#520: Avoid Tears by Properly Utilizing Program Tiers

Bill Hanifin and Aaron Dauphinee from the Loyalty Academy are back with another episode of the “Wiser Loyalty” podcast series.

They continue exploring Key Success Factors in Loyalty Marketing (course #112) from the Loyalty Academy™ curriculum. In this week’s episode, Bill and Aaron, lean into the importance of understanding that all customers shouldn’t be treated the same and the success that can come in doing this through the utilization of program tiers (in various forms).

In the Wiser Loyalty series, Bill and Aaron draw a theme each month based on the courses required to earn the Certified Loyalty Marketing Professional™ (CLMP™) designation and this is now the third month of this global loyalty education series.

Show Notes:

1) Aaron Dauphinee⁠⁠⁠⁠

2) Bill Hanifin⁠⁠⁠⁠

3) ⁠⁠⁠⁠⁠⁠⁠The Wise Marketer 

Audio Transcript

Paula: Welcome to Let’s Talk Loyalty, an industry podcast for loyalty marketing professionals. I’m Paula Thomas, the Founder and CEO of Let’s Talk Loyalty and also Loyalty TV. If you work in loyalty marketing, you can watch our video interviews every Thursday on www.loyalty.tv. And of course you can listen to our podcasts every Tuesday, every Wednesday, and every Thursday to learn the latest ideas from loyalty experts around the world. 

Today’s episode is part of The Wiser Loyalty Series, which is hosted by our partners, The Wise Marketer Group. The Wise Marketer Group is a media education and advisory services company providing resources for loyalty marketers through The Wise Marketer Digital Publication and The Loyalty Academy program that offers the certified loyalty marketing professional or CLMP designation. I hope you enjoy this weekly podcast, The Wiser Loyalty Series.

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Bill: Hello everyone. I’m Bill Hanifin, the CEO of The Wise Marketer Group and one of the two hosts of the Wiser Loyalty Series here at Let’s Talk Loyalty. I’m here with my partner today, Aaron Dauphiney, and we are covering key success factors of loyalty this month. Aaron, how are you?

Aaron: I’m well, doing really well today. Thanks again.

Bill: Good. Good. This is a really good series, and we’re going to run this throughout April. We started off talking about enrollment and all the considerations within enrollment, at least as much as we could cover in 10 minutes or 15 minutes or something. And today we’re going to shift into an equally, I think, complex, potentially topic of tiers. Tier structure, tear strategy. So, it’s a standard in loyalty planning, isn’t it? 

Aaron: Absolutely.

Bill: It’s, you see it so often, you certainly see it in programs that have been around for a while. And when I thought about this and was preparing to have this discussion with you today, I thought about where do tiers come from? Because they’ve always been part of the planning process from the very beginning. And I realized, well, what do we tell people to do? First, you have objectives and then you do some data analytics and you try to get some insights over your customer group, understand who you’re dealing with, right? And try to determine values and all of that.

Well, in that process, you’re going to determine different value segments, different levels of activity, all of those things. So effectively you can come through the analytics and planning process at that point and say, all right, I’ve got all the information I need to create tiers. And I think that’s what an awful lot of brand sponsors for programs have done is they’ve just assumed that they needed to have tiers when they launched their program right away.

We’re sort of seeing maybe different benefits to waiting and making tiers like you know, a second horizon, third horizon type of strategy. But what do you think? Do you think it’s still appropriate to say, let’s look at tiers right from the gate? Or should we be looking at it differently? 

Aaron: Well, you know me, I think there’s a strong and sound argument for aligning your customer analytics, you know, your segmentation strategy into the benefits that you provide to your customers and whether you publish those or not is really the question that we’re talking about.

Because if you’ve got the scoring in your segmentation in place. At the onset, just because you haven’t maybe told your customers about how you’re treating them differently is really the nuance that we’re, or the, you know, the line that we’re walking on this. And so, but really ultimately I do believe that fundamentally strong program does start to make it known and is transparent about the fact that, you know, there are different thresholds for success.

And if you want to get a stronger benefit from us as a brand and in return, the element of reciprocity for your, their changed behavior and the things that you do for us as a brand, you know, you should know what the game is, how the game is stacked and what our expectations are, right? Like it’s like any good relationship, you want to be open and upfront about it. And so, I think that having said that. Some information about that in the form of a tier structure is helpful to know how people just rise up and, you know, it’s about keeping points at the end of the day to comparing you know, I think about airline programs and hotel points is long held tiers as a bastion of the, of their program design and structure. And if I’m sitting on a plane and I hear the flight attendant say, you know, thank you, Mr. Hanifin for being a diamond member. And I’m not at Diamond, but I’m sitting, I’m one tier, one lower level, but I’m still higher than two other tiers. I understand why you’re sitting in front of me and not behind me type thing. And so I, I can chill out a little bit in terms of that expectation because there is a pecking order, so to speak. 

