One of the most common types of rewards programs is tiered loyalty programs. And you’ve probably come across one or more of the world’s leading examples of tiered loyalty programs.
From Starbucks to Sephora and Ulta to Uber to many others, you’ll find many global brands using tiered rewards programs to build brand loyalty and increase customer engagement.
And why do these brands prefer tier-based loyalty programs? Because of the many benefits they offer to customers and brands alike.
In this article, we’ll be focusing on what tier-based loyalty programs are and how they work. We’ll also examine some several examples of tiered loyalty programs
What is a tiered loyalty program?
Put simply, tiers are a kind of levels. Among the various types of loyalty programs, there are those where customers gain points and consistently increase in levels, and there are those with tiers or what we call loyalty tiers.
Tiers are seen as broad levels, each coming with its own set of perks and benefits for the customer.
Most tier-based rewards programs come with three tiers: a free or basic tier, an in-the-middle kind of tier, and a high-value sort-of premium tier for major fans and top-spending customers.
Here’s an overview of what Sephora’s Beauty Insider Program tiers look like.
Most loyalty programs are free to join. And with tiers, customers start at the free or basic level and move up as they spend more. Then they have to maintain that level of spending to stay in that tier.
Benefits of creating a tiered rewards program
So why should you consider creating a tier-based loyalty program? What makes the tiering option so beneficial? How does it make you stand out?
Although there are many industries that work great with loyalty programs, we’ve found that many of the world’s best loyalty programs use a tier-based rewards scheme.
You’ll find other rewards programs in other industries that use loyalty tiers, but cosmetics rewards programs use it the most.
Here’s why tiered loyalty programs are great for online retail brands:
1. Regular rewards customers can expect
One of the top benefits of tier-based rewards programs is that they clarify early on what’s in it for customers. It explains which rewards customers will get based on their loyalty tier.
For example, in Ulta’s Member (free) tier, customers know that they get a free gift during their birthday month but aren’t entitled to an additional $10 coupon. On the other hand, customers in the Platinum and Diamond tiers get a birthday gift AND a $10 voucher.
Ulta customers can therefore expect an annual gift on their birthday.
2. May entice customers to spend more
Depending on where customers are in each tier and their buyer’s journey, finding out that they need to spend $30 or even $50 more to get better perks may entice them to make those additional purchases to rise to the next tier.
In order to stay in the higher tier and enjoy the better rewards, they will need to maintain their spending at the higher level.
3. Creating communities
One of the top reasons global brands like tiered loyalty programs is because they help them create communities.
Online communities today are a driving force for many events, be it shopping, brand loyalty, hacks and tips ‘n tricks, among others.
You’ve probably seen many brands create communities using Facebook groups. But you don’t have to go through that long way. Tiered loyalty programs create those communities for you.
Sephora’s Beauty Insider establishes a community based on the different tiers and the brand rewards customers within that community.
You can do the same by sending specific emails to certain loyalty tiers and through special events, be they online or offline.
And if you’re using Gameball, you can go a step further with customer segmentation within your tiers.
4. Better customer segmentation with loyalty tiers
Tier-based rewards programs are a great way to segment customers based on preferences, perks earned, and the tiers they’re in.
While customer segmentation comes with its own set of benefits, adding tiers to the mix gives you a higher level of personalization and segmentation, which means more opportunities to engage customers.
And if you’re using Gameball, there are a host of ways and features you can use to segment customers and reward them for their loyalty. You can segment customers based on certain actions, preferences, or habits within each tier.
5. More rewards and exclusivity for top fans
One of the reasons tiered rewards programs work so well with retail e-commerce businesses is because they offer better perks to higher spenders. However, it’s important that the way you phrase how your loyalty program works doesn’t sure that you’re just after the money.
After all, customer loyalty programs are mainly about a dual benefit. You offer customers perks and benefits and they reward you with their loyalty and often their referrals.
Global examples of tiered loyalty programs
Before we show you how to create your own tiered rewards program, let’s look at some global examples of tiered loyalty programs.
As you will see, there are many industries that work well with loyalty programs in general and with tiered programs specifically.
Probably the most popular beauty brand and beauty loyalty program out there is Sephora’s Beauty Insider.
As you can see, the program is divided into three loyalty tiers, INSIDER (which is the basic or free tier), VIB (which stands for Very Important Beauty), and lastly ROUGE, which is for Sephora’s highest-spending and most loyal customers.
Looking at the perks for each, you’ll see the rewards improve as you move up in the tiers. Insider customers get free standard shipping, a $10 voucher when they accumulate 500 points and the like. And the tier is free to join.
But in the Rouge tier, perks are much better BUT customers need to spend at least $1,000 a year to qualify for this tier. When Rouge customers accumulate 2,500 points, they get a $100 voucher.
