on February 10, 2019 Loyalty

How To Design a Tiered Rewards Program

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A common issues with loyalty programs is failing to keep a customer engaged after the initial sign-up. Of course, the easiest solution is to make sure a customer always receives more value the longer they stay involved in  the loyalty program. 

Yet this is where some loyalty programs stumble. Their customers find value in the initial sign-up incentive, but then they either lose interest or clunky program design makes staying engaged not worth the effort.

To help customers find enough value in your program to keep coming back, consider implementing a tiered reward program.

The Value of Tiers

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

Reward tiers encourage a customer to engage with your platform from the moment they sign up and provide encouragement for your customers to stick with your program. Here are some simple tips to keep in mind when designing your tiered rewards program.

Make Your Tiers Easy To Understand

One thing you must remember when you design your tiers is making them easy to understand. It’s better to have clear requirements for reaching the next tier. Most times the requirements are the number of dollars spent but it can be anything based on how your individual business functions.

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 find. Make sure your customers understand any limitations. If specific items are not eligible for points or if your points expire after a time, your customers need to know. Customers will quickly drop out of loyalty programs if they suddenly find their purchases are no longer worth anything.

Don't Always Make Them Easy To Achieve

While your tiers should definitely be possible to reach, you need to be careful that you’re not making their requirements too low. 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. A good program makes the process of achieving points rewarding while also challenging customers to achieve elite statuses. By making your rewards tiers too easy your customers could burn through your program too fast and possibly lose interest.

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 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 tier should offer the prime rewards designed around your business. It should provide real value to your customers to achieve the VIP level.

You should want to reward customers who provide the most value for your organization. Spending top rewards on 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 program. You also ensure your most valuable customers are happy.

Show Customer Progress

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 their 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 check out 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 can positively influence their points standing.

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

Growing 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.