Many of us have been part of a loyalty program, whether it’s punch cards at the local coffee shop or airline miles from credit card companies. In fact, there are more than 1 billion members worldwide currently opted into some kind of reward point system.
Consumers are becoming more aware of the importance of being rewarded for their business and they want a reason to continue doing business with you. The question becomes: how do you set up a loyalty system to help strengthen customer retention?
Keep reading to find some of the most powerful tactics that will help you keep your loyal customers engaged and coming back for more.
By Steve Hutt
What Is a Tiered Loyalty Program?
A tiered loyalty program offers different benefits or discounts to specific groups of buyers according to their spending levels. Basically, customers are provided rewards for every purchase, incentivizing them to spend more.
Once a customer reaches a certain level of spending, he or she will unlock new perks and benefits. Incentives offered are in the form of discounts, coupons, gift cards, free items, or even points/miles on credit cards. The more customers spend, the more rewards they can obtain.
This kind of reward-based loyalty program is effective as it establishes an emotional connection with customers, which allows for deeper loyalty and long-term engagement. To illustrate how important your most valued customers are to your business, you can strategically offer them more exciting rewards.
What Does It Take to Make a Successful Tiered Loyalty Program?
The fundamental objective of a loyalty program is to increase customer engagement. The more customers engage with your brand, the more likely they are to purchase. It’s important to note that many loyalty programs are ineffective because they focus solely on rewarding customers rather than engaging with them.
Some of the most well-known companies successfully using tiered loyalty programs include Southwest Airlines, Starbucks, and Sephora.
Some of the primary goals of a loyalty program are to maximize customer retention and lifetime value, engage with customers to keep them coming back, gain greater market share, build stronger customer relationships, and achieve desired business outcomes.
Make it simple for customers to sign up
Ideally, a customer should be able to sign up with your tiered-loyalty plan in about five minutes – no lengthy registration forms or ongoing commitments required – and earning points should take mere seconds.
Make program rewards easy to understand
Make sure customers understand what they are gaining in each tier. Be explicit about their rewards, so they understand what they’ll receive, and make certain customers can easily access their rewards. Customers must be able to recognize the value of each tier in order to make a purchase decision.
Make it easy to earn rewards by tailoring loyalty offers around purchases
The more relevant your offers, the better your customers will respond. The faster you provide loyalty points or benefits after a purchase, the greater the positive impact on customer behavior. Ideally, this should be instantaneous. By delaying gratification, your brand runs the risk of losing that customer altogether.
Your customers might no longer wish to hear from your brand if they’re constantly bombarded with irrelevant communications. Be sure to leverage the behavior of your customers through the first-party data you collect to provide a unique experience.
Examples of Tiered Loyalty Programs
There are a wide variety of different types of tiered loyalty programs out there, but here are some great examples to spur your imagination as you brainstorm with your team on how to make yours irresistible for your most devoted customers:
1. Lancôme 💄
Lancôme’s Elite Rewards tiered loyalty program makes it easy to earn points. Members earn 10 points for every dollar spent, 50 points for connecting with Lancôme on social media, and 100 points if they share more about themselves.
Depending on the tier — Rose Gold, Gold, or Platinum — members can receive early access to products, a ShopRunner™ membership, and invitations to Lancôme parties and events.
2. Southwest Airlines ✈️
The Southwest Rapid Rewards® program rewards members with points they can use for flights or with select Southwest partners.
Southwest offers three tiers: A-List, A-List Preferred, and Companion Pass. To qualify for any of these tiers, a member must earn a specific number of points in a calendar year, or take a set number of Southwest flights.
For example, to qualify for the A-List status (the easiest tier to achieve) a member must earn 35,000 Rapid Rewards points in a calendar year, or fly 25 Southwest flights.
Southwest Rapid Rewards is considered one of the best mileage programs for domestic flights.
3. American Express 💳 & exclusivity
Although different from other rewards plans, the American Express “Black Card” — known as the Centurion Card® — is available only to those who AMEX invites to apply.
The card has no credit limit, allowing members to spend as much as they desire each month, so long as they pay it back within a month. Members gain access to popular events including sporting events, concerts, theater shows, VIP events, and perks from airline companies, hotels, airports, car rental companies, and even shopping sprees.
