Even though many believe that loyalty

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In principal rewards received by shoppers should be non linear—spending x at one retailer should offer the shopper a better reward than spending x n in different stores. One approach to achieve this convexity in rewards is to create loyalty systems that are tiered. It is often argued that tiered rewards such as those offered by airlines hotels casinos and financial service firms are necessary for loyalty programs to thrive.

Many companies in travel and service businesses reward frequent users by bestowing a status that allows them the privilege of high value services. Take for example British Airways which allows Executive Club members the privilege of access to airport lounges around the world. Services offered in the lounges—showers spa Internet connection appetizing free food and Chinese Overseas America Number Data drinks along with the opportunity to rest during a layover—is exceptional value to members. There is even a higher class of lounge facilities for an even more frequent traveler in first class. Similar facilities free upgrades and better rooms are also offered by hotels. Casinos designate their guests as silver gold and platinum members rewarding frequent visits with an increasing level of attention and free services available in each class of service. In designing a tiered system at Harrah.





CEO Gary Loveman was very clear that he wanted to ensure that customers who visited another casino would lose something by not accumulating rewards with Harrah s the opportunity to get to higher levels of rewards and services that have a material impact on the customer s experience. Furthermore tiered systems can stimulate customers to increase their purchases to reach the next stage and therefore more and better rewards in the hierarchy of loyalty classes.  programs that lack this feature won t induce enough loyalty to be sustainable no retailer offers a tiered loyalty program. Conventional wisdom has it that it is difficult for retailers to offer differentiated services or levels of prestige to their different levels of customer loyalty. The belief that loyalty programs lacking explicit tiered reward structures are ineffective is a myth.