Unlike rewards programs, which I discussed in my last two posts, preferred customer programs are not about pricing, but rather are about receiving better treatment than the rest of the world. We all love being pampered, and are often willing to pay a premium for this special consideration. In the Preferred Customer Program scenario, common moments of truth, many of which are the same as for rewards programs, include the following:
IT’S TOO DIFFICULT TO UNDERSTAND HOW TO ACHIEVE PREFERRED STATUS AND TO SIGN UP. Just like rewards programs, it is important that customers understand exactly what is required for becoming a preferred customer—what, for example, constitutes the difference between achieving gold and platinum status. These differentiations should be simple (e.g., spend $500 and become a gold customer; spend $800 and become a platinum customer).
As for signing up, ideally, customers would be notified when they are eligible for preferred customer status, rather than having to "apply" and prove themselves worthy. Or it can happen automatically. I really enjoyed, for example, when American Airlines notified me that I had achieved Executive Platinum status and had already signed me up for all the benefits.
PREFERRED TREATMENT DOESN’T OFFER THINGS I REALLY WANT. Although everyone likes to feel special, just belonging to the preferred club isn’t enough. You need to have perks that you want and are appropriate to you. Most preferred customer programs do a pretty good job of this. For example, airlines have a special check-in line for preferred customers; they can get on the plane early; and they can get discounts on things like upgrades and executive club memberships.
At Bank of America, you become a Premiere customer (I think that’s the term) when you have $25,000 in assets in any combination of accounts with the bank. And the benefits are well worth it for many customers: no fees on anything (eliminating the dreaded nickel and diming tendency that banks have to squeeze every penny out of consumers); a quarter percent better rate on interest and loans. (However, I was shocked to discover, several years ago, that the same status can be achieved with only $10,000 of assets if you live in different parts of the country. It seems monumentally unfair, and gave me pause, hurting my perception of Bank of America—a hurt that really hasn’t gone away. I don’t understand why some customers have to work harder to be valued.)
What really works about these programs is that they make it easier for me to conduct business than non-preferred customers. For example, another benefit of being a premiere Bank of America customer is that I have a special support line to call, with much shorter wait times than the regular support number.
PREFERRED STATUS COSTS TOO MUCH. Unfortunately, there are too many people who cannot afford to maintain $25,000 (or even $10,000) in assets in the bank. (And, of course, these are the exact people who also can’t afford to be nickeled and dimed, but that’s a subject for a different day.) Luckily, most preferred customer programs are based on transactions rather than fees.
However, there is a flip side to paying too much, and that is that often people want to buy into a rewards program. For example, when traveling to a resort, preferred customers get VIP treatment. Well, what about new customers who still want that kind of treatment? They are willing to pay to upgrade their status and get the fresh flowers in the room, the best table at the restaurant, an immediate appointment with the masseuse.
Amazon’s Prime is a great example of a membership program for which many customers are happy to pay. In exchange for $79 per year, you get free two-day shipping. For those of us who purchase a lot through Amazon, Prime pays for itself within a few months. It also removes an obstacle to buying on Amazon. If I have to think twice about shipping charges when shopping online, I may not make the purchase. If I know that shipping is "free" (even though I prepaid for it), I am eager to buy more online.
Another example is at Six Flags, where you can pay for a Flash Pass, where you can actually cut your wait time for rides by up to 75 percent. I can’t think of a parent who wouldn’t find this special treatment well worth the money!
YOU DON’T KNOW ME OR MY PREFERENCES. The real value of being a preferred customer is getting benefits that are appropriate for you! I don’t want a complementary bottle of wine when I check into the hotel because I’m not a wine drinker! Don’t give me a free hour of a personal trainer when what I really want is a facial!
I’m actually pretty impressed with one of my supermarkets, which sends me discount coupons (in addition to those discounts I can get when I swipe my loyalty card. The coupons are always for things I have bought in the past or are very similar to things I regularly buy. That’s good use of a discount based on knowing my needs—thereby treating me as a special individual.
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