Why Should You Consider a Tier Based Loyalty Program for Your Business?
We humans love being unique. We love being treated extra special. And rightfully so, there is only one of YOU on Earth, so why not say it loud and proud?
This is the basic idea behind Tier Based Loyalty Programs.
When you bring that extra special, warm fuzzy feeling to your customer service and marketing processes, this is how you tangibly recognize customers for their uniqueness.
You bring additional value to your brand by giving customers a clear reason to become special. Not only does this make them feel great, they continually strive to be better. The higher the tier, the more special the customer feels – and the more ready they are to make repeat purchases and stick with you.
Once a customer enrolls in your program, you have precisely the data you need to send them the promotions they want, while driving the behavior you seek.
And when you do this consistently over the long run, there are no limits to the benefits for your entire business.
Sounds too good to be true, right?
In fact, it’s not. And we clarify why and how below.
How to Create Tier Based Loyalty Programs with Loyalty Prime
First of all, which features do you need from a Loyalty Platform to technically enable your successful Tier Based Loyalty Program? We have summarized all of the features you’ll need below. Needless to say that these are delivered by our award-winning Loyalty Program Platform Prime Cloud!
Everything You’ll Need in a Loyalty Platform to Power Successful Tier Based Loyalty Programs
A great Tiered Program needs to be powered by a high-notch tech stack to unfold its true potential. Prime Cloud, the Loyalty Program Platform trusted by premium brands around the globe, has got you covered:
|LOYALTY PLATFORM FEATURE||HOW PRIME CLOUD HAS GOT YOU COVERED|
|1. Loyalty Platform Set-up
|2. Tier Rule Configuration
|3. Tier Level Management System (Loyalty Engine)
|4. Loyalty Reward Types
|5. Loyalty Marketing & Promotion Engine
|6. Customer Behavior Tracking & Incentivizing
|7. Loyalty Member Account Management
|8. Customer Service Functionality
|9. Reporting & Data Analysis Functionality
|10. Accounting Functionality
|11. Loyalty Platform Integrations
|12. Loyalty Platform User Interface
|13. Loyalty Platform Rights & Roles Management
|14. Top-Notch Technological Quality
|15. White-label Customer Loyalty Portals
Why Global Brands Choose Loyalty Prime as Their Loyalty Platform for Tier Based Loyalty Programs
Loyalty Prime is a global expert in Loyalty Programs and we’ve got the satisfied clients to prove it. With ‘Prime Cloud’ as the powerful engine of your Tier Based Loyalty Program, get ready to launch a whole new level of business longevity!
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Now that we’ve reviewed what features you need for a Tier Based Loyalty Program and how ‘Prime Cloud’ delivers these, let’s go into more detail on how this type of loyalty program works.
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How Do Tier Based Loyalty Programs Work in Detail?
Tier Based Loyalty Programs enable you to recognize and reward your most valuable customers. They motivate your customers to become loyal and increase both their satisfaction and the behavior you’d like to drive. Based on this specific behavior, members of a Tier Based Loyalty Program qualify for a certain tier or status that you set, which unlocks a world of Loyalty Program benefits and privileges that are the most relevant for them.
The key features of a Tier Based Program are:
- Gives a Feeling of Status and Fosters Emotional Loyalty: earning a higher status taps into human psychology – people like to be recognized and receive something special that is not available to everyone else, and they enjoy the “bragging rights” that go along with it. State-of-the-art Tier Based Loyalty Programs convey a true feeling of exclusivity and deliver benefits of high perceived value, including for example experiential rewards such as money-can’t-buy-events. This of course has great power to motivate your members to go the extra mile to earn the next level for themselves.
- Delivers a ROI Conscious USP Through Data: your “top” customers are eligible for the highest value of benefits and the invest into less valuable customers can be kept lower. Now the key factor is that you become highly specific about who qualifies for which status level, because you base your tier level structure on holistic customer behavior tracking. A “top” customer can be defined as one that spends a lot, for example, or as one who is an amazing ambassador of your brand on social media.
Which Customer Behavior Types Can You Use to Determine Tier Level Eligibility?
- Member Spending: this could be the member’s spend value or volume over a specific time period and/or their spend frequency. If combined with a Points Rewards Program you can also base tier level qualification on the number of points collected within a certain time period. Alternatively, if you have a limited product range that greatly differs in value, you can base tiers on which products have been purchased. A well-known example is the BMW Excellence Club, which unlocks a whole range of exclusive benefits for owners of BMW’s premium car range.
