Tiered Loyalty Programs: The What, Why & How with Examples

Loyalty programs are an effective way for businesses to retain loyal customers and encourage repeat purchases. Tiered loyalty programs, in particular, have become increasingly popular in recent years. Learn what tiered-based loyalty programs are, how they work, and the benefits they offer to businesses. We will also provide examples of successful tiered loyalty programs and name ideas for businesses looking to create their own.

What are Tiered Loyalty Programs?

Tiered loyalty programs or tiered reward programs offer customers escalating benefits based on their level of engagement with the program. The program is divided into different tiers, each with its own set of benefits. The higher the tier, the more exclusive and valuable the benefits offered to customers.

Tiered loyalty programs motivate customers to engage with the program on an ongoing basis. This can increase customer loyalty and brand-customer relationships.

How Do Tiered Loyalty Programs Work?

Tiered loyalty programs offer rewards to customers. These rewards come in the form of loyalty points or other metrics. Customers can earn these rewards by engaging with the business. Rewards can be earned through various means, such as making purchases, leaving reviews, and engaging with the business on social media.

As customers earn more points or reach specific milestones, they progress to higher tiers and unlock new benefits. Examples of benefits include early access to sales, exclusive deals, personalized offers, free shipping, and more.

Features of Tiered Loyalty Programs:

Gamification

Gamification is the process of integrating game mechanics into a non-game context. Gamification is an effective tool when it comes to loyalty programs.

It makes earning and redeeming points more enjoyable and engaging for customers. By using game-like elements such as points, badges, and leaderboards, businesses can boost participation. Gamification can also be used to create healthy competition between customers and reward higher-tier customers with even more exclusive benefits.

Exclusive deals

Exclusive deals are one of the most effective ways to motivate customers to progress through tiers in a loyalty program. By offering limited offers, discounts, and access to exclusive products or services, businesses can create a sense of urgency and exclusivity. As customers are motivated to continue engaging with the brand in order to access these exclusive benefits, engagement is higher

Fear of missing out (FOMO) tactics

FOMO tactics refer to limited-time offers and other scarcity-based tactics to motivate customers to engage with the program. By creating a sense of urgency around the program, businesses can increase customer engagement and encourage customers to make repeat purchases. Examples include giving top-tier customers bonus points for purchases made during a specific time, or offer early access to sales.

Experiential rewards

Experiential rewards refer to rewards that provide customers with unique and memorable experiences. These rewards can include personalized gifts, exclusive events, and early access to new products. Experiential rewards are particularly effective at motivating customers to progress through tiers.

They provide customers with tangible benefits that are not simply based on discounts or free products. For example, businesses can offer top-tier customers a personalized shopping experience or access to exclusive events.

Benefits of Tiered Loyalty Programs

There are many benefits to implementing a tiered loyalty program for businesses. Tiered loyalty programs can increase customer engagement, customer loyalty, and brand-customer relationships. Customers feel valued and recognized for their loyalty, which can lead to higher levels of customer satisfaction and retention.

By offering a clear path to more valuable rewards, businesses can also motivate customers to increase their spending and purchase frequency. This can lead to higher revenue and more profitability for the business.

Increased customer engagement

Tiered loyalty programs are a highly effective way to increase customer engagement with a business. By offering a clear path to more valuable rewards, businesses can motivate customers to make repeat purchases, engage with the brand on social media, and leave reviews. Plus, customers who engage with a loyalty program are more likely to make repeat purchases and recommend the business to others.

Higher average spend

Customers who are engaged with a tiered loyalty program are more likely to make higher-value purchases. By incentivizing customers to progress through tiers and offering more valuable rewards, businesses can motivate customers to spend more money in order to access these rewards. This can lead to higher average spend per customer, which can have a significant impact on a business's bottom line.

Higher frequency of visits and shopping sessions

Customers who are engaged with a loyalty program are also more likely to visit a business more frequently and spend more time in each shopping session. By offering a variety of rewards that can be earned through different types of engagement, businesses can motivate customers to consistently engage with the brand. This can lead to increased customer loyalty and brand-customer relationships.

