While points-based systems have their merits, tiered loyalty programs can be even more powerful for customer retention. Let's see why and how.
October 23, 2023
Your loyalty program shouldn't be just another feature. It must be at the heart of your customer engagement strategy.
But not all loyalty programs are equal.
While points-based systems have their merits, tiered loyalty programs can be even more powerful for customer retention, with each tier being richer and more rewarding than the last.
In this article, we'll break down the what, why and how of multi-level loyalty systems, so you can decide if this is the loyalty marketing strategy your e-commerce brand needs.
A tiered loyalty program is a structured rewards system that offers escalating rewards and benefits as customers engage more with a brand, encouraging not just one-off transactions but ongoing loyalty.
A tiered loyalty program is like the VIP section of customer engagement. But it's not a velvet rope affair. Everyone's invited.
Rather than a one-size-fits-all approach, it segments rewards into different levels or "tiers."
Customers ascend these tiers by accumulating points, spending money, or engaging with your brand in diverse ways, like social sharing or referrals.
The higher the tier, the juicier the perks.
So, how does these tiered loyalty programs operate?
Well, you start by outlining criteria for each tier. Think of it as your loyalty ladder.
Entry-level tiers usually offer basic perks like small discounts or early access to sales.
As customers climb this ladder, they unlock more extravagant rewards: exclusive merchandise, invites to special events, or even personalized services.
These enticements not only keep customers happy, they also fuel their zeal to reach the next level.
But don't underestimate the psychology at play.
A tiered system introduces an element of gamification, igniting that innate human drive to progress and achieve.
It's a winning loop: the more customers interact with your brand, the more rewards they garner, which in turn fuels further engagement.
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Multi-level loyalty programs are not just the latest trend, but a real win-win for your company. Let's find out why.
When we talk about supercharging customer lifetime value, we're referring to transforming one-time shoppers into perennial patrons.
With a tiered system, every purchase becomes a stepping stone to loftier rewards, making customers ponder: "Why shop anywhere else?"
They don't just spend. They invest in future benefits, so they're more likely to visit your e-commerce store, expanding their purchase history over time.
And the statistics show it. Brands offering tiered programs report a 1.8 times higher ROI compared to loyalty programs that don't offer tiers (Antavo, 2022).
Tiered loyalty program allows to categorize customers into different buckets based on their engagement levels.
With this nuanced view, you can say goodbye to broad-stroke marketing tactics and hello to hyper-targeted outreach.
For instance, lower-tier customers might get nudged with deals that have a lower barrier to entry, while your high-rolling top-tier patrons might receive invites to exclusive webinars or special edition product releases.
This segmented approach lets you tailor not just offers but entire experiences to distinct customer groups, elevating their journey from run-of-the-mill to exceptional.
Adding customer segmentation to the mix strengthens your overall strategy.
You can craft laser-focused campaigns and measure their efficacy in real-time, adjusting as you learn more about each segment’s wants and whims.
By regularly updating your rewards and sending customized, tier-specific communications, you're continually nudging customers to interact with your brand.
This constant dialogue keeps your brand top-of-mind and turns routine shopping into an enriching experience.
The brilliance of gamification lies in transforming ordinary tasks into extraordinary journeys.
Customers don't just want transactions; they want experiences, filled with milestones, achievements, and the thrill of leveling up.
This excitement not only keeps customers coming back but also significantly elevates their satisfaction, as each tier conquered is a victory in their consumer journey.
When you offer elite experiences or swanky benefits to your top-tier customers, you're not merely handing out rewards; you're setting the stage for something bigger : a brand community.
Imagine you had a group of super fans who not only loved your brand, but were also its spokespeople.
They'll be your frontline advocates in online forums, social media, and even good old-fashioned word of mouth. That kind of organic advocacy is marketing gold you can't buy.
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When customers hit the upper echelons of your tiered loyalty program, they naturally want to shout it from the rooftops.
They become vocal advocates, sharing their perks on social media and raving about your brand in their social circles.
In the age of influencers and social proof, this organic marketing can outshine even the most polished advertising campaigns.
Here are our favorite examples of thoughtful and inspiring tiered loyalty programs:
Sephora is a global leader in beauty and skincare retail.
