From Bronze to Diamond: How Tiered Loyalty Programs Can Boost Your Business Strategy in 2024

Point-based membership programs have come a long way since the days of punch cards and paper coupons. In today's competitive business landscape, customer loyalty has become more important than ever. With so many options available to consumers, building and maintaining strong relationships with customers is essential to driving growth and success.

One powerful tool for achieving this goal is a tiered loyalty program, which rewards customers for their engagement and encourages them to keep coming back.

In this article, we'll explore the ins and outs of tier-based loyalty programs, including how they work, the benefits they offer, and how to create one using Voucherify.

What are tier-based loyalty programs and how do they work?

Tiered loyalty or rewards programs are a type of loyalty program that rewards customers based on their level of engagement or spending. In a tiered rewards program, customers earn points or rewards for every purchase or action they take, and those rewards increase as they move up through the tiered membership program.

Typically, tiered loyalty programs have three or more tiers, with each such tier offering different rewards or benefits. For example, a basic loyalty tier may offer discounts on future purchases, while a higher tier may offer exclusive access to sales or events. Customers can move up through the tiers by earning a certain number of points or meeting certain spending thresholds.

Tiered rewards programs are a valuable marketing asset designed to encourage and reward lifetime loyal customers, to retain customers who make repeat purchases and engage with the brand over time. By offering progressive rewards, brands and tiered program owners can build stronger relationships with their valued customers, and increase customer loyalty.

Exclusive membership programs with progressive rewards can also be a valuable promotional tool that helps brands identify and reward their most valuable customers, which can lead to increased revenue and higher customer long-term value.

How loyalty programs with tiers drive business growth and benefit customers?

There are many great benefits to using a tiered rewards program for businesses looking to foster customer responsiveness and brand loyalty. Here are some of the key advantages of tiered rewards programs:

1. Increased customer loyalty and retention

Tiered customer loyalty schemes incentivize and reward customers more to engage with a brand over time, leading to an enhanced relationship with customers. By offering increasingly valuable rewards and benefits as customers move up through the tiers, membership tier programs can help to differentiate customers, reduce customer churn and improve customer retention rates.

2. Improved customer lifetime value

By incentivizing customers to make repeat purchases and engage with a brand over time, tiered customer programs can increase customer equity, which is the total value a customer brings to a business over the course of their relationship.

3. Targeted marketing and personaliztion

By tracking customer behavior and engagement, tiered loyalty programs can provide businesses with valuable insights into their customers' preferences and behaviors, allowing them to see customer behaviors and tailor their marketing strategies more effectively. Progressive points programs can allow businesses to gather data and insights on customers' behaviors and preferences, allowing them to provide more personalized experiences and recommendations.

4. Cost-effectiveness

Incentive tier programs can be a cost-effective way to increase customer engagement and loyalty, as the rewards offered by tiered programs can be tailored to fit within a business's budget. From the customer's perspective, they get to save money on future purchases, which can be particularly valuable for frequent buyers or those who make large purchases.

5. Competitive advantage

A well-executed tiered customer loyalty program can give businesses a competitive advantage by providing customers with a compelling reason to choose their brand over competitors.

6. Exclusive rewards

Level-based rewards programs often offer exclusive rewards and benefits to customers who have achieved higher loyalty tiers, such as discounts past purchases, free shipping, or product pre-launch access. These rewards can make customers feel valued and appreciated by the brand.

7. Better value for money

By offering better rewards, and benefits for repeat purchases or specific actions, loyalty programs with multiple levels of relevant rewards can help customers get better value for their money and feel more confident in their purchasing decisions.

8. Greater engagement

Tiered customer appreciation programs incentivize customers to engage with a brand beyond just making purchases, such as leaving reviews or referring friends. This can lead to a strengthened bond with the brand through customer behaviors and a sense of community among the brand community of customer loyalty program tiers and its members.‍

9. Increased recognition

As customers move up through the tiers of a loyalty program, they can receive increased recognition and exciting rewards from the brand, which can foster a sense of accomplishment and pride.

Cons of tiered loyalty programs

Although tiered loyalty programs are not specific to certain industries, some industries may be better suited for them than others. For example, industries with high repeat business, such as airlines, hotels, and retail, may benefit more from tiered loyalty programs. Additionally, industries with high competition may also benefit from offering a tiered loyalty program as a way to differentiate themselves and increase customer loyalty.

As for the potential cons of creating tiered loyalty programs, here are some examples:

1. High costs: Creating and implementing a tiered loyalty program can be expensive, especially if the rewards and perks offered at each tier are significant.
2. Complexity: A tiered loyalty program can be complicated to design and manage, especially if there are multiple tiers with different requirements and benefits.
3. Unbalanced rewards: If the rewards and perks offered at different tiers are not well-balanced, it can lead to customer frustration and disengagement.
4. Lack of personalization: If the program does not feel personalized or relevant to individual customers, it may not be effective in building loyalty.
5. Poor execution: The success of a tiered loyalty program depends on its execution, and poor execution can lead to a lack of engagement and loyalty from customers.
6. Cheating potential: Tiered loyalty programs may incentivize customers to game the system by taking advantage of loopholes or engaging in non-genuine behavior to earn rewards.
7. Customer fatigue: If the program requires too much effort or doesn't offer enough value to customers, it may lead to customer fatigue and disengagement.