Incentivize easily with clear and distinct benefits

Tiered loyalty programs are an effective way to incentivize customers without relying solely on discounts or free products. By offering a variety of benefits that are exclusive to loyalty program members, businesses can create a sense of exclusivity and value around the program. Customers who feel valued and recognized for their loyalty are more likely to continue engaging with the brand over the long term, which can lead to increased revenue and profitability.

Improved customer retention

Customers who are engaged with a tiered loyalty program are more likely to remain loyal to the business over the long term. By offering escalating benefits and incentives, businesses can create a sense of loyalty and commitment among customers. This can lead to increased customer retention, as customers are less likely to switch to a competitor if they are already invested in the loyalty program. By retaining more customers over the long term, businesses can save money on customer acquisition costs and improve their overall profitability.

Valuable customer insights

Tiered loyalty programs also offer businesses valuable insights into customer behavior and preferences. By tracking customer engagement with the loyalty program, businesses can gain insights into which products and services are most popular, which types of customers are most engaged with the program, and which types of engagement are most effective at driving customer loyalty. This information can be used to inform business decisions and improve the overall customer experience.

Examples of Successful Tiered Loyalty Programs

Starbucks Rewards

Starbucks Rewards offers points for every purchase, which can be redeemed for free drinks and food. The program is divided into two tiers, with Gold members receiving additional benefits such as free refills, birthday rewards, and exclusive offers. Starbucks also uses gamification to engage customers, such as offering bonus points for purchasing specific items or participating in challenges.

Sephora Beauty Insider

Sephora Beauty Insider offers members a range of benefits, including early access to new products, exclusive events, and personalized offers. The program is divided into three tiers, with each tier offering its own set of benefits. Sephora also offers experiential rewards, such as a complimentary custom makeover and free shipping on all online orders for VIB and Rouge members.

Hilton Honors

Hilton Honors is a tiered loyalty program for Hilton hotels. Members earn points for their stays, which can be redeemed for free nights or other rewards. The program is divided into four tiers, with each tier offering increasingly valuable benefits such as room upgrades, free breakfast, and access to executive lounges. Hilton also offers experiential rewards, such as concerts and sports events, as well as partnerships with airlines and car rental companies.

Ulta Beauty Ultamate Rewards

Ulta Beauty Ultamate Rewards offers members a range of benefits, including exclusive offers, birthday gifts, and early access to sales. The program is divided into two tiers, with Platinum members receiving additional benefits such as free shipping on all orders and bonus points on purchases. Ulta Beauty offers experiential rewards. For example, a $25 beauty service reward and access to a VIP hotline for Platinum members.

Nordstrom Rewards

Nordstrom Rewards is a tiered loyalty program for Nordstrom and Nordstrom Rack. Members earn points for their purchases, which can be redeemed for Nordstrom Notes (store credit).

The program has two tiers. Influencer members get extra perks, like early access to sales, free alterations, and exclusive events. Nordstrom also offers experiential rewards, such as a complimentary styling session and access to a private shopping suite for Influencer members.

Tiered Loyalty Program Name Ideas

Creating a tiered loyalty program that is unique and memorable is important for businesses looking to stand out. Here are 15 tiered loyalty program name ideas to inspire your business:

• Elite Perks

• Platinum Rewards

• VIP Club

• Premier Points

• Gold Circle

• Diamond Club

• Prestige Program

• Black Card Rewards

• Infinity Loyalty

• Silver Circle

• Loyalty Legends

• Sapphire Society

• Loyalty Ladder

• Diamond Advantage

• Inner Circle

Conclusion

Tiered loyalty programs are an effective way for businesses to incentivize customer engagement and increase customer loyalty. Businesses can motivate customers to take certain actions, such as making repeat purchases, engaging with the brand on social media, and leaving reviews.

To motivate these actions, businesses can offer escalating benefits based on the level of engagement. Successful tiered loyalty programs employ features such as gamification, exclusive deals, FOMO, and experiential rewards. By offering unique and memorable experiences, businesses can differentiate themselves from competitors and create a sense of exclusivity around their brand.