- Tenure: enable members to reach a higher tier based on how long they have been a paying customer with you. This works especially well for subscription-based business models in the telco or Pay TV industry.
- Non-transactional behavior: consider non-purchase behavior to determine status level eligibility. Examples include social media activity, referrals or active customer participation in surveys and focus groups.
Which Tier Level Benefits Should You Offer?
As the concept is based on “tiers”, higher tier members often get more loyalty program points for purchases (when combined with a Points Rewards Program) and/or higher discounts. But more importantly, Tier Based Loyalty Programs usually offer several intangible benefits that create emotional loyalty – think upgrades, early access, invitations to special events, dedicated customer service agents, etc. The strongest programs offer a combination of tangible and intangible benefits.
Questions to Answer to Determine Your Tier Based Loyalty Program Structure:
In order to determine your tier structure, start by asking yourself the following:
What different types of customers do I have?
Do you have a wide range of customers based on spend, where some customers spend far more than others? Or do your customers tend fall within a narrow range of behavior? If the range is wide, a spend-based program is worth considering. If the range is narrow, do your customers fall into groups based on how they spend, for example, do they buy only children’s clothing, or only athletic wear? If so, you could consider tiers based on the type of purchase.
What could I offer to higher tier members?
Think about your customers and what they would value. If necessary, do some consumer research to see what appeals to your top customers. Some customers just want more discounts and loyalty points, but think beyond that – what can you offer that really makes them feel special, and that you can consistently deliver?
How many tiers should I have?
Generally speaking, it’s better to start with a limited number of tiers so you don’t overwhelm your customers and you can learn what works (and what doesn’t). You want a tier to have some feeling of specialness so that your customers are eager to earn it, but you also want it to be achievable. You can always add another tier based on how people respond to an early tier offering.
How would members qualify for a higher tier status?
Answering this question requires some analysis of your customer data, and forecasting of how many members will “stretch” to reach a level. Start by thinking about what behaviors you want from customers – is it more visits? Bigger basket size? More engagement on social media? Purchases across more categories? Any desired behavior can be part of the criteria to qualify for a higher status.
What rules do I want for validity of a tier level?
Finally, you can also decide on the exact rules that determine how long a member, once they have reached a certain tier level, will keep their status and what they need to do to requalify.
Precious Metals, Gems or Royalty? Thoughts on Naming Your Tiers
Most Tier Based Loyalty Programs use metals (think Silver, Gold, Platinum, Titanium) and/or gems (Ruby, Diamond, Sapphire) for their tier names. But think outside the box and have some fun with it! Think about what fits with your brand and your target audience. Ambassadors? VIP’s? Insiders? Magnates? The sky’s the limit!
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How Do Businesses Benefit from Tiered Programs?
Tiered programs create stronger bonds with customers by tapping into emotional loyalty – in an ROI conscious manner. Let’s put it this way: why would you as a customer fly with another airline if you are treated like a VIP in the one where you have already qualified as a Frequent Flyer?
That’s exactly the idea.
Here are a few specific benefits of a Tiered Program:
Enhances Your Value Proposition
A well-designed Tier Based Loyalty Program that offers features and benefits valued by customers makes you stand out. If a customer knows that they are not only going to get a good product and a good price but also get upgrades, faster service, or a sneak preview of new merchandise, they are more likely to get out their wallet.
And if they know some of those benefits are accessible only to members in certain tiers, they become motivated to do what it takes to qualify, which in turn drives incremental revenue and increases your market share.
Gives Customers a Reason to Help You Gather Data
If customers are looking to earn (or keep) a higher status, they want to make sure that they maintain and/or upgrade their status according to your program rules, which is where data gives both parties an advantage. Tracking and having access to all of that data is critical to your success – it enables you to understand your customers deeply and develop features, benefits and a communication strategy that are relevant and personalized.
Now that the regulatory environment around using customer data is getting more restrictive, companies must get permission to collect and use individual customer data. And a Tier Based Loyalty Program is precisely what gives you that permission. Just make sure you have the proper opt-in and opt-out mechanisms to give customers control over their data according to country-specific regulations, such as GDPR in the EU.
