Best Practices & Examples of Tiered Loyalty Programs

Businesses are continually innovating to keep their loyal customers engaged and coming back for more. Amidst the myriad strategies available, tiered loyalty programs have emerged as an effective means to reward customer commitment. Offering a perfect blend of incentives and exclusivity, these programs have redefined how businesses view customer loyalty. As we journey through this guide, we'll demystify the essence of tiered loyalty programs and why they could be the game-changer your brand needs.

What is a Tiered Loyalty Program?

In essence, a tiered loyalty program divides loyal customers into different levels or "tiers" based on their engagement with the brand, typically measured by their purchases or interactions. The higher the tier, the more exclusive and lucrative the rewards. This stratified approach offers numerous benefits, ensuring customers always have something to strive for.

Basics of Structuring Tiers

Tiered loyalty programs often consist of several levels, with each offering its own set of perks. The goal is simple: the more loyal a customer, the better the rewards. For instance, entry-level tier members might earn basic loyalty points, while the elite tier might offer experiential rewards or early access to sales.

Differentiators and Incentives

These programs are not just about collecting points. It's the unique offerings and incentives at each tier that keep customers engaged. Whether it's exclusive member-only events, higher percentages of cash back on a credit card, or early access to new products, tiered reward programs ensure that members receive benefits proportional to their engagement.

From Occasional Shoppers to Brand Advocates

One of the biggest transformations tiered programs bring about is converting occasional shoppers into brand advocates. Through systematic rewards and recognitions, brands can foster deeper connections, ensuring customers feel valued at every interaction.

10 benefits of tiered loyalty programs

1. Gamification Effect

Tiered loyalty programs effectively harness the power of gamification, turning the shopping experience into a rewarding challenge. Just like in video games where players strive to reach the next level, customers are motivated to achieve the next tier, unlocking better rewards as they go. This process not only makes shopping more engaging but also stimulates repetitive purchases. According to Gallup, gamified strategies can lead to a 21% increase in business outcomes due to enhanced engagement.

2. Community Creation

Higher tiers in loyalty programs often come with exclusive perks like members-only events or VIP treatments. These exclusives naturally cultivate a sense of community among top-tier members. They don't just feel like customers; they feel part of a privileged group. This bond not only enhances their connection to the brand but also promotes organic word-of-mouth referrals. Harvard Business Review highlights the importance of community-driven marketing, stating that members of brand communities spend 19% more than non-members.

3. Automatic Segmentation for Campaigns

With a tiered loyalty program, businesses can automatically segment their customer base based on purchasing behaviors and loyalty points. This segmentation is invaluable for targeted marketing campaigns. Brands can craft tailored messages for each segment, ensuring more relevance and a higher likelihood of conversion. Mailchimp, a leading marketing automation platform, found that segmented campaigns have a 14.31% higher open rate compared to non-segmented campaigns.

4. Creating Exclusivity

Exclusivity is a powerful tool in the world of marketing. By offering exclusive rewards or early access to higher tier members, brands create a sense of belonging and importance. This not only encourages other members to climb the tiers but also cements the loyalty of existing top-tier members.

5. Increased Customer Spending

As customers strive to reach higher tiers and better rewards, there's an inherent motivation to spend more. Tier thresholds act as spending goals, prompting customers to make additional purchases, even if just to reach the next tier. This increase in spending can significantly boost a brand's revenue over time.

6. Reinforces Brand Loyalty

Tiered programs have a way of reinforcing loyalty among users. The mere existence of higher tiers acts as an incentive for customers to keep interacting with the brand, achieving milestones, and reaping better rewards. According to research, customers who are members of loyalty programs, especially tiered ones, tend to spend more than non-members.

7. Boosts Customer Feedback and Engagement

Tiered loyalty programs often come with channels for feedback. As customers rise through the tiers, they are more likely to offer valuable insights into improving products or services. This open dialogue doesn’t just foster transparency; it also enables businesses to directly enhance their offerings based on loyal customer feedback. Moreover, customers who feel their voices are heard are more likely to remain loyal and engaged.

8. Diversified Rewards Appeal to a Wider Audience

Every customer is different, and so are their preferences. By structuring diverse rewards across various tiers, brands can cater to the broad spectrum of their customer base. Whether it's early access for a shopaholic, experiential rewards for the experience-seeker, or simple discount vouchers for the budget-conscious, tiered loyalty programs have something for everyone.

9. Enhances Data Collection and Personalization

These programs are goldmines for customer data. As customers strive to unlock higher tier rewards, their interactions, shopping patterns, and preferences are recorded. This data is invaluable. It allows businesses to tailor their marketing campaigns, ensuring they resonate more effectively with their target audience. Personalized experiences, in turn, drive higher conversion rates. According to research, personalized consumer experiences can result in an 80% increase in business.