If they were in the free tier 2,500 points, they would have gotten only $50.
The second-best beauty loyalty program is Ulta, Sephora’s largest competitor. Like Sephora’s, Ulta’s rewards program, called Ultamate, is divided into three tiers: Member (free), Platinum, and Diamond.
To move to a higher tier, customers must pass a certain payment threshold. With Ulta, customers need to spend $500 or more in a tier to qualify for its Platinum tier. Meanwhile, Platinum customers need to spend $1,200 a year to qualify for the higher tier, Diamond.
According to the Ulta website, the beauty brand had 32 million customers in its rewards program by 2020. These customers accounted for nearly 95% of the company’s online sales.
3. Patricia Nash Designs
While fashion loyalty programs aren’t as common as beauty rewards programs, done well they can significantly boost revenues.
The problem with fashion is that you’re not going to buy clothing every day. So how do fashion retailers stand out from their competitors? Here’s how:
- Their loyalty program explanatory page is super clear and easy to understand
- You don’t have to buy products to earn points. They offer many ways to earn points.
- Their points earning-and-rewarding system is clear. Not having a clear points system in place is one of the most common customer loyalty program mistakes we see.
Are you surprised to find a transportation company on this list? Uber has a unique tiered rewards program in the United States.
Uber Rewards comes with 4 easy-to-understand tiers. They are: Blue, Gold, Platinum, and Diamond. Each tier starts at a certain number of points. And like any tiered loyalty program, the higher the tier, the better the benefits.
Starting the Gold tier, customers get flexible ride cancellations as well as priority when calling Uber’s support team. Uber’s Diamond tier is the king or queen of perks.
5. Marriott Hotels
Did you know that in 2019, pre-COVID-19, leading global hotel chains saw a 59% increase in repeat business due to their rewards programs? Leading hospitality chains Marriott and Hilton were among those hotels in the survey and they each reported 62% rise in repeat customers for overnight stays. (Kalibri Labs)
Hotel rewards programs are quite common among larger chains. The Marriott loyalty program, called Marriott Bonvoy, comes with six – yes you read that right, 6! – loyalty tiers. They are: Member (free), Silver Elite, Gold Elite, Platinum Elite, Titanium Elite, and Ambassador Elite.
As you can see, even the tiers’ names show a rise in the expected level of perks and benefits.
Whereas free members get really basic perks, the Silver Elite tier begins at 10 booked nights a year. It also gives customers 10% more points and priority for late checkout, among others.
Marriott also provides a clear explanatory page for each tier and the perks included.
By the time, you get to Titanium Elite, for customers who spend 100 nights a year, your perks include 75% bonus points, a welcome gift, and enhanced room upgrades.
6. Lancôme Elite Rewards
As you’ve probably guessed, the beauty industry is generally one of the best industries for loyalty programs.
And Lancôme’s Elite Rewards is one of the best beauty loyalty programs out there. The program comes with three tiers: Rose Gold, Platinum, and Gold.
As customers rise in those tiers, they get better perks. A good example of how tiers work is with Lancôme’s free-shipping perk to all loyal customers. However, there are minimum-spend limits for some tiers. But as customers rise to the higher tiers, these minimum-spend limits dwindle.
So, while the basic Rose Gold tier gets free shipping at $49, Platinum tier members get ‘2-day expedited shipping [with] no minimum purchase,’ and Gold tier customers get free shipping with no minimum order value.
7. Total Tools
This is an interesting brand because who would have thought to make a rewards program for tools? Well, Australian brand Total Tools did just that!
Called Insider Rewards, Total Tools’ three-tier program gives customers special perks based on how much they spend per year.
Perks also include exclusive-Insider Rewards member-only deals and invitations to special events.
Tips for creating an effective tiered loyalty program
By now you should have a clear idea of what a tier-based rewards program looks like and possibly how to create one. Still, here are a few more tips to remember if you’re going with the loyalty tiers.
1. Explain how your rewards program works
This is a tip we highly encourage e-commerce business owners to regardless of the type of rewards program they’re doing.
Explaining how your loyalty program works can go a long way in getting customers to use that program and accordingly build more brand loyalty.
Create an explanatory page for your loyalty program and make sure it’s easy to find on your website.
2. Clarify what perks come with each tier
When using a tier-based program, it’s best to create a table that indicates the benefits that come with each tier.
This way customers know where they are at and what perks they get. With Lancôme’s Elite Rewards, customers are clear on what the minimum order value is to get their free shipping. Customers in the basic level (Rose Gold) get free shipping for orders starting $49.
Patricia Nash is clear about how its discount coupons work. The more points customers earn, the higher the value of the coupon.
3. Make it easy to sign up for your rewards program
You’d be surprised by how some companies keep it vague and may not even tell customers about their rewards program.