So, you know, I think the biggest thing for me is really about making sure that the tier structure aligns along the thought of the multi value proposition. And that, you know, you take our traditional thinking, which we’ve inherently had for a long time, which is really around taking the tier structures that you put in that maybe that you publish and applying them in a way that success comes from putting your hard benefits according to district different customer value and the potential to maximize return on that on an individual customer level basis or groups of customers.

So, I mean, real quickly, the reasons that you do this is first, you want to avoid overfunding segments, you know, where with marketing spend and offers that aren’t going to change behavior, ultimately, and not going to have an effect. I often call that some of the longer tail that doesn’t accumulate is not as active in the program. You don’t want to keep investing in that long tail.

Bill: Sure.

Aaron: Unless you truly know that there’s potential as you rise them up. You know, if you think about that in a classic structure, you know, that’s your base group, or maybe in some of your silver folks, you want to keep them a little bit of interested, but if they don’t see any sparks of change, then, you know, you really want to focus on that gold or platinum diamond for using that you know, traditional type of definition.

And with that you on the opposite side of that, you know, the other goal post is, of course, you don’t want to dilute the value proposition of your best customers. You want to keep being able to give them more and when you have fixed marketing budgets you know that you want to make sure that spread is appropriate and you can do that with your, your said your heart benefits, but really where you provide the ample value and the experience of being differentiated. And it comes from the layering in of soft benefits, you know, status, aspirational things, experiential components, things like that, so.

Bill: You mentioned something really interesting to me earlier. You said the word game. 

Aaron: Yes. 

Bill: And I was thinking, you know, that’s maybe what we don’t realize enough with tiers is we’re creating a game. And you mentioned about the people in the cabin on the airplane, but that’s exactly what we’re doing. And so when, if you’re going to create the game, you have to realize the implications of the game, because it’s one thing for people to recognize it. They have to change behavior, do something different to achieve a higher level and get some additional benefits, but can they do it?

Is it realistic for the type of business that you have and the frequency of purchase, the purchase cycle, all those sorts of things that people can actually move up. So, and you don’t necessarily want everyone to just sort of march like an army through the tiers because ultimately, you know, you have that visual of a massive people trying to get through one door and they’ll never make it.

So, you know, I think you have to think about what the implications of the tier means in terms of the customer behavior, and then maybe set some realistic expectations about what kind of migration you want to see between. Entry level bottom middle, high, things like that, don’t you agree?

Aaron: Yeah, you can see me smiling here for those.

Bill: You don’t have to agree. 

Aaron: I am going to because I’m grinning for those who can’t see on the podcast, but certainly on the video, you will. I, this comes down to me for a simple statement, such as not all programs are created equal, right. And so the way in which they tier, they’re like put in tiers or utilize tiered structures really needs to align to the loyalty program values proposition and their brand identity. Right? And it doesn’t have to be as formal as a traditional tier structure. Like, there are other ways that you can put the tier effect into play is how I’ll describe it. 

So, you know, I last week we talked a little bit in enrollment of creating some friction, fee versus no fee. That’s a form of tier in effect. Strata, you’re putting a strata in place co branded cards. So the co branded card alongside a traditional mainstay loyalty program and the, you know, intricacies of how those layer up oftentimes with airlines, you know, you can be a high status individual and a high status with a co branded card. And that’s your one up because you’ve invested more in the brand across two different categories of product, if you will, that, that they want you to have in your pocket. You know, there’s also things like hidden or unpublished tiers to surprise and delight. So many of your very top customers that come into play. So we’re not seeing more of those. We’re hearing more about those. 

I think is the way to describe those unpublished and hidden tiers. I’m certainly not in the many of them myself aspiring potentially in one particular retailer to get to there but that’s a number of the way of exclusivity. It is a way of rising up and differentiating because, you know, there is in some places too many people are rising to those top tiers. It’s too easy to get to them. There’s not enough differentiation. There’s not enough stretch in the value equation.

Bill: Right.

Aaron: And it’s hard to take away from people once you’ve given something to them because you want them to retain it. So you’ve got to create this other next, you know, level of strata. And then and you mentioned this at the very beginning, the last comment, then I’ll turn it back to you for maybe a couple of examples about to hear some examples of some of the better tier structures that are failing that use some improvement as really around internal scoring mechanisms, right?

Like there’s now an ability with dynamic or even AI enabled cluster analysis and segmentation that you can create relevant offers to on an ongoing basis to an entire member group in a specific campaign. And you can just keep doing that. And so your tiers are actually just your analysis and clustering to some degree, that’s a little bit more forward thinking about getting your head around that. Cause we like to keep our structures of, Hey, this is a tier and whatnot. But if you’re not, if you’re not publishing tiers, that certainly is a form of getting to that structure. So, and that’s my thoughts. I’d love, maybe we tie off with an example of some people.

