Why Tiered Loyalty Programs Are Attractive For CustomersGuides • February 21, 2019
What makes customers truly loyal? According to Relationship Marketing, the key lies not in sales and discounts, but in customer satisfaction and long-term engagement. This is underlined by the fact that customers with an emotional connection to a brand have a 306% higher lifetime value. From this point of view, tiered loyalty programs are one of the most efficient ways to retain your audience. Let’s find out why!
What Is a Tiered Loyalty Program?
A tiered loyalty program is a type of membership program where customers enjoy permanent perks and benefits depending on their rank. Unlike traditional earn & burn loyalty programs, tiered loyalty programs rank members into certain groups based on a certain metric. Each rank – or tier – is defined by a set variety of rewards, services or benefits, which increases in value as customers progress.
To better understand this, think about “love” as a strong emotional bond that’s required for a successful marriage, or even a deal or purchase. This bond sustains loyalty, which is the core component to repeated and frequent purchases. And that’s precisely why tiered loyalty programs are so powerful, since they give customers a benefits structure they can really sink their teeth into and engage with for years to come.
If your customers are fed up with point expiration or want a more flexible way to spend points, tiered loyalty could be a great alternative. In this video Zsuzsa Kecsmar, CMO and Co-founder of Antavo asks Jörn Roegler – our VP of Strategy & Insight – what tiered loyalty programs actually are, and how they work.
The 4 Benefits of Tiered Programs
Tiered loyalty programs are popular because they make the life of both the customer and the company better. Here are four benefits for having tiers in your membership program.
- New ways to engage customers: Use the reward program for branding – come up with meaningful reward level names and use a new layer of color scheme and imagery to bring excitement to a member’s life.
- No mix-up with expiration dates: Points that expire are frustrating for the customer and a major undertaking for the company to properly communicate. Also, if you have levels, long-time customers can keep being entitled to benefits, in contrary to only using point.
- Shield Yourself from the Competition: By attaching services like free delivery or extended returns to certain tier levels, people will be inclined to choose you over the competition, as they are granted additional benefits to their purchase.
- Segment customers even better: By reviewing the activity and aspiration of members, companies can better understand them. On the other hand, customers would feel that the brand looks after them.
If you wish to retain your customers, inspire them to climb your loyalty program ladder. Tiers help you set up the ladder – and the rules that customers can follow to receive rewards and benefits. But instead of just collecting loyalty points indefinitely, members receive a status which makes them stand out and feel more acknowledged and invested in the brand. And more importantly: it provides a goal for members to shoot for, and therefore an incentive to keep up their interest in your loyalty program far longer.
Just think about the video games where you beat monsters and collect treasures to unlock a higher level. Once you reach that higher level, more awesome rewards are unlocked. You kind of get addicted to this gameplay loop, because it lets you experience a series of incremental achievements.
5 Ways to Make Your Tiers Exceptional
1. Have a differentiator that sets you apart from your competitors
Everyone is a child at heart and expects to be rewarded for what they have done. And that means customers compare their gained value with other customers’ achievements. Hence, you as a smart parent of a brand should underline and visualise the difference in benefits your customers can reach. The gold status must have at least 2-3 more privileges than lower membership tiers.
This adds an air of exclusivity to the loyalty program, while also giving a feeling of satisfaction and superiority to those who achieve the desired rank. Furthermore, members who obtain the gold rank will push their way even higher to achieve more rewards and get an even better status, that maybe money can’t buy. This is how a tiered loyalty program unobtrusively prevents your customer from choosing your competitor’s membership program.
2. Create cool names for membership levels that increase the feeling of belonging to a community
Let the creativity flow when choosing the name of each rank. Find titles that reflect your business’s personality AND really speak the language of your target audience to increase brand engagement. For example, in the case of a nutrition supplement store, the level names could be: Rookie, Hardcore Builder, Shredded Superstar, etc. Be as fun and engaging as possible.
3. Use the power of subscription fee-based status
For years now, discount culture has been conditioning customers to follow the price tag. As the direct result, buyers feel less loyal, as they are abandoning you immediately in favor of a competitor who offers bigger markdowns.That’s why your reward system should have a wide array of gifts, benefits, points or services to surprise, satisfy and, as a result, retain customers.
Moreover, you need to be consistent with your offer. The best working example of fee-based loyalty programs – beside the recently released Amazon Moments – is that of Amazon Prime. In different tiers, you can get different rewards based on your subscription fee. Their success proves that people are willing to pay month-after-month for high-quality benefits.
Fee-based memberships can add further value to your tiered loyalty program, especially by deploying some of these features:
- Faster ROI delivery, because money comes into the program right after a member signs up, instead of driving revenue over a longer period of time.
- Pay-to-play incentives motivate customers to stay active, because they don’t want to throw money out the window.
- Qualified membership allows you to avoid having loyalty members who sign up without actually having a real interest in your loyalty program.
4. Increase customer engagement through gamification
Another great example comes from our all-time favorite coffee chain: Starbucks. They have a tier system and also involve a little gamification in their loyalty program, by allowing gold card owners to earn more points on Monthly Double-Star Days. Once per month, flashing the personalised membership card earns customers four stars per $1 spent, instead of two. This is a great way to max out another gold-tier reward, which comes after collecting 125 stars. So why is this a clever move?
To put it simply, the feeling of being rewarded is a great motivator. 75% of consumers prefer to associate themselves with a brand that offers rewards. However, this report suggests that some loyalty programs actually don’t help to strengthen emotional bond with the brands, because they only focus on discounts. This is precisely when gamification swoops in to save the day, because it introduces fun elements into your tiered loyalty program. And where there’s fun, there are emotions.
5. Personalise emails based on customer tiers
By including tiers in your rewards program, you automatically have a way to send more personalised offers based on the tier a customer is currently in. Email and loyalty programs are a match made in heaven anyways, proven by this award-winning campaign that generated more revenue than all non-loyalty emails combined.
If you know their tiers, you can set up automated email campaigns to nurture specific groups of customers. When someone reaches the silver membership, you already know he/she is a returning customer, but if you tell them about the benefits of the gold rank, they’ll be more inclined to further increase the value or frequency of purchase.
The goal here is to incentivise customers by offering helpful advice and showing the benefits of higher levels, encouraging customers to engage and reach the next level. You’re encouraging them to move from their current customer life cycle stage toward the ultimate goal, real loyalty. Want some more tips on getting there? You can read more about customer life cycle-based loyalty offers and personalization in this blog post.
How to Get Started
Before you start planning your loyalty program tiers, it’s best to get back down to the basics and examine how to create a loyalty program, step-by-step. In case you missed it, this ebook describes how to build a successful and flawless loyalty program in 7 steps.
This article was first published on 27 September, 2016. Edited for comprehensiveness and updated with a video on 21 February, 2019.