What are the pros and cons of tiered vs. point-based loyalty programs?

Tiered loyalty programs offer several advantages. Firstly, they ensure that no one misses out on rewards. Each tier provides value, catering to different customer segments. For instance, in an airline loyalty program, bronze customers might receive free food and drink. Secondly, tiered programs set a brand apart by offering exclusivity and perceived value, making customers more likely to choose it over competitors. However, managing tiers requires careful planning, and there can be challenges in balancing rewards and costs. In summary, tiered programs enhance engagement but demand strategic execution.

Tiered Loyalty Programs: Pros: - Increase engagement: Members carry motivation to reach higher tiers to unlock better rewards and they spend/fly/transact more. -Status recognition: Members feel the "proud" and "I am the elite one" thing and they like to be treated exclusively. They like to be welcomed to lounges and priority lanes instead of waiting in the endless queues with "ordinary people" Cons: - Complexity: Managing multiple tiers and ensuring customers understand the benefits of each tier can be complex - Potential Disappointment: Customers who do not reach higher tiers may feel left out or disappointed, which could negatively impact their loyalty

Relying on a single program type won't achieve loyalty goals. Begin with base points for all purchases, enhancing point multipliers as customers advance through tiers. Implement points + cash payments, with higher tiers offering better redemption value. Encourage tier progression with exclusive rewards and bonus points. Integrate the program seamlessly across online and offline channels.

A carefully crafted tiered loyalty program creates significant value for both the business and its customers. For the customer, knowing that their lifetime spend or engagement is rewarded at higher levels is motivating. For the company, this helps foster loyal customers who are enthusiastic about the brand. However, the tiers must be easy to understand and attainable, which requires a good understanding of consumer behavior, supported by historical data on customer spending.

Tiers create natural opportunities to connect with your customers beyond transactions. You can create another layer of names, branding, color schemes, and imagery around tiers, which can create more excitement and more emotional engagement from customers. Use your unique branding in your rewards program and make it creative and specialized by designing program tiers to fit both your brand and audience. Using tiers is also great for running a loyalty program without points. This can be especially valid in luxury fashion when using points might be perceived as “cheap”. Expiring points can also be frustrating for customers and are a major undertaking for companies to properly communicate.

If your loyalty program will offer some kind of currency or points, they should come with certain conditions, such as rounding logic, refund rules, expiration dates, etc. You should also dedicate time to calculating how many points additional actions, such as enrolling into the program or writing a product review, should be worth. You should also consider how many points certain rewards will cost.

First, personalize. Your customers aren't just numbers. They're individuals with distinct preferences. Use data to offer tailored rewards. Second, innovate in point accumulation. Beyond purchases, reward social media shares, referrals, or reviews. This not only enhances engagement but also turns your customers into brand advocates. Third, remember that the best loyalty programs create emotional connections. Celebrate milestones - be it a customer's anniversary with your store or their 100th point. Small gestures, like a personalized thank-you note, can make a big difference. Finally, keep evolving. What's exciting today may become mundane tomorrow. Regularly refresh your rewards and keep an eye on market trends and customer feedback.

Point-based loyalty programs are the currency of customer commitment, each point a token of the journey shared between brand and buyer. Like stars in the night sky, points guide customers back, encouraging engagement and purchases. They offer a clear path to rewards, turning every transaction into an opportunity for gain. Yet, without the allure of immediate gratification, the shine of distant rewards may dim, requiring careful calibration to keep the spark of interest alive. Additionally, a sky too cluttered with points and complex redemption options can overshadow the journey, leaving customers navigating in the dark rather than following the North Star to loyalty. It's crucial to design in advance the (solid) economy of this "game".

If you are thinking about adding a points based program you'll need to make it a bit more exciting than your traditional earn and burn model. Recent data suggests that on average the American household is enrolled in 21 points based programs. Make sure you created a strategy that help you stand out from the pack... It does not need to be anything super complicated... Think surprise and delight rewards for discounts on products or services.

Whether to use a currency in the loyalty program depends on several factors, but one key point must be considered. The Self Determination theory of human behavior shows that people are competive and like to "keep score" in order to monitor their own progress but also to compare with others. While it is easy to criticize the use of points, miles, stars or another name for the currency, the method works because it connects with the way people are wired. There are brands that may benefit from using a loyalty model without an explicit currency. The technology behind the scenes may still be applied to "keep score" and that score can be used to generate offers and communications. See the Loyalty Academy for more information on this topic.

Tiers and points deal with different aspects of loyalty. It really depends on your business needs and what you’re trying to achieve. In a travel context (typically airlines and hotels) both aspects are important. Points form the core value proposition for most members, where they are able to choose rewards based on their transactional loyalty. Whereas tiers are designed to recognise the most valuable members. They also form an aspirational layer to the program, that helps to drive repeat behaviour for all members.

Tiered program is NOT the best Loyalty. Points-based program is NOT the best Loyalty. Paid program is NOT the best Loyalty. Web3 program is NOT the best Loyalty. Coalition program is NOT the best Loyalty. The best Loyalty design is one that solves just two things. 1/ How it creates value and improves the lives of its members. 2/ How it creates value and measurable results for the business. Figure out what your business needs from Loyalty. Focus on what your customers want from it. Not where your competitors are doing. Not what the latest trends are. Be audience-focused: Your biz stakeholders and your customers.