Their Beauty Insider loyalty program is a textbook example of how to do tiered loyalty right.
It has three tiers: Insider, VIB, and Rouge.
The Insider tier offers birthday gifts and free beauty classes; move up to VIB by spending $350 in a year, and you unlock one-on-one makeup consultations, plus exclusive seasonal savings. Go big by spending $1,000 to hit the Rouge level and enjoy free custom makeovers and invitations to exclusive events.
As you can see, apart from the quintessential points-for-purchases system, it goes a step further by offering highly personalized and experience-based rewards.
It's not just about collecting points; it's about becoming part of an exclusive beauty community.
Starbucks is a worldwide coffeehouse chain.
Their rewards program also operates on a tiered basis, but it's all about the stars.
Green level gets you free refills, while at Gold level (earned by collecting 300 stars) you snag a personalized Gold Card and can redeem stars for anything on the menu.
What makes Starbucks distinctive is their use of their mobile app to merge the payment and reward experience seamlessly, making it incredibly convenient for customers to earn and redeem stars.
Amazon is an e-commerce giant offering everything from books to electronics and groceries.
While not strictly a tiered program, Amazon Prime has diversified into various categories, including Prime, Prime Student, and Prime Video.
This loyalty program succeeds by offering a host of benefits.
Each offers unique perks that go far beyond free shipping, such as exclusive access to movies, TV shows, ad-free music, Kindle books, and more.
It’s a prime example (no pun intended) of how a loyalty program can transcend the confines of a single service to encapsulate a whole ecosystem.
Frequent flyer programs can often feel impersonal, but Delta changes the game.
Their SkyMiles loyalty program tiers (Silver, Gold, Platinum, and Diamond) each offer an escalating array of benefits, from priority boarding to complimentary upgrades and extra baggage allowances.
Delta stands out for its lucrative partnerships with hotels, car rental services, and even dining establishments.
It's a program designed to make each flyer feel like a VIP, no matter how often they travel.
Nordstrom is a luxury department store offering apparel, shoes, and accessories.
The Nordy Club loyalty program has four tiers: Member, Insider, Influencer, and Ambassador.
Nordstrom raises the stakes by offering a multi-faceted program that rewards both spending and engagement.
With The Nordy Club, you accrue points not just by purchasing but also by interacting with the brand in other ways, like using their Nordstrom app.
Then perks goes from basic points on purchases to priority access to style events and beauty workshops.
They also set themselves apart with its "First to Shop" feature, giving top-tier members early access to new collections.
REI sells outdoor gear and apparel for nature lovers.
Their single $20 lifetime membership may not be tiered, but its dynamic rewards system mimics a multi-level experience.
The rewards grow as you continue shopping, but they also offer dividend returns on your annual spending.
Plus, this loyalty program is intertwined with REI’s focus on sustainability and outdoor education, offering exclusive classes and trips to its members, aligning perfectly with their adventure-loving demographic.
Marriott is a leading global hospitality company. Their Bonvoy loyalty program consists of six levels: Member, Silver Elite, Gold Elite, Platinum Elite, Titanium Elite, and Ambassador Elite.
What really sets it apart is its sheer breadth of redemption options, going way beyond room discounts and free nights.
Members can use points for experiences like exclusive concerts, culinary events, and even once-in-a-lifetime adventures like a safari.
Marriott also leverages partnerships with airlines and car rental services, allowing members to earn and redeem points across a vast network of travel-related services.
The program's success isn't just in its tiered structure but also in its ability to understand and cater to the diverse needs of travelers.
It's not just a hotel loyalty program; it's an entire travel ecosystem.
Hilton is another global giant in the hospitality industry. Their Honors loyalty program features four tiers: Member, Silver, Gold, and Diamond.
It distinguishes itself with the flexibility of point redemption.
It allows members to use points for anything from room bookings, to online shopping, free Wi-Fi, late check-out, room upgrades or even continental breakfast.
This one flips the script by focusing on rewarding the service providers rather than just the consumers.
Airbnb’s loyalty program isn't for guests but hosts, encompassing four assessment periods per year.
Superhost program evaluates hosts based on hospitality, reliability, and the overall experience provided, then offers tiered rewards like increased visibility and earnings potential.
