Tiered Loyalty Programs 101: Everything you need to know
Tiered loyalty programs are one of the most effective ways to boost sales and foster customer retention. But they don’t work unless you know how they work! In this post, we’ll explain everything you need to know about tiered loyalty programs so that you can create one that will help boost your sales and foster customer retention.
Tiering a loyalty program means creating different groups of customers who interact with the program differently.
When you hear the word “tiering,” it’s easy to think of a tiered wedding cake. But in this context, it means categorizing customers into groups based on how much they spend, how often they shop and how loyal they are. This can help you better understand which customers are most valuable to your business and create more meaningful relationships with them.
Tiering is also a way to reward the most loyal customers for their loyalty—and it’s good for business! According to CEB TowerGroup research, companies that use tiered loyalty programs experience 24% higher sales growth and 18% higher customer retention than those who don’t have such programs in place.
Typically there are 3 tiers in a loyalty program, though some have more.
Most loyalty programs have three tiers: bronze, silver and gold. The higher your tier, the more benefits you receive.
The most common number of tiers in a loyalty program is three: bronze, silver and gold (though some have four or five). The lower your tier is, the less you get out of it. For example, if you’re at the bronze level in this hypothetical program and pay for a $5 coffee with your card once per week for three months—you’ll earn a free cup of joe at the end of those three months! If you were at gold level instead and did that same thing—your reward would be two free coffees instead.
The nice thing about having multiple tiers is that it gives customers more flexibility when choosing what they want to do with their money while still giving businesses an opportunity to incentivize certain behaviors over others by offering different rewards at different levels within their programs too (for example: paying for one drink every day gets employees into Silver faster than paying for one drink every three days).
You must give tier 1 members value automatically, such as discounts or exclusive access to products.
If you want your loyalty program to be successful and pay off, it’s important to remember that tier 1 customers are the core of your business. These people should automatically receive benefits in order to keep them loyal and engaged with your brand.
Tier 1 members can receive:
- Exclusive access to products, discounts or other perks that aren’t available to customers in lower tiers. For example, Amazon Prime members get exclusive early access to new products before they go on sale
- Discounts on specific items or services that align with their preferences (e.g., free shipping for individuals who often buy from Amazon)
To earn the level-up to the next tier
As you build your loyalty program, consider how you will award points to your customers. This decision should be made as part of your strategy development process. There are many different ways to structure a tiered loyalty program and they can vary based on the number of tiers, point values, and point earning methods. Some examples of points systems include:
- 1-tier – one point per purchase or action completed
- 2-tier – one regular tier with higher reward points required to level up
- 3-tier – two reward tiers with a different amount of points required for each tier
- 4-tier – three reward tiers with a different amount of points required for each tier
Tier 2 customers get exclusive deals
When you implement a tiered loyalty program, tier 2 customers get exclusive deals (tier 1 customers don’t). They also participate in a loyalty program on another level because they have to take action to process and redeem points. If a customer is maintaining status in tier 2, they get a chance to collect extra benefits.
Tier 3: Tier 3 customers are the most engaged of them all. This group is more likely to spend money and recommend your business, resulting in increased brand awareness that translates into sales growth for your company. Tier 3 members can be targeted with special offers or discounts based on their preferences as well as use that data when making product recommendations for future purchases – ultimately increasing retention rates.
Tier 3 members are VIPs!
Tier 3 members get special access, events and rewards that aren’t available to anyone else in the loyalty program. They may also get other perks like free shipping or discounts on gift shop items.
Tier 3 members are VIPs! They get all of these things:
- Special access to events at the hotel or resort where you can meet your favorite performers before everyone else does!
- A backstage pass that lets you skip lines at restaurants, gift shops and attractions around town so you can spend more time relaxing instead of standing in line for hours at a time waiting for rides or food service.
- A special “VIP” badge on their account page so everyone knows how awesome they really are!
Understanding tiered loyalty programs can help you create one that boosts your sales and fosters customer retention.
Tiered loyalty programs can help you boost sales and build customer retention. As a business owner, you want to reward customers for their loyalty by making it easier for them to redeem rewards and earn points towards free products or services. In this section, we’ll discuss:
- Why tiered loyalty programs are great for increasing sales
- How tiered loyalty programs foster brand loyalty
- How your personal data can benefit from tiered loyalty programs
The best way to understand tiered loyalty programs is to see them in action. We’ve highlighted some of the ways you can use tiering in your business, but there are so many more! If you’re curious about how this strategy could help your company grow, reach out for a consultation today.