How To Design a Tiered Rewards Program

A common issue with customer loyalty programs is when they fail to keep customers active and engaged after the initial sign-up. The best solution is a strategic one: ensure a customer always receives more value the longer they stay involved with the loyalty program. 

Yet this is where some loyalty programs struggle. Their new members are enticed by the value they received at the initial sign-up, but then start to lose interest. Sometimes they don't feel motivated enough to participate consistently. Another reason could be factors such as outdated technology or poor loyalty program design causing user experience frustrations. 

This is why one of the top concerns for loyalty program administrators is preventing new members from believing their new loyalty program is not worth their time or effort. Consider implementing a tiered reward program to help customers find enough value in the program to keep coming back.

Why Choose A Tiered Loyalty Program?

1. Tiers Provide Customers With Tangible Value 

Tiered rewards programs offer increasingly valuable rewards once a customer reaches certain milestones. Typically the first tier will have relatively simple rewards while the highest tier provides the most exclusive and sought-after rewards.

The benefit of this system is that customers can clearly see the value they get in return for their time, money, and effort. These multi-tier rewards programs continue patronage and create an emotional connection with the brand, enhancing overall customer satisfaction and retention. 

2. Tiered Programs Incentivize Immediate and Long-Term Engagement

Another benefit of tiered loyalty programs is that reward tiers encourage customers to engage with your program from the moment they sign up. The "small wins" of the lower tiers are shown to have a positive impact on customer response and increase the likelihood that members will keep participating in the future. For instance, the first tier might offer discounts or basic loyalty points, which are easy to attain and encourage customer participation. Then as customers advance through the levels, they might unlock perks such as free shipping, early access to sales, or exclusive member events. By the time they reach the highest tier, consumers can enjoy premium experiences like personalized services, VIP customer support, or luxury gifts.

As such, tiered programs both incentivize initial engagement and promote long-term loyalty as customers strive to attain higher tiers for better benefits. 

Tips For Designing A Tiered Loyalty Program

Tiered loyalty programs are a simple enough concept to understand; however, they're not always easy to design in practice. Here are some simple tips to keep in mind when designing a tiered rewards program.

1. Do Make Your Loyalty Program Tiers Easy To Understand

One thing you must remember when you design your loyalty program tiers is to make them easy to understand. It’s always better to have clear requirements for reaching the next tier than complicated rules. Most times the requirements are meeting a threshold, such as a certain number of dollars spent,  but it can be anything based on how your individual business functions.

This also applies to the rewards and benefits you'll assign to each loyalty program tier. Take some time to evaluate your current customers and potential rewards. Would monetary rewards like a $5 credit be best? Should you give away high-quality items for free when a customer reaches a milestone? Are your customers the ones who would appreciate first access to exclusive items or events?

Once you have an idea of what kind of rewards and benefits you’ll offer, ensure the process of achieving milestones is easy to understand and find. You especially want to ensure your customers understand any limitations, such as if specific items are not eligible for points or if your points expire after a certain period. Customers will quickly drop out of loyalty programs if they suddenly find their purchases are no longer worth anything.

2. Don't Always Make Loyalty Program Tiers Easy To Achieve

You don't want to make your loyalty program tiers impossible to reach because this will discourage customers and tank program participation. At the same time, you must be careful not to make each tier's requirements or qualifications too low. By making your rewards tiers too easy to achieve your customers could burn through your program too fast and lose interest.

A good program makes the process of achieving points rewarding while also challenging customers to achieve elite statuses. This is why gamification in loyalty programs is one of the biggest drivers of program engagement; it’s fun for customers to see their progress through their program.

Your loyalty program could also run the risk of affecting your profit margin if you’re too free with your rewards. Your program needs to be mindful of how and when rewards are awarded.

Ideally, the more a customer engages in the loyalty program, the better their rewards become. Exclusivity is a driver for many loyalty program customers who want to feel valued by the organizations to whom they’re giving their business. The top VIP level of your tiered loyalty program should offer prime rewards designed around your business. It should provide real value to your customers who achieve the VIP level.

You want to reward customers who provide the most value for your organization. Allotting top rewards to a customer who only shops with you once doesn’t provide any significant benefit. By reserving your best rewards for the customers who engage with you the most, you increase the appeal of your loyalty program. You also ensure your most valuable customers are happy.

3. Show Customer Progress And Achievements

A tiered rewards program won’t mean anything if customers have no idea where they are on the spectrum. It’s important to keep your customers updated on their points standing so they’re incentivized to stay engaged in your program.

Sephora’s Beauty Insider Program, for example, has its rewards tiers based on dollars spent in a calendar year. Each time a user signs in their total points are clearly visible in the top right-hand corner of the page.

Customers can also see how their future purchases will affect their points total. Sephora’s checkout process lists the number of points a customer will obtain if they purchase everything in their current cart. The points change when an item is added or removed. Customers can literally see how purchasing items positively influences their points standing.

Showing how many points a customer could earn when they make a purchase offers real-time incentives for customers to spend more — especially when the customer is close to making the next tier!

Grow Your Business Using A Tiered Rewards Program

Tiered rewards programs are significantly beneficial when you’re looking to grow a loyal customer base. Tiered rewards generate customer engagement, provide incentives for your customers to choose you over competitors, and give you multiple opportunities for you to delight your customers with exclusive rewards.

To learn more about developing a Tiered Rewards Program to boost your customer engagement and retention , contact the customer loyalty experts at Brandmovers today!