It’s a powerful way to raise the bar for quality while incentivizing hosts to provide an exceptional service.
Then, superhosts get a host of benefits, including more visibility, better customer support, and exclusive travel credits.
Chick-fil-A is an American fast-food restaurant chain specializing in chicken sandwiches.
Their Chick-fil-A One loyalty program includes Member, Silver Member, and Red Member tiers.
Each level offers a range of rewards, from food products to priority seating and a behind-the-scenes tour of the kitchen.
The program stands out by offering a point-gifting feature, fostering a sense of community and making it unique among fast-food loyalty schemes.
They've nailed the balance between small, immediate rewards and aspirational, long-term ones.
Ulta Beauty is a U.S.-based chain offering cosmetics and skincare brands, men's and women's fragrances, and haircare products.
The Ultamate Rewards loyalty program has three tiers: Member, Platinum, and Diamond.
Basic members earn a point per dollar spent, while Platinum members, who spend $500 per year, earn points 25% faster. Diamond members spend $1,200 annually and earn points 50% faster, plus free shipping on orders over $25.
Ulta nails it by offering a points system that aligns with their diverse product range, making it super attractive for beauty lovers to climb the tiers.
Patricia Nash is known for handcrafted leather goods like bags, footwear, and accessories.
Its tiered loyalty program includes Bronze, Silver, Gold, and Platinum levels.
Customers don’t just earn points through purchases; they also accrue them through brand engagement activities like writing reviews, sharing on social media, and even just for signing up.
As members rack up points, they gain access to an array of rewards that go beyond mere transactional perks.
Yes, there are standard offerings like discounts, but it's the added touches (such as early access to limited collections and personalized styling tips) that make the program feel like an elite club.
Moreover, Patricia Nash offers limited-time promotions and double point events, adding a layer of dynamism to the loyalty experience.
Here some actionable advice for building a stellar tiered loyalty program:
First and foremost, you need to determine the criteria for moving up the tiers.
Will it be points-based, spend-based, or perhaps a mix of both?
Your criteria should align with your brand's unique selling proposition and what you know gets your customer base buzzing.
For example, if you're a high-end fashion retailer, your tiers might be based on annual spend, whereas a content platform might favor frequent engagement or social sharing.
In the initial phases, keeping it simple can be your best bet.
Launching with a simple, straightforward tier system invites broad participation.
As the saying goes, you need to walk before you can run.
After gaining initial traction and customer buy-in, that's your green light to introduce nuanced layers of rewards and incentives.
Consider seasonal bonuses, collaboration with complementary brands, or double-point days to continually refresh this loyalty program and sustain customer interest.
Adding a sprinkle of gamification in your tiered loyalty program (like challenges, badges, or scoreboards) can make the journey through tiers feel less like a transaction and more like an adventure.
It adds an element of fun and competition that keeps customers coming back for more.
Use the data you've collected to offer rewards that resonate with individual customer needs and preferences.
Whether it's a birthday discount, early access to new product lines for tech enthusiasts, or exclusive recipes for foodies, personalized perks turn generic interactions into memorable experiences.
Keeping your rewards fresh and timely can stir the pot and renew interest in your loyalty program.
Whether it’s seasonal gear or limited-time offers, fresh rewards keep your tiered system from gathering cobwebs.
No one likes a puzzle they can't solve. Make sure your tier system, point allocations, and the journey to the next tier are as transparent as it can be.
Spell out the details clearly on your website, through FAQs, or even via interactive tutorials.
Regular updates, like monthly progress reports or tier status notifications, maintain an open line of communication.
The more informed your customers are, the more invested they'll become in progressing through the tiers.
Create channels for members to offer feedback on the loyalty program.
Maybe they love one aspect but think another could be tweaked.
Listening to your most engaged customers can provide invaluable insights that can shape future iterations of your tiered program.
A loyalty program isn't a 'set it and forget it' endeavor; it's a living, breathing entity that requires upkeep.
As we say, the devil's in the details.
Use A/B testing for different reward structures or promotional tactics, analyze the results, and make data-driven adjustments as you go along.
Choosing the right name for your loyalty program is a critical decision that can impact its success. This is your program's identity we're talking about, the front line of your relationship with customers and the phrase that'll be on everyone's lips. So, let's get it right.