10. Drives Non-Purchase Behaviors

Tiered loyalty programs aren't just about purchasing. They can be structured to reward other valuable behaviors like social media shares, referrals, reviews, or even attending brand events. By incentivizing these non-purchase behaviors, businesses foster a more holistic customer-brand relationship. It’s not just about the money; it’s about the entire ecosystem of interaction with your brand.

Tiered Loyalty Programs: 10 Best Practices and Tips

1. Clear and Transparent Tiers

Always ensure that the rules and benefits of each tier are crystal clear. A customer should never be left wondering how many points they need to reach the next level or what benefits come with each tier. Having an easily accessible FAQ page or a visual representation, like a progress bar, can be instrumental. Reports show that clear navigation and information accessibility can boost user experience by up to 78%.

2. Offer Immediate Incentives

Don't make customers wait too long for their first reward. Offering a small incentive as soon as they sign up or make their first purchase can significantly boost enrollment rates. As revealed by Invesp, a well-structured loyalty program can increase the average purchase frequency by up to 20%.

3. Ensure Seamless Integration Across Channels

In today's digital age, customers might interact with your brand through various channels - online stores, mobile apps, or brick-and-mortar locations. Ensure your tiered loyalty program functions seamlessly across all these channels for a consistent user experience. According to Harvard Business Review, omnichannel customers tend to spend 4% more in-store and 10% more online than single-channel customers.

4. Engage with Personalized Communications

Send personalized emails or notifications updating members about their tier status, upcoming benefits, or how far they are from the next level. Personalized marketing messages can lead to a 19% increase in sales, as highlighted by SmarterHQ.

5. Regularly Update and Refresh Rewards

Keep your rewards fresh and relevant by updating them periodically. This not only keeps the program exciting but also ensures that it aligns with current market trends and customer preferences. Updated loyalty programs can lead to a 30% increase in customer retention rates.

6. Encourage Social Media Sharing

Integrate social media actions into your loyalty program. Allow customers to earn points by sharing purchases, leaving reviews, or referring friends. This not only boosts your brand's visibility but also leverages the power of social proof. Research shows that 83% of consumers trust recommendations from friends and family over any other form of advertising.

7. Periodic Tier Review

It's essential to periodically review and, if necessary, adjust the criteria for each tier. Market dynamics and customer behavior can change, and your program should be agile enough to adapt. Flexibility ensures the program remains relevant and engaging.

8. Offer Experiential Rewards

While discounts and cashbacks are great, offering experiential rewards, like exclusive events or workshops, can create memorable brand experiences. Eventbrite highlights that 78% of millennials prefer spending on experiences rather than physical items.

9. Leverage Feedback

Actively seek feedback about your loyalty program. Understanding what your customers love and what they think could be improved can offer invaluable insights. In fact, brands that actively engage and act on customer feedback witness a 25% higher customer retention rate.

10. Prioritize Data Security

Ensure that your loyalty program platform is secure and compliant with all relevant data protection regulations. Reassuring customers about the safety of their data can enhance trust. As per Gemalto, data breaches can lead to a 31% loss in customers.

15 Unique Examples of Tiered Loyalty Programs

1. Peloton's "The Pack" Community

Peloton, a high-end exercise equipment and class subscription company, has expanded its offerings to cultivate an exclusive community known as "The Pack". Members who've reached certain milestones or class counts get badges and gain access to special events, exclusive rides, and community meetups. It's a testament to how tiered loyalty goes beyond traditional point systems and dives into fostering community.

2. LEGO's VIP Loyalty Program

While toys might not be the first industry to come to mind when thinking about loyalty programs, LEGO's VIP program stands out. Members earn points for purchases, but the real charm is in the exclusive sets available only to VIP members and early access to new products. It brings a gamified experience for adult fans of LEGO who are looking for unique and limited-edition sets.

3. Monzo's "Monzo Plus" Banking

Banking might seem like a dry industry for loyalty programs, but Monzo, a UK-based digital bank, changes the game with its "Monzo Plus". This tiered membership program offers tangible benefits like higher withdrawal limits abroad, interest on account balances, and exclusive card colors. It’s a refreshing take in an industry typically marred by minimal differentiation.

4. Imperfect Foods' Referral System

Imperfect Foods, a service that delivers 'imperfect' produce to consumers, has a unique loyalty spin. Instead of traditional points, members climb tiers by referring friends. The more referrals, the bigger the discounts and bonuses. This approach not only gains new customers but strengthens the loyalty of existing ones by involving them directly in the brand's growth.

