The marketplace is busy. Consumers can purchase through online retailers, social media marketplaces and traditional brick-and-mortar storefronts. It has become difficult to engage consumers and stay relevant for a long-term buying relationship.
Psychology of Loyalty Programs
Motivation is key to most human action. If someone is not properly motivated, they may not get out of bed in the morning. They may not go to work or run on the treadmill. Loyalty programs provide motivation to engage with a brand, product, or service. This engagement leads to an emotional connection that leads to further purchasing interactions.
Positive reinforcement is a proven method to develop desired behaviour. We return to activities or situations that made us feel good. An employee that receives a bonus cheque each time they exceed a sales quota is likely to keep trying to exceed expectations. Loyalty programs use a positive feedback loop to create a bond with a brand, product or service.
Why Should You Implement a Tiered Loyalty Program?
Traditional loyalty programs offer rewards for purchases at a standard ratio. Every participant is treated the same regardless of the value of their purchases or years of involvement.
Tiered loyalty programs break participants into groups with similar characteristics. Each group is considered a tier. Tiered participants earn and receive program rewards tailored to their common characteristics.
Customisation creates greater engagement
A company that completes segmentation, driven by data analysis, can find a way to recognise a participant as an individual. Being treated as an individual, instead of a faceless consumer, creates an emotional bond between a consumer and a brand, product or service.
For example, new customer communications and promotions can focus on programs designed to drive adoption. Vouchers for free trials or coupons for first purchase discounts may resonate better than freebies after the 10th purchase. The latter promotion is better suited to long-term established customers.
In Australia, loyalty program participants are increasingly seeking rewards for life-improving actions such as bringing back containers to be refilled. Designing promotions and programs to appeal to conscious consumers can help them feel positive about your brand, product or service. The positive feedback loop may lead to a longer purchasing relationship.
Tiered programs are hard to duplicate
Differentiation from competitors helps businesses stand out in the crowded marketplace. Configuration of your loyalty tiers adds a layer of difficulty for competitors to match.
There are different levers to be pulled when designing your tiered loyalty program, such as:
- Benefits per tier
- Eligibility to tier entry
- Qualification of program participation
- Rules for program earnings
- Exceptions, limitations
- Types of rewards such as physical rewards, experiential rewards, vouchers, coupons, and gamified rewards
Combinations of the above program elements also make it difficult for consumers to compare your program to other programs. Consumers will be unable to determine if one loyalty program may be better than another. This creates stickiness to your brand, product or service.
Drive business sustainability
In a study by First Point Research and Consulting, 68% of Australians confirmed loyalty programs enhanced their brand experience. Consumers with positive brand experiences are less likely to switch to alternative brands due to lower prices. Loyalty programs enable businesses to beat the discount culture and develop sustainability in purchasing relationships with customers. This may enable a business to manage product or service margins upwards compared to businesses without a loyalty program.
At EonX we work with you to instil brand relevance whilst tailoring a unique user experience with dynamic rules and triggers, engagement metrics, personalised communications and content. Get in touch with our specialist team to kick off your loyalty program design.