Loyalty Programs Make Customers Feel Like They Have Status Over Others
A recent Chicago Journal of Consumer Research study found that businesses can make consumers feel more special by creating multi-tiered loyalty programs, which pander to a sense of status:
Many businesses create loyalty programs to confer a sense of status to their customers. Examples are platinum, gold, and silver charge cards, or red and blue membership levels. The study provides insight for planning programs that enhance consumers’ perception of status.
Authors Xavier Drèze (University of Pennsylvania) and Joseph C. Nunes (University of Southern California)…tested a variety of options for expanding loyalty programs. In six separate studies, they added tiers and people to customer loyalty programs in varying combinations to determine how people would feel if an organization added people to a top-tier program. They asked respondents how they felt when they added more tiers on top of them (platinum on top of gold), or added more tiers below them.
“We find that increasing the number of elites in the top tier dilutes their perception of status, but adding a subordinate elite tier enhances their perceptions of status,” write the authors. “Thus, if the firm creates a larger top tier while adding a second status tier rather than persisting with a single small top tier, it can recognize more customers without decreasing the perceptions of status among its most elite.” In other words, being in the gold level is more special if there is a silver level below.
Good point. If a customer enters a loyalty program at the silver level, it’s safe to assume they will aspire to, or at least feel somewhat off-put by, the existence of a gold level. And, as the study shows, gold-level customers get a status boost through the existence of a lower tier.
Tangentially, social networking popped into my mind when I read this article. Sites like Facebook are forever looking for ways to monetize. And users of those sites are looking for status, mainly by accumulating friends. What if sites introduced loyalty tiers? For example, users with more than 200 friends would automatically qualify for a silver tier. That tier would offer certain perks not available to people with fewer friends. With that loyalty in place, sites could more easily charge for certain services, or offer exclusive partner deals.
Now, I’m off to lunch, courtesy of my extra-special platinum credit card…