According to the 2023 Loyalty Programs Data Study, one of the top five things consumers (34%) would love to see from brand loyalty programs are multiple tiers that better align with their shopping habits.
For example, consumers would like to see tiers that offer different rewards based on their yearly spending with the brand or a premium tier that offers the best benefits in exchange for a membership fee like Amazon Prime.
When consumers join a tiered loyalty program, they have to hit certain milestones to achieve specific statuses that keep them active and engaged. By offering your loyalty program members various tiers, you broaden your reach for them to engage and participate.
And here’s the thing: 74% of consumers agree that they would engage more with brands that offered different tiers in their loyalty programs based on how much they spend per year. When your brand strategizes and structures its loyalty program around tiers, members desire to advance and achieve status which makes it more appealing.
It’s great experiences that drive engagement. A tiered loyalty program is a way for a brand to achieve that because it gives better rewards and experiences in exchange for increased engagement.
Table of Contents
- What Is a Tiered Loyalty Program?
- The Psychology Behind a Tiered Loyalty Program
- What Are the Benefits of a Tiered Loyalty Program?
- How Important is Offering a Premium Loyalty Tier?
- How To Build a Successful Tiered Loyalty Program
- Examples of the Best Tiered Loyalty Programs
- A Tiered Loyalty Program Can Showcase the Best Your Brand
What Is a Tiered Loyalty Program?
Unlike simple points-based programs, tiered loyalty programs offer members different benefits depending on status.
Each new tier reveals more desirable benefits, which could be discounts, coupons, free items, gift cards or VIP experiences. The more members interact, the more rewards they’ll earn and the more engaged they’ll become.
The more members engage, the better benefits they receive. Experiential rewards create sustainable emotional bonds and give members something to aspire to. A feeling of exclusivity for members is an intangible element that sets tiered loyalty programs apart.
The Psychology Behind a Tiered Loyalty Program
People like to achieve status, whether it’s professionally, intellectually, socially or athletically. It also applies to loyalty programs.
When a brand offers a loyalty program with exclusive, tiered benefits, members are driven to achieve a higher status. Lower-tier members have something to aspire to, while upper-tier members feel that they have earned exclusive benefits and are proud of their status. As members achieve new tier status, they feel privileged and want to hang onto it.
Studies have shown that when we train our minds to think about what we want in life and work toward achieving that, our brains rewire to acquire the ideal self-image that becomes part of our identities. According to this scenario, if we reach the goal there is a sense of fulfillment. If we don’t, our brains push us until we achieve it.
As a result, by offering a tiered rewards program you’re triggering your customers’ brains to set goals and engage. Just as walkers and runners set various goals based on age, health and desire, so too will your customers if you offer them a tiered loyalty program.
What Are the Benefits of a Tiered Loyalty Program?
Because of their structure, tiered loyalty programs are built to retain members for the long term because as they spend more and earn better benefits, they become more engaged with your brand. Their standing in the program keeps them more connected to the brand on a regular basis and they feel special when they move up the tiers and receive elevated benefits. That feeling of exclusivity and being valued is there whenever they interact with your brand.
But aside from this, there are other benefits to offering tiered rewards.
These programs can help you segment your customers based on their status and engagement to better personalize communications according to member preferences and interests. Personalized communications to your loyalty program members go a long way toward long-term customer retention. According to our 2023 Loyalty Programs Data Study, 90% of consumers agree that in general, when it comes to being personalized to their preferences, most loyalty programs have room for improvement.
They also allow your brand to give members much better rewards and experiences than they could get with a regular points program.
And speaking of points, a key benefit of a tiered loyalty program is not having to rely solely on points by offering better rewards and benefits purely based on status. In fact, according to our 2022 Premium Loyalty Data Study, 78% of all consumers say they don’t want to wait to accumulate points in loyalty programs and think loyalty programs should provide immediate benefits.
Because members of tiered loyalty programs don’t want to lose their status and are highly invested, they protect you from your competition. And the more status they receive, the more engaged they’ll become and that keeps them shopping with your brand.
Most importantly, your most engaged members become brand advocates. It’s almost impossible to engage with a brand at the highest levels and not tell everyone you know about it.
How Important Is Adding a Premium Loyalty Tier?
One thing that more brands are getting on board with is premium loyalty tiers. Premium tiers are popular because they allow your best customers to get the best possible benefits.
In a premium tier, members pay a monthly or annual fee to receive great benefits immediately and they can interact with the program any time. CVS and Best Buy are great examples (more on those programs below). In our instant culture where millions of consumers buy subscriptions for a variety of items, premium loyalty fits right in and your best customers are more than willing to pay for it.
According to the 2022 Premium Loyalty Data Study, 78% of consumers would pay to join a premium loyalty program. And 77% of consumers that don’t belong to any premium loyalty programs would join one if their favorite brand offered one and the benefits were valuable to them.
This next stat ties a points-based loyalty program to a premium loyalty program: 83% of consumers said they were likely to invest in a brand’s premium loyalty program if they already belong to that brand’s traditional loyalty program. Having a premium loyalty tier on top of a points-based program gives consumers options and spreads your potential reach.
Premium loyalty members are your best customers because they self-identify, buy more from you and advocate on your behalf. And premium loyalty members are active: Consider that 71% of premium loyalty members shop with brands whose programs they participate in at least once a week.
