• by Kathleen Stockham , May 21, 2013

Customers are not loyal; you know this, you have experienced it and, as marketers, it’s the dirty little secret we try not to notice.

The fact is, they are free to make the purchasing decisions regardless of their moral or ethical dilemmas (or lack thereof) as it relates to their wallet.

Unfortunately, as marketers, we typically assume that loyalty programs are something you just have to stick out there like a Roach Motel or a Venus Fly Trap and, snap, you have a loyal customer stuck in the yellow goo of rewards.

However, several recent reports have shown that most customers are so overwhelmed with loyalty cards and programs and rewards and “cash back” programs that they either throw the cards away or shove them in a drawer and forget they have them. Or worse, they download the app on their smartphone but never use it.

So how can you make your brand stand out from the pile of cards, key ring fobs, apps, traps and mailbox crap?

Examine what your customers are actually using your loyalty program for: discounts, advantages, upgrades, exclusives, and privilege, right? So, are these truly advantages they wouldn’t normally get? Are they in line with what your competitor offers? Better yet, how often are those rewards being cashed in? Are they really disadvantaged by advantage?

You will be surprised to know that more often than not for every five benefits you offer loyalty customers, they only take advantage of one.

Yes, you read that right; only a one-in-five scale of use for the average customer. Airlines are getting sneakier about obscuring that fact, however. A recent loyalty report from a well-known satisfaction-ranker had airline programs as one of the most useless in terms of award usage outside of mileage cash-in. Forgotten was the floral discounts and rental car perks. Left behind were the special 1-800 numbers and “real” people you could talk to on the phone. In fact, most airline loyalty customers have no idea they received other bonuses besides mile currency.

Some clothing retailers see a similar pattern with discounts at point of sale and special pricing being the key drivers. But events, newsletters and other custom advantages for the loyalty customer often go unnoticed en masse.

So how about a tiered system of loyalty? Perhaps maybe offering the lowest level of loyalty perks to your lowest-value program members and higher, more “hooked up” perks for those who are truly members on a broader scale?

Starbucks actually does this the right way with the “Green-to-Gold” tiered loyalty program; the more you use it (mobile and in-store), the more perks and goodies you receive. No pressure, no goading and certainly no shame, the “Green-to-Gold” set-up gives the customer a graduated sense of belonging and expansion into cool tools, recommendations and offerings. Use it a lot? Great, you are richly rewarded with your own Gold card and frequent free beverages. Use it a little? You still get some perks and a free drink on your birthday along with a pat on the head.

Tiered loyalty also helps you spend a little less money on the yellow goo to trap any customer and actually gives you an easy way to segment those customers who are beyond loyal. (They are fanatical.) Tiered loyalty also provides some cheap entertainment in the form of A/B split testing to see what kind of loyalty programs are working with the different groups of customers. You may find, for example, that serious redemption or upgrades are only used seasonally and co-op/cross-brand discounts only work with females.

Examine your loyalty participation and see where you can funnel customers to more like a coin-sorter, and less fly trap. It’s a snap!