How to build a successful tiered loyalty program?

There are several steps to consider before you start building your tiered loyalty program:

1. Come up with branded names for membership levels

Naming membership levels is an excellent way to create a sense of community among customers. By assigning unique names to various tiers, customers feel like they are part of an exclusive club. It also creates a sense of achievement, as customers work their way up the ladder towards more significant rewards and benefits.

Moreover, fun names can also be a powerful tool for brand recognition. Customers will be more likely to remember and engage with a loyalty program that has unique and creative names for its tiers. In a crowded market, this can be a crucial differentiator. Consider using a theme for your membership level names. For example, a coffee shop might use different names of coffee sizes for its tiers, such as "Short," "Grande," and "Venti."

One of the prominent examples of creating fun and engaging membership names based on tiers is Singer Featherweight Shop. The brand has created a loyalty program called Featherweight Sewciety, which is tailored towards sewing and quilt enthusiasts. The program consists of tier names that are based on the customer's skill level and their journey with the brand. For instance, beginners are referred to as Stitchery Friends, and as they progress, they can become a Patchwork Pal, and eventually, a Quilting Confidante. This loyalty program is unique as it combines the customer's level of expertise and intimacy with the brand, showcasing the customer's investment not just in the products but in their relationship with Singer Featherweight.

2. Choose the best structure for your tiered loyalty program

When creating a tiered loyalty program, it's crucial to choose a structure that aligns with your business strategy. You can choose between a spend-based tier structure or a points-based structure. While spend-based tiers limit engagement touchpoints with the brand, they can incentivize customers to spend more money. In contrast, points-based structures encourage customers to participate in various non-transactional activities and can help you gather more customer data. Ultimately, the structure you choose will depend on your business goals and the type of engagement you want to foster with your customers.

3. Make your best customers feel appreciated

When creating a tiered loyalty program, it's important to provide exclusive benefits to your best customers. This can be achieved by offering additional privileges to customers in the top tier compared to those in lower tiers. By providing unique rewards and incentives to your most loyal and engaged customers, you can make them feel appreciated. This not only increases their loyalty but also creates a sense of exclusivity that can motivate them to continue engaging with your brand to reach higher levels of the program. Moreover, this creates a feeling of satisfaction and superiority among top-ranked customers and motivates them to strive for even greater rewards and status that cannot be bought with money.

Marriott International, one of the world's largest hotel chains, has a tiered loyalty program called Marriott Bonvoy. The program has six different tiers: Member, Silver Elite, Gold Elite, Platinum Elite, Titanium Elite, and Ambassador Elite. Customers can earn points by staying at Marriott hotels, booking through their website, and utilizing Marriott's co-branded credit cards. These points can be redeemed for free hotel stays, flights, car rentals, and other travel-related expenses. Moreover, as customers progress through the tiers, they unlock exclusive perks such as late check-out, free breakfast, and personalized travel planning services from Marriott's team of travel experts.

4. Customize communication to match customer tiers

​​Customizing communication to match customer tiers is a crucial aspect of a successful tiered loyalty program. By segmenting your email list based on tiers, you can create personalized content that resonates with each group of customers. For example, customers in the top tier could receive emails and/or notifications with exclusive promotions and special rewards that are not available to other tiers. Additionally, sending targeted messages through various distribution channels to specific groups of customers can increase engagement and help to build a stronger relationship between your brand and your customers.

5. Experiential rewards as a cherry-on-top of your loyalty program

Experiential rewards can help establish an emotional bond with your customers. Consider offering perks that go beyond typical transaction-based benefits. Examples include invitations to special events like product launches or meet-and-greets with celebrities. Such unique experiences can leave a lasting impression on customers and differentiate your loyalty program from others. By exceeding expectations and providing memorable experiences, you can elevate the appeal of your tiered loyalty program.

The Nordy Club is one of the best examples of tiered loyalty programs which implement experiential rewards in their business strategy. Nordstrom's tiered loyalty program has four tiers: Member, Insider, Influencer, and Ambassador. The VIP tier of the Nordy Club is the Ambassador level, which is the highest and most exclusive tier. Ambassador members receive a range of benefits and perks that are not available to members of lower tiers. These benefits include free alterations, access to a dedicated customer service team, invitations to exclusive events, and early access to new products. Additionally, Ambassador members have the ability to earn triple points on all purchases made with their Nordstrom credit card.

One of the unique benefits of the Ambassador tier is the ability to create a personalized shopping experience through the Nordstrom Trunk Club. Members can work with a stylist to curate a wardrobe that fits their personal style and needs, with the added convenience of having items shipped directly to their home.