5. The Wizarding World's Gold Subscription

Fans of Harry Potter can dive deeper into their passion with the Wizarding World's Gold Subscription. This tiered program offers subscribers exclusive pins, early access to merchandise, and even priority bookings for Warner Bros. Studio Tour London. It's a magical way of deepening brand engagement by offering truly experiential rewards.

6. TOMS Passport Rewards

The socially-conscious shoe brand TOMS turns purchases into a journey with its Passport Rewards. Members earn stamps instead of points, with higher-tier members getting first dibs on sales and new products. It's a beautiful example of a brand story woven directly into a loyalty program.

7. Ulta's Ultamate Rewards

The Ultamate Rewards by Ulta Beauty provides not only points for every dollar spent but also offers its highest-tier members a full day of beauty treats during their birthday month. This dedicated day of pampering is a unique approach to make top-tier members feel cherished. For businesses, dedicating special days or events to honor high-tier members can amplify the exclusivity and make members feel genuinely special.

8. Binge's "Binge Collective" Program

Binge, an Australian streaming service, recognizes its most dedicated viewers with its Binge Collective. Members get unique badges for their viewing milestones, early access to new features, and even opportunities to attend exclusive Binge events. It transforms the solitary act of watching TV into a shared, communal, and rewarding experience.

9. BarkBox's Super Chewer Program

Dogs and their owners share a special bond, and BarkBox taps into this relationship with its subscription service. Their Super Chewer Program is for pups with strong jaws, sending them sturdier toys and treats each month. This specialized tier caters to a niche but dedicated segment, underscoring the importance of understanding customer needs. Consider niches within your customer base and tailor specific tiers to address their unique needs.

10. REI Co-op Membership

REI Co-op Membership from the popular outdoor retailer offers a unique approach to tiered loyalty. Instead of just standard discounts, they provide members with exclusive events and sales. This fosters a strong sense of community around the brand and deepens customer commitment. An actionable tip from this model is to host exclusive events or offer priority access to new products for higher-tier members, as it makes them feel more valued and enhances brand loyalty.

11. Nordy Club by Nordstrom

Nordy Club by Nordstrom takes a different route. While they also operate on a points-per-purchase system, they elevate the experience for higher-tier members by offering beauty and style workshops and "First to Shop" events. The unique aspect here is the focus on educational events, which offers customers more than just products. Based on Nordstrom's success, businesses might consider implementing workshops or tutorials related to their products to deepen the connection their customers have with the brand.

12. DSW VIP loyalty program

The DSW VIP loyalty program, from the shoe giant DSW, caters to its top-tier members with perks like free shipping and early sale access. But what truly sets it apart is the personal touch they add by giving a birthday phone call to their high-tier members. This level of personal interaction elevates a member's experience from just transactional to personal. A tip for businesses is to consider adding personalized touches to their rewards program, be it a handwritten note, a personal call, or any gesture that would make the customer feel genuinely recognized.

13. Peloton's All-Access Membership

Peloton's All-Access Membership may be known for its fitness classes, but it's their tiered approach that's worth noting. Beyond the regular classes, higher tiers get advanced booking, specialized content, and even one-on-one coaching sessions. Peloton has mastered the art of making its top members feel like they're a part of an exclusive fitness community. For businesses looking to replicate this, offering exclusive content or specialized services for top-tier members can be a game-changer.

14. Yeti's Outdoors

Yeti's Outdoors loyalty program goes beyond just the purchase. High-tier members get invited to exclusive outdoor events, adventure trips, and even masterclasses with outdoor experts. Yeti has made their loyalty program an experience rather than just a points system. A take-home tip for brands is to think outside the box and offer experiences, not just discounts. Collaborating with industry experts for exclusive events or masterclasses can be a fresh addition to a tiered loyalty program.

15. Birchbox's Beauty Subscription

Birchbox's beauty subscription service stands out with its tiered loyalty program. Beyond the monthly beauty box, high-tier members receive priority access to select products, exclusive content, and even input on future box items. This co-creation aspect is unique, making customers feel like an essential part of the brand.

A tip for other businesses is to involve top-tier members in the decision-making process, be it for new products, services, or even marketing campaigns. This inclusion creates a deeper connection and commitment to the brand.

In the ever-competitive market, the tiered loyalty programs mentioned above have managed to stand out by offering more than just points or discounts. They've woven experiences, exclusivity, and personal touches into their programs, making members feel genuinely valued. Whether it's by hosting exclusive events, offering educational content, or adding a personal touch, there's plenty of inspiration to draw from these brands to craft a unique and compelling tiered loyalty program.