Loyalty Programs Make Customers Feel Like They Have Status Over Others

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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…

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Comments

  1. jeff's Gravatar Comment by jeff on January 15th, 2009 at 9:02 am

    This is all fine and dandy, but to what end?

    If I have “status” with a particular retailer, am I therefore more likely to further spend? Or return? Or what?

  2. Drea's Gravatar Comment by Drea on January 15th, 2009 at 11:09 am

    Jeff, I think you’re more likely to stay loyal to that retailer, therefore spend more over time and be more amenable to their special offers.

  3. jeelago's Gravatar Comment by jeelago on January 20th, 2009 at 2:56 am

    point taken on the loyalty programs, so maybe this is slightly off-topic, but about the facebook example…. Is the idea that people there chase status through numbers of friends really something that’s taken for granted these days? Im curious because this has not been my experience.

    @jeelago

  4. Dave Jenkins's Gravatar Comment by Dave Jenkins on January 23rd, 2009 at 12:06 pm

    The idea that people “want” more friends on facebook, and therefore are willing to give up something in return, seems a little off. Facebook friend-counts are usually regulated by other factors: real friends (IRL) or common interests (outside just facebook).

  5. Drea's Gravatar Comment by Drea on January 23rd, 2009 at 11:15 pm

    @jeelago and Dave: Hmm. I may have to reconsider that Facebook idea. I only add people I personally know, so I pigeonholed those other folks (with 700+ friends) as people who placed a premium on the number itself. I thought that I was in the minority, but considering your comments, I might be more representative of how most users think. I’m still convinced, however, that some kind of loyalty program could be instituted. Perks for heavy use/hours put in? Perks for the most elaborate profile? There’s gotta be something.

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