Taps Into Emotional Loyalty, a Powerful Motivator
Customers love great prices and convenience, but those are easy for competitors to replicate, are behavioral in nature, and tend to focus on one transaction at a time. In contrast, emotional elements are longer-lasting and more likely to drive engagement and purchases. It has been proven that members will stretch to reach a tier if the benefits are sufficiently valuable and the threshold is achievable.
By its very nature, a Tier Based Loyalty Program taps into emotions of status and recognition. Customers want to feel special and appreciated, and people enjoy the “bragging rights” of having earned higher status. Status and recognition take many forms, and it is important to deliver these in ways that are appropriate to your brand, products and services, and most importantly, your customer base. Status and recognition could mean expedited shipping, a special check-in/check-out line, an upgrade, early boarding, or an occasional thank you gift.
Focuses Your Spending On Your Most Valuable Customers
By definition, a Tier Based Loyalty Program allocates spending according to a member’s status. Assuming that the criteria used for earning status are set properly, higher tier members are more valuable and worthy of extra marketing spending. So, a Tier Based Loyalty Program enables you to direct spending more efficiently than a “one size fits all” program.
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Who Are Tier Based Loyalty Programs Best Suited For?
Tier Based Loyalty Programs can work for many companies in many categories, but they’re not for everyone. Tiered Programs work best for companies that:
- Have many different types of customers, whether by spending, by categories, by interests or other non-purchase behavior.
- Can deliver special benefits to higher tier customers without disrupting the customer experience for non-tier members. For example, if a supermarket were to offer “skip the line” benefits to let higher tier members check out ahead of non-tier members, mayhem would ensue! Benefits that can be offered more discreetly, for example, in an app or through a website, are less disruptive.
- Can offer benefits that have emotional appeal, to make higher tier customers feel special.
Successful Tier Based Loyalty Program Examples
Here are two examples of strong Tier Based Loyalty Programs from the US: Sephora Beauty Insider and Marriott Bonvoy.
Sephora Beauty Insider
Sephora’s popular program offers a mix of tangible benefits that get richer as you shop more and reach higher tiers.
How it works:
- Qualification: there are three tiers. For the upper tiers, members must requalify each year.
- Insider – the base level, no minimum spending required
- VIB (Very Important Beauty insider) – qualify by spending $350 per year
- Rouge – qualify by spending $1,000 per year
- Point earning: all members earn points based on spending, which they can use toward merchandise in the Rewards Bazaar. Members earn more points with point multiplier events, but VIB and Rouge members get more bonus points than Insider members.
- Savings events: all members can participate in seasonal savings events, but VIB and Rouge members get higher discounts.
- Gifts and samples: all members get special gifts and samples, but VIB and Rouge members get more choices.
- Exclusive events: Rouge members have access to exclusive events and get first access to some new products.
- Community: Sephora has an online community where members can share tips and ideas. Members are identified in the community by their tier status, adding an element of recognition and status.
Why it’s successful:
- Connects with the target audience: Sephora customers love makeup, love to try new products, and love to share information in the community. The package of benefits in Beauty Insider hits the nail on the head.
- Matches the brand: in a category that sometimes drifts into luxury and opulence (think about all the high-end cosmetics you see in department stores), Sephora’s brand is about accessibility for everyone. The Beauty Insider tiers give recognition to valuable customers without turning off base level customers.
How it works:
- Qualification: there are five tiers above the basic member tier. While point-earning is based on dollars spent, qualification for tier status is based on nights stayed. Members must re-qualify each year.
- Silver Elite: 10 nights per year
- Gold Elite: 25 nights per year
- Platinum Elite: 50 nights per year
- Titanium Elite: 75 nights per year
- Ambassador Elite: 100 nights per year + $20,000 annual spend
- Points bonus: higher tier members earn extra points for their stays.
- Welcome gifts: Members who are Gold or higher receive a gift each time they check in for a stay.
- Check-in/check-out: higher tier members get guaranteed reservations and late check-out
- Upgrades: Members who are Gold or higher get room upgrades.
- Lounge access: Members who are Platinum or higher get lounge access.
- Concierge service: Ambassador Elite members have access to personalized assistance.
Why it’s successful:
- Mix of benefits: with its numerous base of members around the world, Marriott has many different types of customers to please – business vs. leisure, one-night vs. extended stay, occasional travelers vs. road warriors. The opportunity to get tangible and intangible benefits offers something for everyone.
