Customer Tier Programs

Abstract

In today's highly competitive environment, many companies have made the strategic decision to protect and develop their most valuable customers. This strategy is implemented through customer tier programs, whereby customers are assigned to tiers — e.g., gold, silver, bronze — and accorded different levels of marketing and service depending on the tier to which they are assigned. We discuss various methods of defining the tiers and the fundamental allocation decisions firms must make in developing customers within a tier, possibly to the point where they can migrate to a higher tier. We conclude with a review of actual programs used by companies such as Bank One, Royal Bank of Canada, and Viking Office Products.