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!
Table of Contents
In Antavo’s latest Global Customer Loyalty Report we’ve gathered every important detail you need to know about the current loyalty landscape, how loyalty programs drive engagement and customer retention, plus insight on impactful trends to look out for in the future.
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 (on which level they currently are in the program). 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 loyalty as a flower that needs time and nurturing before it can blossom. This is the core component of tiered programs is repeated actions 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.
How Do Loyalty Tiers Work?
Tiers are popular to this day due to their addictive feedback loop and because the customer journey and the experience design revolve around long-term engagement. 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.
The biggest challenge when it comes to designing a tiered loyalty program is not to leave large gaps between the milestones. In other words, leveling up shouldn’t get boring or feel overly prolonged. The solution to this is to allow alternative ways to progress, outside making purchases.
There are two types of tiers in loyalty programs: spend-based and value-based. Spend-based tiers are quite straightforward: when customers reach a cumulative threshold in their spending (or purchase frequency), they level up. Value-based (or point-based tiers) are more exciting, because in these structures members can progress towards higher tiers by doing non-transactional activities too.
The 6 Benefits of Tiered Loyalty Programs
Tier-based loyalty programs are a phenomenal way to get your customers invested and increase your ROI. According to program owners surveyed in one of our industry benchmark Loyalty Reports, tiered programs have a 1.8x, aka 80% higher return on investment (ROI) compared to programs that do not offer tiers. On top of that, loyalty programs in general were perceived as helpful during economic downturns, and 9 out of 10 companies reported a positive ROI. In the section below, we’ll show you everything about what makes tiered reward systems so uniquely effective for engaging customers and boosting revenue.
1. Constant Motivation for Customers to Interact With You
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 Emotionally 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. Creating this bond and getting people truly invested in your tier system will inevitably have a positive effect on customer retention and CLV, constantly prompting customers to spend and engage more in anticipation of unlocking a new set of rewards.
3. Long-lasting Customer Loyalty and Commitment
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. Exclusivity That Customers Actively Seek
The tiered membership model is quite versatile. It can be used in free, freemium, even in paid loyalty programs. Subscription-based or progressive loyalty tiers are able to provide a much-needed edge, designed specifically to reach the most loyal group of customers. Elevating these members – who are willing to pay for the extra layer of exclusivity – with real value, limited access, experiential rewards, and premium benefits will help ensure their satisfaction, and with it, their continued interest and engagement, this way boosting both AVB and ROI.
5. Community Building Through Shared Member Experiences
Look at loyalty program levels as little communities: containing customers with similar interests, product preferences, maybe even lifestyles. Building a sense of comradery and community between these members with online and offline events, challenges, and competitions will drive engagement, encourage advocacy, and create a positive emotional connection.
6. A Shield Against 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.
8 Strategies 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 spend, 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.
However, if your tiers are based on points, customers will be able to advance through the ranks by making purchases and completing additional engagement actions, like filling out 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. Reserve the 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 (limited-item collections, invitation-only event access, high ticket partner 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. Show Next-Level Tier Benefits In Personalized Emails
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 and purchase 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. Remember to regularly verify your email list to make sure you’re reaching the right people.
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.
8 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 members-choice birthday 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, shopping, golf, 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 Pro
With Uber Pro, drivers earn points with every trip they complete, plus 3 extra points for peak hour journeys. Their’ tier status gets determined based on the points they’ve accumulated in the previous 3 months. At the beginning of every new 3-month period, their points are nullified, and they can start collecting again.
- Members can unlock car-related benefits, such as fuel and in-store savings, free 24/7 breakdown assistance, and discounted car maintenance
- Recreational perks include Gympass membership, tuition coverage, and language lessons
- Besides their point earnings, drives also need to excel at additional criteria, regarding driver ratings and cancellation rates to be eligible for the program
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 1,000 destinations worldwide, upgrades, and vacations.
- Members earn miles for every dollar spent at partner restaurants, shopping at over 950 eligible online stores, or using their Citi® / AAdvantage® credit cards
- They can also earn miles when making a donation to “Stand up to Cancer”, receiving 10 American Airlines AAdvantage miles for every dollar with every donation of $25 or more
- Travelers can reach travel rewards faster by purchasing AAdvantage bonus miles with Mileage Multiplier
5. Charlotte Tilbury – Charlotte’s Loyalty Programme
Charlotte’s Loyalty Programme offers a wide variety of exceptional perks to beauty lovers. There are 6 tiers within, which members can unlock based on their spend in a 12-month long period. The perks within each tier are differentiated in both transactional and non-transactional value.
- Members can enter the program without initial purchases and are welcomed with Magic Benefits
- Customers earn both Magic Rewards (free gifts, vouchers) and Magic Benefits (free delivery, engraving, exclusive masterclasses, early access to launches) in each tier.
- Besides the tier structure, loyalty members can also earn coins by completing soft actions like completing quizzes, shopping for certain products, and filling out their profile information.
6. Nordstrom – Nordy Club
Nordstrom’s loyalty program Nordy Club provides premium perks for its members, who are categorized into 3+1 Nordy Club levels based on their spend. Members earn different amounts of points based on how they shop and which tier they belong to:
- 1 point per $1 spent with any payment method, 2 points per $1 using Nordstrom credit or debit card, and 3 points per $1 for Ambassador and Icon leven customers using their Nordstrom credit card
- The program has an exclusive tier – available to cardmembers only – called Icon, which contains their highest ticket benefits, such as Icon Customer Care, Icon-only Events, Dining or Spa experience
- All loyalty members are eligible for rewards, like free basic alterations, lifestyle workshops and many more
7. 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 10 points for every $1 they spend on e.l.f. Cosmetics, or any purchases made at retailers via uploading their receipts/screenshots of their 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, personal beauty consultation and trying new products before launch, for free
8. Lancôme – My Lancôme Rewards
My Lancôme 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 at the My Lancôme Rewards Dashboard or spent online on full-sized products & loyalty-exclusive items in the Rewards Catalogue
- Members earn 50 bonus points and 10% off their first purchase upon signing up
- As they advance, members can access VIP flash offers, point multiplier events, in-person masterclasses, invitation to VIP beauty services
Antavo’s Technology In Action: Adding a Unique Spin to Tiers
Tiered reward systems have been at the core of Antavo’s loyalty platform since the beginning. And since we are a pure-play technology company, we offer a variety of ways to make your tiered structure unique:
- Soft tier downgrade: losing the tiered privileges due to an expiration date is a bad experience, but without it, members wouldn’t be active. With our capability, you can take the middle road and instead of wiping their whole progress, just push them back one level. Or don’t take away all of their perks when the expiration happens, just limit how much they can use it — our technology allows this.
- Segment-driven tiered experience: Use Antavo’s platform to offer vastly different rewards for each level. For example, a Prize Wheel would show different rewards based on the member’s tier level.
- Engagement-driven leveling: Our sophisticated points economy module allows users to define which actions count towards leveling the tiers. If you wish, you can specify that referrals should not advance someone’s tiers, but earning points through running (tracking it via a sports tracker) should. Or you can have two separate tiers, one that can be advanced by making purchases, and one where leveling is done through soft actions.
- High level of integration: Antavo has established integrations with leading CDP, CRM and Marketing Platforms, such as Braze, Bloomreach and Salesforce. This way you can build tiers on rich data from your CDP platform, or trigger personalized messages when someone reaches a higher tier, using a marketing automation platform.
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.
Whenever you require help introducing or revamping your own program, our team of experts is here for you, just book a demo or send an RFP.
And don’t forget to download Antavo’s Global Customer Loyalty Report, 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.
