What makes customers truly loyal? The key lies not in sales and discounts, but in customer satisfaction and long-term engagement. According to Salesforce, 91% of customers say they’re more likely to make another purchase after a great service experience. In the world of loyalty management, there’s a feature that embodies this concept: tiers. But what’s the secret behind tiered loyalty programs? What makes them so irresistible? Let’s find out!
What Is a Tiered Loyalty Program?
A tiered loyalty program is a type of membership program where customers enjoy different loyalty program benefits depending on their rank. Unlike traditional earn & burn loyalty programs, tiered loyalty programs rank members into certain groups based on certain metrics. 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 these loyalty program types, 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—they give customers a benefits structure they can really sink their teeth into and engage with for years to come.
As customers advance upward through a program’s tiers, they should have access to better and better rewards. And because the higher levels provide better benefits, these programs, by nature, make your customers feel appreciated and valued. They know they’re getting exclusive rewards that are not available to the majority of other customers, which makes them stick to your brand even more.
Antavo’s tier management module empowers you to create your very own tier management rules and logic based on your needs.
The 6 Benefits of Tiered Loyalty Programs
Tiered loyalty programs are a phenomenal way to get your customers more invested. According to the Global Customer Loyalty Report 2022, tiered program owners reported a 1.8x higher return on investment compared to programs that do not offer tiers. So, let’s see what makes tiered reward systems so uniquely effective for engaging customers and boosting revenue:
1. Shower Customers With Great Benefits and Privileges
Tiers are associated with benefits that incrementally increase in value. The higher the tier, the better the benefits and the more exclusive the brand experience. Tiers give program members positive motivation to continue purchasing from your brand and engaging with your loyalty program.
2. New Ways to Engage Customers
Tiers create natural opportunities to connect with your customers beyond transactions. You can create another layer of names, branding, color schemes, and imagery around tiers, which can create more excitement and more emotional engagement from customers. Use your unique branding in your rewards program and make it creative and specialized by designing program tiers to fit both your brand and audience.
3. Build Long-Lasting Customer Loyalty
Tiered programs establish a foundation for building long-term relationships between customer and brand — on an emotional level. Achieving a special status or rank makes members feel recognized by the brand while achieving incremental benefits creates anticipation and gratification. Customers see the advantages of committing to your brand and will return again and again.
4. Run a Loyalty Program Without Points or Expiration Dates
Using tiers is also great for running a loyalty program without points. This can be especially valid in luxury fashion when using points might be perceived as “cheap”. Expiring points can also be frustrating for customers and are a major undertaking for companies to properly communicate. Also, if you have tiers, long-time customers can keep their benefits without having to start all over again once they’ve redeemed their points.
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, Co-founder, CMO & Head of Partnerships at Antavo, asks Jörn Roegler, CCO at Antavo, what tiered loyalty programs are and how they work.
5. Understand Your Customers Better
With the help of a tiered loyalty program, you can segment your customer base more effectively, by monitoring and analyzing member activities and interests. You can improve the customer experience they provide and create highly-targeted communication. Also, customers will feel that the brand looks after them.
6. Shield Yourself From the Competition
When you have a tier and benefits that a customer can get without using points, you’ll be in a better position to defend customers against the competition. This is because all members will have benefits that are linked to future transactions. 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 will receive additional benefits along with each purchase.
How to Create a Successful Tiered Loyalty Program
If you would like to retain your customers and grow their customer lifetime value, create a tiered loyalty program. 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 will receive a loyalty status that makes them feel more acknowledged and invested in the brand.
But that’s just the tip of the iceberg. Here’s a list of strategies to make your tiered loyalty program truly attractive to your customers:
1. Name Membership Levels to Increase the Feeling of Belonging
Let your creativity flow when choosing the name of each tier. To increase brand engagement, think about the best customer loyalty program names and titles that reflect your business’s personality and really speak the language of your target audience. 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. This allows members to associate their levels of membership with their level of commitment to the community.
2. Pick a Structure that Reflects Your Strategy
There are two ways to set up a tiered loyalty program: based on tiers, or points. If your tiers are based on spend, customers reach new levels by spending more, and every tier corresponds to a specific spend milestone. However, using tiers based on spend limits the number of engagement touchpoints with the brand, and progression will generally be slower and less eventful. If, however, your tiers are based on points, customers will be able to advance through the ranks by making purchases and completing additional engagement actions, like completing a gamified profile, writing a product review, or performing athletic activities. This allows you to incentivize members to participate in a range of non-transactional activities and allows customers to earn points faster.
3. Best Benefits for Your Best Customers
Bring in a touch of exclusivity by underlining and visualizing the difference in benefits. Each level should differentiate customers and reward them for their loyalty and engagement. The top tier must have at least 2-3 more privileges than lower membership tiers, and your best rewards should be reserved for your best customers. This adds an air of exclusivity to the loyalty program and gives a feeling of satisfaction and superiority to those who reach the top ranks. Furthermore, members in the top tiers will be motivated to continue achieving more rewards to get an even higher status that, perhaps, money can’t buy.
4. Personalize Emails Based on Customer Tiers
By including tiers in your rewards program, you automatically have a way to offer more personalized benefits and send more personalized emails as well. Email and loyalty programs are a match made in heaven. If you are aware of customers’ tiers, you can set up automated email campaigns to nurture specific groups. When someone reaches the Silver tier, for example, you already know they are a returning customer. But if you tell them about the benefits of the Gold tier, they’ll be motivated to make more purchases. The goal here is to incentivize customers to engage more by showing off the benefits of higher tiers. By doing so, you’re encouraging members to move from their current customer life cycle stage toward the ultimate goal — real loyalty.