4. philosophy and gamification
The beauty brand philosophy has found a way to leverage gamification to entice members of philosophers rewards to make it to their next tier.
philosophy’s rewards program is divided into three different tiers that give points to customers for every purchase. By joining a higher tier, customers can enjoy special sales days plus free shipping. Any rewards member can gain extra points for reviews, referrals, and by connecting on social media.
In a monthly email to members, philosophy includes a gamified “Gratitude Meter” that lets them know how close they are to the next tier of rewards, as well as offering items based on shopping habits that can help them achieve the next tier.
5. Total Tools 🧰
In Australia, Total Tools is the largest professional tool retailer. Loyalty members earn Insider Rewards for making in-store and online purchases. The program offers three tiers — Bronze, Silver, and Gold — and provides members with exclusive member-only deals, event invitations, bonus offers, dollar amount rewards for specific tiers, and much more.
“In our stores, when one of our loyalty customers comes in, we can identify them at POS through a loyalty ID that’s attached to their profile. So, from that, our stores can engage with a customer on a first name level. They know what tier they’re in, what trade they are, what products they may have recently purchased, or also to better recommend products that they may be interested in, because they know who that customer is, and they’ve really built up that relationship. And for us, it’s all about that personalized experience, because if you only lead by price and product, you’ll really lose relevance.”
-Elisse Jones, National Loyalty Manager, Total Tools
6. Innovasport ⚽
Innovasport is the leading sporting goods retailer for men and women in Mexico. Their tiered rewards program called Legends gives customers access to events and other special benefits such as raffle entries by dividing them into low, medium, and high spender tiers.
Customers can use their phone to get credit for in-store purchases through a QR code, redeem rewards, and gain access to real-time loyalty updates.
“Before Legends, my team used to communicate some promotions, and we used to get like, well, because they used to send it to the general database. That was a couple of years ago. And they used to send these communication[s] to all the users. They weren’t used to micro segment[s]. So they used to get, I don’t know, maybe 8% open rate. And after we start targeting all [these] communications through Legends, we have achieved 35% open rate, 40% open rate, which is huge. […] We have right now 350,000 members in our database. Actually, in exactly two months, we have achieved 350K members.”
-Danielle Ríos, Head of Loyalty, Innovasport
7. Membership Programs 🛒
A basic membership program is meant to collect customer information so that you can use it to personalize the shopping experience users have with your brand. It isn’t based on any type of reward or incentive.
These programs are often seen with financial services, members-only clubs, or large retail chains like Costco and Sam’s Club where customers can choose from a number of membership levels, all with varying benefits.
Premium loyalty program members are 60% likely to spend more on your brand, whereas free loyalty program members are only 30% likely to do so.
8. Experiential rewards 👚
Experiential rewards help customers get placed in a higher tier. Customer data helps you put together the right type of experience for them and measure their effectiveness.
A great experiential reward example is Nordstrom’s Nordy Club rewards where one specific tier of customers receive an in-home visit from a stylist.
How to Create Effective Tiered Loyalty Programs
Offers that are customized and targeted are most effective. You can maximize engagement and conversions by tailoring a customer’s experience based on their past purchases and other data.
It is imperative that you use the right technology for this tactic, such as the Emarsys Customer Engagement Platform, which breaks down purchase history and provides deep insight into what drives customer decision-making, putting your brand far ahead of the competition and giving your customers a unique, 1:1 experience.
The more targeted and personalized your offers, the more effective they will be. By using customer purchase history and other data points to create a tailored experience for each customer, you can maximize engagement and conversions.
Loyalty programs are one of the best ways to turn existing customers into lifelong brand evangelists. The best way to do this is to make certain customers feel valued and appreciated at all times. This is why it’s critical to pay very close attention to how your customers are behaving in relation to your program.
You also must be willing to listen and respond accordingly when a customer has a question or concern about the loyalty system. Make your program visible, easily accessible, and easy to use. Make sure that your customers know how it works, when they can earn points, and how the benefits will be applied.
What’s great about tier-based loyalty programs is that they’re flexible and make it easy for you to reward your most loyal customers, offering them a way to come back and buy again over their lifetime.
This article originally appeared in eCommerce Fastlane.