How To Create an Effective Tiered Loyalty Program
No two loyalty programs are the same and that’s how it should be. However, this makes creating one difficult for companies. Whilst we can’t give you a step-by-step manual on how to create the perfect tiered loyalty program for your business, we still want to help.
We have designed a great resource with excellent industry insight, offering top tips to remember when designing a tiered loyalty program.
This guide will come in handy if you’re building a tiered rewards program in-house. If you’re looking for a flexible loyalty engine that will feed into your systems and work well with your data, you can get in touch with us here.
Now, without much further ado, let’s get right into the topic of tiered loyalty programs.
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What is a tiered loyalty program?
A tiered loyalty program, often referred to as a multi-tier or multi-level loyalty program, is a customer incentive strategy designed to reward different segments of consumers in distinct ways. These programs typically follow a hierarchical structure, with each tier offering increasingly valuable benefits or incentives.
Businesses implement tiered loyalty programs to encourage customer engagement and retention. As customers progress through different levels, they unlock exclusive perks, discounts, or rewards, fostering a sense of achievement and loyalty.
This type of program is a strategic tool used by companies to not only attract new customers but also to cultivate lasting relationships with their existing clientele, ultimately driving brand loyalty and increased revenue.
How do they work and why?
The world is full of hierarchies, from socio-political to enterprise contexts. Hierarchies also feature frequently in consumer psychology; from Maslow’s hierarchy of needs to Elements of value pyramid. It signifies how human brains work in tiers.
By nature, people always look for something better. This is why tiered loyalty programs feel so natural and they also tap well into consumers’ motivations and aspirational nature.
In a way, tiered loyalty programs mirror social settings, in which humans climb the social ladder to acquire a higher social status. As a result, desiring recognition for belonging to a higher tier or group is expected.
By clearly presenting all the benefits customers can get by climbing the loyalty program ladder, they are intrinsically motivated to become a part of that exclusive group. Consequently, engagement is increased, which in turn results in retention and loyalty.
What are the benefits of a tiered loyalty program for a company?
Create more engagement
Tiers create natural opportunities to connect with your customers beyond transactions and they give members positive motivation to continue purchasing from your brand and engaging with your tier-based loyalty program.
Multi-tier loyalty programs also introduce a form of gamification, so with the right tools in place, they develop a stronger bond with the customers over time without losing momentum. A progressive improvement in rewards ensures every customer feels valued and excited throughout their entire journey.
Understand your customers better
Having multiple tiers of loyal customers helps with segmentation. Not only do multi-tier loyalty programs create useful data but tiers also make it easier to prioritise certain segments by monitoring and analyzing member activities and interests.
Build long-lasting customer loyalty
We know that it costs 5x as much to acquire a new customer than to retain an existing one. Thus, tiered loyalty programs aim to maximise ROI of every single customer without the extra effort of setting individual incentives.
Tiered loyalty programs tend to be more stable and predictable, which is beneficial for both the company and the customer. Customers see the advantages of committing to your brand and will return again and again.
How to create a tiered loyalty program?
First, ask yourself this question:
‘What brings value to my brand and what brings value to my customers?’
Your tier-based loyalty program should align with your wider marketing and business goals: all the best tiered loyalty programs focus first of all on what the customer wants and needs.
For instance, if you’re a growing e-commerce brand still working on brand awareness, value can lie within your customer reviews and social media shares as well as the amount your customers spend. For your customers, on the other hand, free returns or express shipping can be valued rewards.
Then, you can drive value on both sides by encouraging customers to review your brand in exchange for free shipping on their next order. To create a tiered loyalty program, simply create a set of rules that customers must follow in order to get their set of desired benefits, just like in the example we created below.
If your company is already more established in the market, you might also consider a points-based tiered rewards program. Points-based loyalty programs are good for encouraging customers to shop regularly and spend more at your brand. They are also straightforward and easy to understand, which is why most retail companies tend to employ them.
Nevertheless, the principles stay the same - your brand needs to establish at which point is a customer more valuable to the company in order to create tiers.
In other words, you must decide the dividing number of points a customer must accumulate to move up a tier. In return, your brand should offer better value rewards or more points per £ spent (see example below).
The reason why something as impersonal as points can motivate customers so well to spend more is exclusivity. Being a part of an exclusive group can give us a feeling of self-actualisation and make us feel accomplished. Never underestimate the value of exclusivity.
For the same reason, choose the name of each tier after careful consideration: think about what reflects your business’s personality and speak the language of your target audience. Be as fun and engaging as possible.
Do tiered loyalty programs work in B2B?
The question is: Do tiered loyalty programs work in B2B? Yes, tiered loyalty programs can be highly effective in the B2B sector, offering a tailored approach to incentivize and retain business clients.
Unlike B2C models, where point collection and redemption systems often dominate, B2B transactions often revolve around subscription-based or long-term commitment arrangements. Tiers, in this context, provide a structured framework for recognizing and rewarding client loyalty.
In a B2B loyalty program, tier progression typically hinges on factors like spending levels, volume of business, or other relevant performance metrics.
Consider creating a VIP tier of rewards in B2B tiered loyalty programs, which will make your loyal customers feel valued and satisfied. Such a connection then creates a barrier for switching suppliers.
Top Tips For Effective Tiered Loyalty Program
1. Always think customer first. Test every single decision and step against whether it is valuable and attractive for the customer. If not, scrap it.
2. Geek it out. use gamification to increase engagement, build relationships, and by extension drive loyalty. In order to truly achieve loyalty, a bond between the brand and a customer must be established. Unfortunately, too many companies focus on offering discounts.
Whilst these can work well on a short-term basis, they do not promote relationship-building. What’s more, they contribute to the brand-switching behaviour that is so common among consumers in this day and age. Instead, put some thought and creativity into personalising gamified rewards for your specific audience.
3. Monitor results. Use an analytics software to evaluate which parts of your program work well and which do not seem to resonate with your audience. Consider getting feedback directly from the targeted customers and make necessary changes.
4. Communicate. If you want your loyalty program to be successful, you’ll have to work with your clients to make it work. Explain how the program works, display benefits clearly and regularly communicate when and how they can redeem them.
Remember that if you can be helpful in any way, this will benefit both parties. Thus, set up a system of reminding customers of what rewards they are eligible for when they have enough points (or equivalent triggers that you set up).
5. Have it all in one place. Whether you’re building your own tiered loyalty program from scratch in-house or getting help from specialists (remember to check out the platform we built if you’re looking for solutions), remember to integrate. From campaigns, to analytics, to reward fulfilment, you want your systems to be clear and easy to use.
Checklist for Effective Tiered Loyalty Program:
- Create measurable value for your company
- Offer rewards that your clients actually want
- Design each new tier to be aspirational and offer improved desired benefits
- Make your program engaging and create customer bond
- Set up targeted communication for each tier
- Put analytics in place
- Integrate systems
Need more information on tiered loyalty programs? Get in touch with us here.
For more guidance on how to create a loyalty program for the modern customer, click here.
Not sure a tiered loyalty program is exactly right for your brand? Read our Loyalty Programs 101 Guide to find out more about different types of programs you can choose from.
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Kristyna is our Marketing Manager. She helps White Label Loyalty reach the right businesses in need of a loyalty program and helps our clients' programs reach their full potential. She loves sharing her varied experience in marketing and loyalty by writing helpful resources on the blog from time to time for all loyalty novices and aficionados alike.