Since shoppers started receiving “S&H Green Stamps” for qualifying purchases, or “depression glass” for buying Quaker Oats, loyalty rewards have been popular with consumers. The science of loyalty marketing was elevated even further when Braniff Airways introduced the first frequent-flyer program in 1980… and the strategy has become easier and more efficient as technology and the Internet have made it easy to measure and manage customer loyalty.
But what happens when an “A” client drops to “B” status? One recent study suggests that when a customer is demoted, the harm caused by the demotion can outweigh the original goodwill that was generated by the rewards program in the first place.
You can read a briefing about the study at the ANA Journal of Marketing web site; the story contains a link to the actual report.
Implications: At a time when many consumers are cutting back… companies might see many customers fall from “gold” status to merely “silver” (or from platinum to gold, from first- to second-class, five-star to four, et al). So the questions become:
- If these people are still some of your most important customers, should you really send them any kind of signal that might indicate they’re now “second class?”
- If they’re not earning platinum status, can you afford to give them platinum rewards?
- Can you afford not to?
- What kind of incentives might make the customer eager to resume (or re-earn) their elite status?
- If you had it to do over again… how would you modify the terms of your rewards program?
If you grant someone “important status” for their patronage, taking that status away is likely to be interpreted by some consumers as a signal that your company considers them “un-important.” Of course, the best time to consider and mitigate the consequence of customer demotion is before a loyalty program is ever launched. But when recession might be causing many of your loyal customers to spend less… you may have no choice but to consider those consequences right now.
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