Es gibt unzählige Programm-Anbieter, die sich auf spezifische Segmente spezialisieren. Z.B. konzentriert sich Comarch sich auf Großunternehmen aus der Travel, Finance und Retailbranche und passt deren umfassende Loyalty Plattform an individuelle Bedürfnisse innerhalb bestehender IT-Infrastrukturen an. Anbieter, wie helloagain konzentrieren sich dagegen auf KMUs aus dem Dienstleistungssektor, wie Friseurbetriebe, Bäckereien oder Restaurants. Bevor Unternehmen sich für ein Treueprogramm entscheiden, sollten sie die Programmziele an ihre Unternehmensstrategie anpassen, z.B. Erkaufte Loyalität mit wiederkehrenden Preisanreizen (Kostenführerschaft) vs. Emotionale Loyalität, die das Markenbewusstsein erhöht (Qualitäts-/Beziehungsführerschaft)?

With many options to think about like points, tiers, perks... plus the types of rewards you are looking to offer, choosing a program type can be daunting. I always tell my clients to work backwards from the outcomes they want to achieve from their customers. This will always give you the best place to start.

The number one tip that I share with my clients when creating a loyalty program and strategy is work backwards from the outcomes you want from their customers and don’t fall into the “everyone else is doing it” mindset.

The most simplified advice I can offer is to make sure that planning starts with setting objectives. Once this critical step is completed, the available customer data should be analyzed carefully to understand current transaction and engagement levels. This work is key to creating baselines and assumptions in a financial model. Understanding the brand attributes of the sponsoring company is the next key point. Given the brand, its objectives and having valuable data insights will inform which model makes the most sense for consideration. Even at that point, it is recommended to pursue sensitivity analysis on multiple scenarios in order to evaluate 1-2 models and to create the program rules in each case.

To create a successful loyalty program: Set Clear Goals: Define what you want to achieve (e.g., increased sales, customer retention). Know Your Customers: Tailor rewards to their preferences and behaviors. Choose the Right Type: Select a program that fits your business model (e.g., points, tiers). Offer Valuable Rewards: Ensure rewards are desirable and attainable. Simplify Participation: Make the program easy to understand and use. Promote Effectively: Communicate benefits clearly across channels. Monitor and Adapt: Continuously evaluate and improve based on feedback.

When I work with clients to design a loyalty program, one of the first conversations we have is about the focus of the program. The focus of a loyalty program should be to build loyalty to the brand. Unfortunately, too many loyalty programs are structured in a way to build loyalty toward an offer or sale, instead of toward the brand. The punch card is a classic example: It builds loyalty toward the offer (10 punches gets you a free pizza!) instead of the brand. Once the card is filled and redeemed, it’s value is gone and the customer has to start over with a new card. Structure perks so they focus on building loyalty toward the brand and build a deeper connection with the brand. Provide greater access to the brand vs a product discount.

1. Die Anmeldung muss schnell & einfach sein. 2. Materielle Vorteile, wie Rabatte & Geschenke, sind besonders zu Beginn einer Beziehung wichtig. 3. Die Vorteile müssen zur Zielgruppe passen und der jeweiligen Beziehungsphase passen (Relevanz & Personalisierung) 4. Die Regeln, z.B. Erreichen einer höheren Stufe, müssen einfach & klar verständlich sein. 5. Lieber auf viele kleine und häufige Belohnungen setzen, als auf schwer erreichbare Benefits. 6. Immaterielle Vorteile sind besonders in späteren Beziehungsphasen wichtig für die Erreichung echter Loyalität. 7. Transparente & flexibel gehaltene Datenverarbeitungsprozesse & menschliche Interaktionspunkte tragen zum Vertrauensaufbau bei, was der Grundstein nachhaltiger Loyalität darstellt.

Both teired and points based loyalty programs leave much to be desired by consumers. I believe loyalty is moving more towards slope models and micro tiers with instant gratification playing a role in executing these strategies.

Zusammenfassend ist ein intelligentes Datenökosystem erforderlich, das aus einer funktionierenden Symbiose von Technologien, Mitarbeitern, Partnern und Kunden besteht. Das Ziel von Treueprogrammen 5.0 sollte die Lösung sozialer, ökologischer & gesellschaftlicher Probleme sein. Um die Bedürfnisse der Society 5.0 zu erfüllen und Resilienz zu entwickeln, ist es erforderlich, die Wertschöpfungsprozesse ganzheitlich zu betrachten und Kundenproblemen in Echtzeit betrachten. Im Kundenbindungsprogramm ist es wichtig, ein vertrauensvolles, nachhaltiges und lebenswertes Umfeld zu schaffen, um Mitglieder auf ihrer individuellen Kundenreise mit kontextbezogenen Informationen zu begleiten und damit eine echte Loyalität zu erreichen.

The basis of any loyalty program has to be : 1. How do you want your customers to "engage " and "grow" with you. 2. What your customer expects from a brand in your industry.

Whilst some markets, the US being one, adopt a point centric model, there are a lot of other retailers looking at alternatives. Some shoppers are disillusioned with the concept of a point, not necessarily understanding how 'much' that point is worth to them, or how long it takes for it to turn into something they can tangibly use. The concept of 'Bonus' or 'Bonus Cash', where $ =$, is starting to take off more in the industry, due to the transparency involved in the earning. There's no need to wait to accumulate X points before turning them into $X - at any given time a shopper can use their bonus for a tangible discount, and this is becoming more powerful, encouraging shoppers to return more frequently to both earn & burn.