/2004 at 6:05 PM Member
    I don't think lower tiered people would be offended byb higher tiered member benefits. Think of airline frequent flier programs - they have lots of tiers.

    You do want to have a clear definition for the Tiers, so everyone understands what it takes to move up. This way they feel the tier settings are fair.

    If it is a concern, you can try to keep the higehr tier benefits quiet. For example, the airlines only send out information about some benefits for the higher members to these higehr members directly. This way the lower members don't feel offended by missing out on some benefits. Of course, this can also work against you, as these higher level benefits also can act as an incentive for lower level members. If you downplay the benefits, then there is less incentive.
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