6. Unlock the benefits of a secret tier in your loyalty program

Consider adding a mystery or hidden tier exclusively for brand ambassadors and influencers. This will simplify program management and allow you to offer them unique benefits and rewards. By incorporating a secret tier into your loyalty program, you can also distinguish between your customer base and categorize your most significant audience. Doing so enables you to provide them with the most exceptional rewards.

Examples of brands leveraging tiered loyalty programs for success

There are several tiered reward programs which have been taking the world by storm. Here are some of the most prominent examples:

1. Sephora Beauty Insider

Sephora Beauty Insider is an example of a successful tiered loyalty program. This program has three tiers – Insider, VIB, and Rouge – each offering different benefits, including birthday gifts, free beauty classes, and exclusive products. This has helped Sephora to create a community of beauty enthusiasts, as well as to amplify customer participation.

2. Starbucks Rewards

Starbucks' tiered loyalty program, known as Starbucks Rewards, is designed to reward and retain loyal customers. The program has three tiers: Green, Gold, and the invite-only Starbucks Reserve. Customers earn points, or "stars," for purchases made with a registered Starbucks card or through the mobile app.

Green members earn 2 stars for every $1 spent, while Gold members earn 2.5 stars per $1 spent. Once customers reach 300 stars within a year, they advance to the Gold level and receive personalized Gold membership cards. Gold members receive benefits such as free drinks and food items, a birthday reward, and exclusive offers. Starbucks Reserve members enjoy all the benefits of Gold membership, plus entry to exclusive events and early access to new products. The program also offers bonus star opportunities and surprise rewards to keep members engaged and excited.

3. Delta SkyMiles

The airline industry is another sector that has been successful in implementing tiered loyalty programs. Delta SkyMiles, for example, offers customers different levels of benefits based on their loyalty, including free checked bags, priority boarding, and lounge access.

4. Uber Rewards

Uber Rewards is a tiered loyalty program that rewards Uber customers for their loyalty and usage of the service. The program has four tiers: Blue, Gold, Platinum, and Diamond. Each tier offers various benefits such as priority support, price protection on a route, and access to premium features like Uber Black and Uber Eats. Customers earn points for every dollar spent on Uber rides, Uber Eats, and JUMP bikes and scooters. The more points earned, the higher the tier and the more benefits received. The program is designed to incentivize repeat usage of the platform and provide a better customer experience for loyal users.

How to Set Up a Successful Tiered Loyalty Program with Voucherify?

Creating a multi-level loyalty program with Voucherify is a straightforward process. Here are the general steps to follow:

1. Define your loyalty program members' structure

Determine how many tiers your loyalty program members will have and what actions (earning rules) customers will need to take to move up through the tiers. For example, you might have a bronze, silver, and gold tier, with top tier members and top tier customers, either needing to spend a certain amount of money or make a certain number of purchases to move up through the tiers.

2.Choose rewards for each tier

Rewards are a key component of any successful tiered loyalty program, and Voucherify offers a range of reward options that you can customize to fit your business or brand community and needs. Here are some of the rewards you can offer in your own tiered loyalty program program, with Voucherify:

• Points-based Rewards – allow customers to earn points for specific actions, such as making a purchase or referring a friend.

• Discount-based Rewards – offer customers a percentage or flat discount on their purchases.

• Tier-based Rewards – offer exclusive benefits and rewards to customers in higher tiers.

• Cashback Rewards – offer customers a percentage of their purchase amount back in the form of store credit or other rewards.

• Material Rewards – this means that customers can earn rewards in the form of physical items, such as merchandise or gift cards, rather than just points or discounts.

3. Map earning rules and restrictions

Earning rules specify the necessary actions customers must perform to earn loyalty points, which can then be used to claim loyalty rewards. Voucherify allows you to establish eight different types of earning rules based on:

• Segmentation of customers – enables targeted distribution of rewards or incentives to specific groups of customers based on their behaviors or attributes.
• Paid orders made by customers – rewards customers with incentives or benefits based on the number or value of purchases they make.
• Custom events performed by customers on your application/website – allows the rewarding of customers with incentives or benefits based on specific actions they perform on your website or application.
• Tier-based conditions – in Voucherify, tier-based conditions can be created using tier-events. Tier events are triggers that are used to determine when a customer qualifies for a specific tier based on their behavior or actions.

Every earning rule can have a unique time frame that determines its activation period.

Summary

Using reward tier loyalty programs with Voucherify is an effective and reliable way for businesses to enhance customer participation, increase customer lifetime value, and drive revenue growth. With Voucherify, businesses can easily design, implement and manage tier based loyalty programs that are tailored to their unique needs and goals.

Whether you're a small business looking to launch your first loyalty program or a large enterprise seeking to upgrade your existing rewards program further, Voucherify offers the tools, expertise, and support you need to achieve your own loyalty goals. By leveraging the power of rewards-based loyalty programs and Voucherify's innovative platform, businesses can build lasting relationships with their valued customers everywhere, drive repeat business, and achieve sustainable growth over time.

Learn more: Explore Voucherify's Open Source Loyalty Accelerator

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