A tiered rewards program is a powerful way to increase customer retention and revenue. By creating different levels of rewards based on customers' spending habits, businesses can incentivize customers to spend more, while also providing exclusive benefits to their most valuable customers.
Such programs can increase customer loyalty and drive repeat business, helping businesses achieve their revenue and growth goals quickly.
Let’s explore what a successful tiered rewards program looks like, and how to start your own.
There are lots of different types of loyalty programs and a tiered rewards program is a specific program that rewards consumers differently depending on the tier they’re in. Customers can advance to higher tiers — and receive more valuable rewards — after completing predetermined actions.
Since the rewards program is typically set up similar to a hierarchy, members are incentivized to reach higher tiers. Upper tiers elevate their social status and reward them with special perks.
When executed properly, tiered rewards programs can boost customer loyalty, increase referrals, and improve retention rates.
Whether you’re looking to acquire new customers or simply keep the existing ones loyal, tiered rewards programs can be used in both referral marketing and loyalty marketing to scale your rewards programs and keep customers happy.
In short: A tiered structure can take your already successful referral or loyalty program to the next level.
Here are 6 of the top benefits you get from choosing a tiered structure for your next rewards program.
You can learn what your customers respond to and what excites them once you have a tiered rewards program. If you introduce a certain reward for a tier, and customers respond positively by completing the actions to reach that tier, you have a solid understanding of what they respond to. On the other hand, if customers don’t try to reach that tier, you have valuable information on what kind of rewards they don’t want to see.
This valuable information can not only help inform your marketing efforts but also product development by seeing which products are redeemed the most.
Friendbuy customer MZ Wallace uses a tiered structure to both incentive customers and promote products to their most active members.
A tiered structure also allows you to improve segmentation. Customers naturally fall into segments depending on the tiers they’re in. Use this information to identify which customers are most engaged or spending the most, and target them appropriately. This insight into customer behavior is extremely valuable.
It’s key to segment customers by behavior rather than needs, values, or demographics, research by McKinsey proves. When you segment by behavior, you can see customer acquisition increase from 10% to 20% and customer satisfaction and engagement increase from 20% to 30%.
Everyone loves a little healthy competition, and a tiered reward program is one way to invoke your customer’s competitive spirit. Use that spirit to drive customers to other platforms, like social media or newsletter signups, or to engage them differently, like redeeming rewards.
With a tiered rewards program, they’ll be motivated to engage more if that means leveling up to a higher tier.
The key: make sure the greatest ranking has the greatest prize, so customers are incentivized to reach it.
A tiered rewards program that is designed creatively can offer a win-win situation for both the business and customers.
One way to make the program more engaging for customers is to gamify it by adding elements such as a progress bar or points tracker. This will allow customers to visually see their progress in the program and how close they are to reaching the next level, which can be more motivating than a program that only advances based on money spent. Additionally, this allows them to compare themselves to their peers in the rewards program, creating a sense of friendly competition.
It's also important to understand that not all members are created equal. We can break them down into segments like enrolled members, active members, and redeemers. Out of these groups, redeemers are the most valuable as they tend to spend more.
In fact, active members typically spend 10% more than enrolled but inactive members, while redeemers spend 25% more. To maximize the impact of your loyalty program, focus on increasing the number of redeemers as it can lead to greater sales increases than simply tracking membership numbers.
These increased levels of engagement can transform into increased levels of customer loyalty and customer happiness, both crucial metrics to your brand’s success.
Focusing on existing customers is crucial for building long-term loyalty. According to research, 75% of customers who are part of successful loyalty programs are willing to change their behavior to benefit the business. Tiered reward programs are a great way to achieve this kind of loyalty by giving customers incentives to continue doing business with your brand.
With so much competition in today's market, it's important to make your brand stand out and a reward program can be a great way to do it. By providing special rewards and the ability to advance through program tiers, customers will see the long-term benefits of staying loyal to your brand.
Customers are drawn to status, and they also appreciate feeling valued. Since you can identify your most valuable customers based on which tier they’re in, you have a great opportunity to show them how valuable they really are.
Your highest program tiers should be your most exclusive ones, meaning it takes high levels of engagement and spending to reach them. Reward exclusivity by setting truly valuable rewards for these tiers. Customers want to feel special, and you can do this by offering early access to new products, an invite to special events, or personal notes with freebies.
Friendbuy customer OLLY doubles down on loyalty points the higher the tier, making it a better deal for members to spend more.