The secret to getting customers to use your loyalty program is to
- Tell them you have one
- Make it easy to join
- Offer them points or a perk for joining
4. Tell customers how to rise to the next tier
Your rewards program should indicate how many points customers need to accumulate to move to a higher tier.
Qualifying for higher tiers may also be based on other aspects such as number of transactions or a minimum combined value of purchases.
This can increase their chance of spending more a bit more to get the better perks.
That said, and as is the case with most of the examples of tiered loyalty programs listed here and available worldwide, customers need to maintain a certain level of spending in order to remain in that higher tier.
5. Give your rewards program a name
An important step in standing out and creating a community is giving your rewards program a name. Sephora calls theirs Beauty Insider, already giving customers the impression that they’re getting special insider bonuses that they wouldn’t be getting if they didn’t join.
Ulta calls its rewards program Ultamate, while IKEA calls its program IKEA Family, instantly giving a sense of coziness and family.
Giving your customer loyalty program a name not only makes it stand out but also cements its branding.
6. Listen to your customers
One of the top benefits and loyalty tips we can offer you is: Listen to your customers.
Because customers are the ones whose loyalty you’re trying to gain. If customers complain about something, then it’s best to give it a second look. And that’s what Starbucks did a while back.
The Starbucks loyalty program is one of the most popular in the restaurant and coffee shop industry. And it used to be an often-mentioned examples of a tiered loyalty program. BUT…
But customers complained that the tiers were confusing. As a result, Starbucks overhauled its rewards program and removed the tiers entirely.
This shouldn’t put you off creating tiered rewards. After all, tiers are working great with various brands across many industries. It’s likely that Starbucks was trying to do too much with their loyalty tiers.
7. Use email marketing to drive and build loyalty
Once you’ve created your tiered rewards program, be sure to create automated email campaigns to drive customers to take action.
This is especially important in the early days of creating your loyalty program. Use the benefits of tiered rewards programs to drive customers to your store through emails.
Inform customers if you’ve added perks to certain tiers or if it’s their birthday and they get a reward.
8. Make sure you’re offering value
One of the reasons customers engage with rewards programs is because they get something in return. They get value from their relationship with your brand.
So whether you’re creating your tiered rewards program or revamping one, make sure your rewards increase the higher the tiers go and that you’re offering value and benefits to your customers.
Tiered rewards program tips and ideas with Gameball
Tiered programs mean the higher customers can rise in the tiers, the better perks they’re entitled to get. That’s why, we’ve prepared a few more ideas to help drive traffic and build customer retention with loyalty tiers and Gameball.
1. Use challenges and badges
One of the top reasons e-commerce store owners love Gameball is because of the challenges and badges. Challenges are a great way to drive customer engagement.
With Gameball, you can create one or more challenges for customers. In these challenges, customers are required to take certain actions like share a tweet about your store, respond to an email, or visit a certain webpage on your site.
It can even include making a purchase in a certain department in your online store. Once they fulfil all the requirements in the challenge, they earn a reward and a badge.
And you can customize badges as you please. Create your own or customize available templates.
Further reading: Learn more about Challenges and Badges using this video tutorial.
2. Engage customers using Gameball’s segmentation options
We’ve mentioned briefly how customer segmentation can play into your favor when combined with a tiered loyalty program. You can segment customers within each tier and drive them to take action in your store.
- Customer segmentation: Inactive customers
Have you noticed that some customers in your free and second tier haven’t logged in weeks or even months? Get them back into your store by segmenting them based on their activity and sending them an email.
Offer them a one-time-only double points week. Or remind them of an ongoing sale. Or maybe you can entice them with a 10% discount if they complete an order within the next three days.
There are many ideas you can come up with.
- Customer segmentation: Treat your biggest spenders
Personalization is an important element in any successful customer loyalty program. And customer segmentation plays a major role in personalization.
Have you noticed that some customers have made a series of purchases lately? Or maybe they’ve carried out few but large-value purchases?
Use segmentation and push notifications or email to thank them and offer them a special reward for their loyalty.
3. Offer better rewards for referrals
With a tiered program, you can offer even better rewards to the higher tiers who refer your online store to others.
This way, the higher customers go in your loyalty tiers, the better perks they’ll get for not only making purchases, and taking action, but also for referring others to you.
Be sure to follow referral marketing best practices. These include explaining how your referral program works and when customers get their rewards.
Meanwhile, loyalty tiers are a unique tool you can use to build brand loyalty, create a community, entice customers, and increase customer retention.
Whether you have a physical store or an e-commerce store or both, you need to consider personalization and customer retention. And as you’ve seen with the abovementioned examples of tiered loyalty programs, loyalty tiers are a great way to achieve a lot with a small investment.