Bill: You know, I think that there may be the, again, like a pro and con example might be that to me it’s difficult. There’s a challenge to create meaningful benefits to differentiate the tiers. And we had done an exercise recently, you and I, where we looked at a variety of beauty brands, and I remember that we looked at the tier structures just from their websites and we were saying, okay, if I was a consumer, how would I view this?

And we had all three side by side. And it was, well, I would say the benefits were very similar, one. So we recognize the difficulty in that, but then also, you know, to try to understand what you would have to do, progress from one tier to another would be pretty tough too. So in those cases, it just wasn’t differentiated enough for me, at least outside of the right structure.

Aaron: Yeah. Outside of spend, right? Like it’s pretty clear of like, if you hit the spend threshold, then you migrate up, but otherwise the benefits, as you said, are, we’re not that differentiated across them, so. 

Bill: Right. Right. Now I have to admit to you softie for Marriott, but there’s something about the way Marriott. It communicates their tiers in my standing. It’s very appealing to me there. They will give you some awards based on your longevity. And I feel like they more than some other programs that I’ve seen incorporate an element of tenure into the program. So great. I still have my goal for the year. I know I need so many nights and I’ve got to do certain things. If I start splitting my stay basket up, I’m not going to make it. 

But on the other hand, because I’ve been there a long time, and because I’ve reached a certain level, you know, I’ll inevitably end up getting just a free bonus night, or I’ll get some other perks in there. And the way, maybe again, it’s communication, but the way they communicate where I am and how close to, I somehow feel more motivated through that approach than I do with some other programs. 

Aaron: So, you know, I’ve come around on Marriott since the SPG merger and whatnot as well. I mean, there’s other programs Hilton and Accord do strong programs as well, too, and a few other, the other hotels. 

Bill: Sure.

Aaron: But what your comments specifically, and I don’t want to pick on Marriott, but because you brought them up because they have that tenure component as well as the spend, the number of nights stay for someone platinum elite for lifetime. I’m going to get there for nights, probably this year. But then I got to sit on the sidelines for three years until that tenure kicks in. Cause I got to have 10 years in total. So they get to platinum elite. 

Bill: Right.

Aaron: Great. I’m not complaining. It affords me a nice luxury for my dedicated service over the last, you know, seven plus years or so. But I can tell you like the more travel I’m doing later in life for business getting me faster and not being at platinum elite earlier, because it’s just a, it’s a waiting game and patience, you know, that’s something that I just have to get my head around. And that’s the program I participate in. 

Who knows, Marriott, it might be change it and see that the speed in which I’ve accumulated over the past 2 years, or 3 years relative to the first 4 or 5 years of my 10 and make a decision to early up. But and that’s a prerogative, but at least I know the rules about those two things. And I do agree that there’s something to be said about not just buying your way into it, even though it’s working against me right now. I can humbly admit it. Right? 

Bill: Right. Right. 

Aaron: But a relationship that’s on a long, ongoing basis. So I respect the program design. I just, in this particular moment, have a little bit of irritance with it. Cause I want to get faster, quicker. 

Bill: So that’s great. And and I would just say to the listening audience, ladies and gentlemen, you’ve just gotten a view on how complex it is to satisfy all customers. Because there’s some that are delighted easily, there’s some that are, you know, have been on the road for a long time, people like Aaron and myself, and I’m sure a lot of you listening, but it’s, you really have to think through all the options, the scenarios. And I think you have to put your customer head on at the end of the day and look at those tiers, just like one of your customers and say, if I were entry level, if I were elite in another program and starting to frequent my brand, like what would it look like for them? What would be the challenge? How long would it take for me to climb the ladder? I think that’s a key. 

Aaron: Yeah, I would agree. I think that’s probably a good way to capstone this particular segment, so.

Bill: Yeah, absolutely. So thanks everybody for listening. You’ve been listening to The Wiser Marketer. We’re covering key success factors and loyalty this month. And we’ve talked about enrollment number one, and we’ve talked about the tier structures to number two, and we’ve got a couple pretty neat topics coming up to balance out the month. So thanks for being here and we’ll see you next time. 

Aaron: Thank you everyone. Talk to you soon.

Paula: This show Wise Marketer Group, publisher of The Wise Marketer, the premier digital customer loyalty marketing resource for industry relevant news, insights, and research. Wise Marketer Group also offers loyalty education and training globally through it’s Loyalty Academy, which has certified nearly 900 marketers and executives in 49 countries as certified loyalty marketing professionals. 

For global coverage of customer engagement and loyalty, check out thewisemarketer.com and become a wiser marketer or subscriber. Learn more about global loyalty education for individuals or corporate training programs at loyaltyacademy.org.

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