5. Increase Customer Engagement Through Gamification
Gamification is an exciting feature of reward programs that can level up your brand community. By using addictive elements like progress bars and milestones, tiered reward programs are a perfect way to keep customers hooked. Gamification brings in fun, exciting elements while ensuring that customers earn something with every action or every win.
6. Establish an Exclusive VIP Tier to Cater to Status-Driven Customers
Exclusivity makes every customer feel valued. By giving better rewards to customers in your upper tiers, you are showing them that you value their business more. This not only improves their experience with your brand but also improves the likelihood of them becoming brand advocates. Advocates are passionate members of your community who can’t wait to tell everyone else about their experience, making them your most valuable marketing asset.
7. Spice Up the Loyalty Experience With Experiential Rewards
Experiential rewards create an emotional connection with customers. Offer benefits that reward customers outside of the buying cycle. Invite them to a product launch, arrange celebrity meet-and-greets, and create a memorable experience. Exceeding customers’ expectations and adding experiences to your tiered loyalty program will help you stand out.
8. Don’t Forget About Mystery and Hidden Tiers
Create a separate secret tier specifically for influencers and brand ambassadors. This will make it easier for you to manage the loyalty program and provide ambassadors with special rewards and benefits. By implementing a hidden tier in your loyalty program, you can also differentiate between your customers and easily segment your most valuable audience. This will help you offer them the best rewards of all.
7 Awesome Tiered Loyalty Program Examples
There are a wide variety of different types of tiered loyalty programs, so let’s see some great real-life examples that you can use for inspiration.
1. Sephora – Beauty Insider
Sephora’s Beauty Insider loyalty program is one of the most talked-about loyalty programs—and for good reason. Members love it not only because of the tiered approach, but because it provides experiential rewards, unlike pure points programs.
- Members receive perks like earning more points per dollar spent and using points for samples or full-sized products
- Point multiplier events, free shipping, and gifts for reaching the next tier are also among the benefits
- Members of the Rogue tier get to enjoy being first in line for new product launches, restocks, and more
2. Marriott – Marriott Bonvoy
Marriott International is a great example of a company using a tiered reward program as a tiebreaker in a competitive market. Marriott Bonvoy offers its members rewards and experiences that truly make a change in their hotel stays.
- Customers not only earn points with hotel stays, but with credit card usage, car rentals, flights and more
- They can also redeem their points for travel, renting a car or even for gift cards
- Members can use their points for exceptional experiences, like tickets to music festivals, sporting events, or exclusive culinary events
3. Uber – Uber Rewards
With Uber Rewards members earn points with every eligible dollar spent on rides with Uber and orders with Uber Eats. Whether they’re just starting out or they ride with Uber every day, passengers can rack up points and access exclusive membership benefits at each level.
- The free loyalty program is easily accessible through the Uber app
- Diamond tier members receive premium support, highly rated drivers, and double points on Eats
- Members earn 10 reward points per eligible dollar on the route of their choice and get cancellation fees refunded when they rebook within 15 minutes
4. American Airlines – AAdvantage program
Members of the AAdvantage program earn miles when they fly on American, oneworld, and other participating airlines. Members can use their miles for rewards like flights to nearly 1,100 destinations worldwide, upgrades and vacations.
- Members earn miles for every dollar spent at restaurants, plus they can shop at over 950 online stores to increase their mileage balance
- Travelers can reach travel rewards faster by purchasing AAdvantage bonus miles with Mileage Multiplier
- Members can also earn miles when making a donation, receiving 10 American Airlines AAdvantage miles for every dollar with every donation of $25 or more
5. philosophy – philosophers rewards
Philosophy’s rewards program is divided into three tiers: optimistic, confident, and empowered. Each tier gives points to customers for every purchase. By joining a higher tier, customers can enjoy special sales days plus free shipping.
- Customers instantly earn 100 points upon joining
- Members of the loyalty program receive recommendations based on their shopping habits, which can help them rank up to the next tier
- Rewards members can gain extra points for reviews, referrals or by connecting on social media
6. e.l.f. – Beauty Squad
e.l.f. Beauty Squad is a loyalty program with major rewards and surprises for every e.l.f. fan. Beauty Squad members earn points for any e.l.f. Cosmetics purchase and a variety of other activities. There are three tier levels – FAN, PRO, and ICON – and as you advance to a higher level, you unlock access to more perks.
- Members earn points for any e.l.f. cosmetics purchase made at a retailer by uploading a photo of your receipt or online order confirmation
- Customers also receive points for completing their beauty profile, connecting on social media, writing a review, signing up for email or texts, browsing e.l.f.cosmetics.com, and more
- Icon tier members benefit from free shipping and trying new products before launch, for free
7. Lancôme – Elite Rewards
Lancôme Elite Rewards is an exclusive rewards program designed to delight and treat Lancôme lovers. The brand continuously plans new surprises and experiences for its most dedicated members.
- The brand’s loyalty program is based on spend; points can be redeemed as vouchers and spent online
- Members earn 50 bonus points upon signing up and extra points for following the brand on social media
- Customers receive samples with every purchase, exclusive offers, access to private events and birthday rewards
Aim for the Top Tier
Tiers provide a goal for members to shoot for, and therefore an incentive to keep up their interest in your tiered loyalty program for far longer. This, in part, is because preventing the loss of something valuable is more important than acquiring new things, which is why members are just as focused on maintaining their current tier as they are on reaching a higher one. That’s precisely why they will stick with your company instead of choosing another brand.
Setting milestones based on loyalty points earned encourages your customers to interact with every aspect of your program, while moving customers through tiers based on dollars spent increases their lifetime value.
And don’t forget to download Antavo’s Global Customer Loyalty Report 2022, an in-depth report that showcases dozens of statistics as well as future industry trends to help you navigate the world of next-gen loyalty programs.