- Ability to offer differentiated benefits: Marriott has built its tiers on elements that can be delivered to top members without disrupting the experience of base members, including upgrades, welcome gifts and lounge access. This is critical to keeping less frequent customers satisfied, while still giving them something to aspire to.
- Integration with the customer experience: Bonvoy’s tier benefits don’t just give members extra points, discounts or gifts – they actually improve the overall hotel experience with things like reservation guarantees and late check-out.
Tier Based Loyalty Program Best Practices
How can you make sure you have a great Tier Based Loyalty Program? Here are some best practices to help you WIN the loyalty game:
What do you want from your Tier Based Loyalty Program? Who is your real target audience? What behaviors do you want from them? Set up your Tier Based Loyalty Program to reward those behaviors and get members excited about earning a higher level of status. Do the upfront analysis, including customer research, to understand what your customers value and what will keep them loyal.
Best Practice #2
Determine the Right Qualification Thresholds for Your Tiers
The biggest mistake companies make with Tier Based Loyalty Programs is to set the qualification thresholds too high or too low. If a threshold is too high, customers will say “I can never reach that.” If it is too low, too many members will qualify and you may not be able to deliver (or afford) the benefits for so many people. And if too many people are in an upper tier, it tends to make the tier feel less valuable. Set your thresholds so that members do have to “stretch” to achieve it, but not so high that it loses its meaning.
Best Practice #3
Build a Great Set of Benefits
The key to success for a Tier Based Loyalty Program is to make higher tiers aspirational. People should be eager to earn the next level of status because there’s so much good stuff there. The benefits should feel like a reward for hard work, and should feel special. You should certainly include some tangible benefits like extra points and/or discounts, but the heavy lifting should be done by emotional benefits like special access, an improved member experience, and recognition.
And don’t forget unanticipated rewards – it’s great to receive benefits that you expect, but how much more exciting is it to get an unexpected gift just for being you?
Best Practice #4
Keep it Fresh
Tier Based Loyalty Programs should never be “set it and forget it.” Your higher tier members are loyal to you, return the favor by offering new and different features. These members are likely interacting with you frequently, and you don’t want them to feel like your offering is stale and boring. New and different features can be time-limited offers, or they can be permanent additions to a program, but either way, keep members engaged so you remain on top of mind.
Best Practice #5
Use the Right Technology
Last but most certainly not least, a big factor in ensuring success of your program is using the right technology. Always choose a software that empowers you to:
- Set up and launch your program according to your individual needs and business rules, that also seamlessly integrates with your current tech stack.
- Implement and maintain your Tier Based Loyalty program based on 360° customer data with top-notch performance and efficiency.
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Best Practice #6
Overall Loyalty Program Best Practices
We’ve shared some best practices specific to Tier Based Loyalty Programs, but there are additional best practices to consider for any type of customer loyalty program. If you’d like to dive deeper, check out the article below.
Combining Your Tiered Program with Other Loyalty Program Types
A Tier Based Loyalty Program should make your customers want more! Tier Based Loyalty Programs are often paired with other program types to offer a full portfolio of benefits and features. Here are a few ways to do so:
- Points Rewards Programs: Tier Based Loyalty Programs are a natural fit with Points Rewards programs. Points and rewards can offer the foundational benefits that people have come to know and love, but the higher tiers (literally) take a Points Rewards program to a new level. Higher tier members often get accelerated earnings and/or exclusive opportunities to use their points, greatly enhancing the program’s value.
- Surprise & Delight: unexpected rewards and gifts are a natural fit for Tier Based Loyalty Programs, since they offer strong emotional value and make tier members feel special. Because they are not expected, you have great latitude over which tier members to reward with the criteria of your choice.
- Partnerships and Coalitions: there are several ways to leverage partnerships to make a Tier Based Loyalty Program more powerful. You could offer benefits and gifts from partners to your higher tier members or, if a partner also has a loyalty program, you could offer your tier members special benefits in the partner’s program. Airlines, hotels and credit cards often have partner benefits as a feature for their higher tier members.
- Subscription-based Programs: some programs offer higher tiers that can be purchased. The tier available for purchase may be identical to a tier that is earned. For example, some airlines have the option to purchase Gold or Platinum status if you do not qualify by normal criteria. Or the purchased tier may differ from the earned tier in order to reserve some benefits for those who have earned it. Either way, tiers can be used to create an important revenue stream of fees.
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