Frequency programs: tearing up tiers?

Colloquy, the " go-to resource for loyalty intel¬≠ligence" for over two decades in their tireless search for insights into loyalty programs takes another look at loyalty program tiers and what they mean to consumers. Their most recent paper offers a somewhat startling conclusion that a full third of respondents, all subscribers to loyalty programs, were unaware of the "tier" they were at. 

The muddled consumers could be forgiven as anyone who has enrolled in a program, whether for hotels or airlines or retail, is often confronted with what looks like an unscalable ladder before any meaningful rewards come their way.  Colloquy's study (predictably) notes that members of the lower tiers of loyalty programs are almost twice as likely to believe that is too difficult to meet the requirement s for the higher tier level.

More searingly, in what would easily fit into today's class warfare debate, they find that people with incomes below $50,000 per year are fifty percent less likely to earn their way to a higher tier than those with incomes over $100,000 per year. If the latter seems obvious, another finding is that a third of those residing in the bottom tier "do not think they are properly acknowledged for their level of participation"; something that can be easily attested to by anyone who is in the bottom tier of an airline program although those who clambered up a couple of rungs probably have a not too dissimilar experience. 

On the plus side (for the purveyors of loyalty programs) a full 69% of respondents have no problem with people buying their way onto a higher tier. The latter is something airlines, United in particular, has cottoned on to as evidenced by its prodding to customers at almost all stages via a non-sequitur to "earn extra award miles" given that it involves paying and not earning miles. Also on the right side of the ledger for businesses is the finding that 75% of respondents saying that they "approve of businesses giving preferential treatment to customers who spend mroe money. 

The takeaway from the study is that although technology has made it easier for customers to participate in very personalized programs the tiers need  to be more "micro-segmented" internally with a greater focus on the middle tier which offers the most potential in terms of mobility for the customer and revenues and loyalty to the business.

Published by

Vijay Dandapani

Co-founder and president of a New York based hotel company for 24 years. Grew the firm to five hotels in Manhattan and also developed a greenfield project at MacArthur airport, New York. Speaker at numerous prestigious forums including Economy Hotels World Asia, Lodging Conference, NYU, Columbia University Real Estate Roundtable, Baruch College's Zicklin School and ALIS. President and ceo of New York City Hotel Association since January 2017.