Seventy-seven percent of consumers would still want to remain a member of a brand’s free loyalty program if they’re thinking of canceling their premium loyalty membership because they’re not getting enough value out of it. If members stop engaging with a higher tier and drop to a lower one, you don’t lose them and they remain in your loyalty ecosystem.
This is why it’s important to offer both types of loyalty programs.
How to Build a Successful Tiered Loyalty Program
Before you concern yourself with how to structure your tiered loyalty program, figure out the benefits and experiences that are most valuable to your customers and at which levels (free and premium).
Step 1: Focus on exclusive benefits and experiences that are desired by your members and tell your brand story. For your premium tier, members pay to receive enhanced benefits so they must be highly valued.
Step 2: Create your first tier and make it free to join and this comes with standard benefits. Getting customers into your loyalty program is the first step toward building lasting relationships.
Step 3: Make Tier 2 for members who spend a certain amount annually and offer them better benefits.
Step 4: Tier 3 can be reserved for premium loyalty customers who pay a monthly or annual membership. This provides members with enhanced benefits because it identifies your best and most valuable customers. Premium loyalty members raise their hands and tell you they are willing to pay to receive elevated benefits and stay regularly engaged with your brand.
Step 5: Name your tiers to make them more attractive and engaging for members. As we said earlier, a tiered loyalty program allows you to be creative with your branding, such as using different names and rewards for each tier. This will entice more of your customers and fuel their aspirations.
Step 6: Offer experiential rewards because they are very alluring to consumers. They create stronger, emotional connections to your brand because loyalty program members feel a sense of exclusivity, recognition and community. The more experiential rewards members receive, the higher the probability they will become brand advocates.
Step 7: Ensure your best customers receive the best benefits. This may sound simple, but if your rewards aren’t differentiated enough among tiers, members’ aspirations may not be as lofty. Make sure your highest tier offers benefits that are exclusive and significantly more desirable than your lower tier rewards. Your highest tier should be for your VIP members and include experiential rewards.
Step 8: Personalize your communications based on tier levels. This is one of the best features of a tiered loyalty program because it allows you to segment your members and send them personalized communications based on their purchase history and preferences.
Examples of The Best Tiered Loyalty Programs
These examples of tiered loyalty programs offer outstanding benefits that are on-brand as members advance among the tiers.
Sephora® Beauty Insider
Consumers sign up for a free tier and advance to higher tiers based on annual spending. Higher tiers offer better member benefits.
Insiders receive free shipping on orders of $50 or more while VIB members that spend $350 annually only need to meet a $35 order minimum.
Rouge members that spend $1,000 annually receive free shipping with no minimum order amount. They also gain access to exclusive events and products. Insiders and VIBs don’t receive this benefit.
Experiential benefits for VIB members include in-store beauty services, free beauty classes and access to the Beauty Insider Community.
My Best Buy
This year Best Buy launched three membership options in its loyalty program, My Best Buy Memberships™. The three memberships are My Best Buy™, My Best Buy Plus™ and My Best Buy Total™. The first option is free while the latter two carry annual membership prices.
Each membership tier has different benefits, ranging from members-only pricing and deals, access to exclusive sales and events, 24/7 tech support, product protection and free shipping.
CVS offers ExtraCare, which is its free loyalty program. And it offers a premium tier called CarePass, which is $5 per month or $48 per year. ExtraCare members receive 2% back every time they shop and receive personalized deals based on purchase history.
In 2021 CVS tweaked the ExtraCare program to administer the 2% back in ExtraBucks rewards shortly after each transaction, instead of having them paid out on a quarterly basis.
If ExtraCare members want to achieve higher member status, CarePass allows for free same-day prescription delivery, 20% off CVS Health® brands, a 24/7 pharmacist helpline available every day and a $10 monthly promo reward.
AMC Theatres certainly has its customers covered through its highly successful tiered loyalty program, AMC Stubs.
AMC Stubs Insider: This program is free and members receive the company’s standard benefits, including a free refill on every large popcorn and discount Tuesday savings.
AMC Stubs Premiere: This tier costs $15 per year where members receive enhanced rewards points and other benefits. Join this tier and receive $5 Bonus Bucks, waived online fees, free popcorn and fountain drink size upgrades.
AMC Stubs A-List: This tier costs between $19.95–$23.95 per year and carries the best benefits. A-List members receive all the benefits of Premier members plus up to three free movies each week.
A Tiered Loyalty Program Can Showcase the Best Your Brand
Not only can a tiered loyalty program give your customers options and goals to reach, but it also can showcase your brand by telling your company’s story through appealing transactional and experiential benefits. The more your members engage with a tiered loyalty program, the more rewards they’ll earn and the more engaged they’ll become.
When a brand offers a loyalty program with exclusive, tiered benefits, members are driven to achieve a higher status and aspire to achieve something. A tiered loyalty program offers the best of your brand among different status levels and combines a sense of exclusivity, status and personal fulfillment.
If you’re looking for more information on consumer preferences when it comes to loyalty programs, download our 2023 Loyalty Programs Data Study here.
If you’re interested in speaking to a loyalty expert about launching your own tiered rewards program, reach out to us here.