Tier Your Loyalty Programs Apart

Set different levels in your loyalty programs so that your especially profitable customers gain recognition and additional rewards, providing motivation.
     You might be concerned that if you add levels above what you now have, this will irritate your current frequent shoppers. Researchers at University of Pennsylvania and University of Southern California explored what happens when a retailer introduces new award levels in a loyalty program. Suppose that up to now, you’ve had a gold level at the top. Now we’ll add a platinum level above for which only some gold members will qualify because the purchase thresholds are higher. The researchers found that consumers actually prefer retailers who offer elite loyalty program tiers, even when those consumers know they’re unlikely to themselves qualify.
     Here are some tips for maintaining multitier loyalty programs, based on experimental research findings and retailer experiences:

• For movement to the next level, set thresholds which are out of grasp, but within reach. Consumers dislike a feeling that you’re forcing them to buy what you’re selling. In general, they don’t object at all to being tempted, coaxed, or even challenged by thresholds they feel they can achieve and that they’ve earned. 
• Provide lots of ways to earn credits for movement to the next level. Referring a friend earns points. “Get extra credit for coming to special event sales, even if you end up purchasing nothing.” The objective is to maintain momentum and a sense of achievability. Do assess the profitability that comes from these non-purchase sources of credit, though. Discontinue those which aren’t working. 
• Set thresholds on the basis of continuing activity, not lifetime activity with you. You wouldn’t ever want to completely drop a customer from loyalty program participation unless the person asks to be dropped. The loyalty program serves as a way of tracking the shopper, not only for rewarding good customers. However, you maintain purchasing motivation by requiring ongoing actions in order to receive the elite benefits. 
• Include among the reward choices for elite levels a few options which allow your customer to show off and you to show them off. A five-minute shopping spree in front of other customers or an extravagant event at the customer’s home with media coverage would bring attention to your program. Some of your clientele would absolutely hate this attention. But other would love it, and the publicity can motivate consumers to aspire to those high levels. 

Click below for more: 
Help Loyalty Program Members Progress 
Set Moderately High Purchase Thresholds