When customers are happy, they want to shout it from the rooftops. Upper tier program members will gladly show off their unique rewards, which means more word-of-mouth marketing for you.
Companies dread slow seasons, but with the right strategies in place, you can avoid those undesirable months altogether. Ecommerce businesses largely see summer as a bad time for businesses, with July generating 30% less activity than December. A tiered rewards program is your key to circumventing this drop in sales.
While there’s not a societal pressure to spend like one would in the holiday months, your tiered rewards program can stand in as this form of incentivization. Identify your “slow” season — it might not be summer depending on your product/service — and make sure you're promoting your tiered rewards program during this time.
With enough members, your program can fill the gap during this otherwise “slow” period. Keep up the rewards and keep increasing engagement, and you should steer clear of a damaging slow season.
Customers don’t appreciate excessive communication when it’s unwarranted. A tiered program is the perfect excuse to stay in constant communication with your program members naturally.
Send automated email campaigns that update them on the rewards they can claim, what they need to do to advance to the next tier, and how they rank among other customers. This encouragement might be what they need to move up to the next tier. And, in the meantime, you’re increasing your revenue.
When you’re running a tiered rewards program, you’re giving out valuable perks and rewards — but in exchange, you’re receiving invaluable benefits like increased engagement, increased revenue, and more customers.
An effective tiered rewards program saves the best rewards for the best customers. Even better, you’re giving them the blueprint on how to be the best customer, while still rewarding them along the way.
Here's a few tips for launching a successful rewards program that’s attractive to your newer customers and your most loyal customers:
One hesitation brands may have before starting any kind of rewards program is how much it’s going to cost them. Is the investment worth the return? For tiered rewards programs, it is
Brands with tier-based loyalty programs report a 1.8x higher return on investment compared to programs with no tiers. Customer acquisition is important, but customer retention is perhaps more vital. Customer retention reflects how well your brand is keeping existing customers happy — and tiered levels in referral or loyalty programs are a proven way to keep them satisfied.
When starting a tiered rewards program, keep the amount of tiers relatively low. You can always add tiers, but taking them away introduces complications. Save your most valuable rewards for the customers who deserve it, and don’t go giving everything away to anyone who participates.
Some brands have really figured it out when it comes to tiered programs and how to make them successful. Whether you’d prefer to keep it simple or go all-out with various rewards and tiers, we’ve got an example for everyone.
Here are some tiered loyalty program examples to inspire your own.
We collaborated with OLLY to revamp their loyalty program, focusing on innovative solutions and strategic alignment with OLLY’s business objectives and customer behaviors.
We integrated with Attentive, enabling OLLY to enhance customer engagement through real-time SMS messages about significant loyalty and referral events. This approach not only clarified the benefits of program tiers to OLLY’s customers but also fostered enhanced engagement and a stronger connection between OLLY and its customers.
The results were transformative. The loyalty program became a pivotal element in driving OLLY’s business growth. By aligning the program with OLLY’s business objectives and customer needs, we ensured the program was not just a feature but a significant contributor to business growth, illustrating the transformative power of our innovative and customer-centric approach.
Friendbuy worked with Olive & June to create a loyalty program that is meticulously designed to reward customers at every interaction point. Customers can start by creating an account, earning them 5 points right off the bat. The earning doesn’t stop there; every purchase, review, photo addition to a review, and attendance at a Masterclass Series brings in more points. Special actions like hosting a painting party or purchasing a membership yield even higher rewards.
The points can then be redeemed for a variety of exclusive products and experiences, ranging from nail care products to unique accessories.
This tiered system not only incentivizes spending but also fosters a sense of exclusivity and belonging among the customers, enhancing their overall brand experience.
Friendbuy customer MZ Wallace, utilizing a straightforward yet effective tiered loyalty program, allows customers to earn and redeem points seamlessly. Customers create an account and ensure they are signed in when they checkout, earning 1 point for every $1 spent. These points can be redeemed to receive discounts, with every 10 points equating to $1 off.
The program is tiered with Silver for those who spend $0-$199, Gold for spending between $200-$1199, and Platinum for spending $1,200 and above. Each tier comes with its unique perks such as early access to launches, surprise double points days, VIP events, free shipping and returns, birthday surprises, and exclusive gifts.
This approach by MZ Wallace not only incentivizes purchases but also encourages customer engagement and interaction, fostering a sense of exclusivity and appreciation.
Friendbuy customer ALOHA Collection welcomes customers aboard their Frequent Flyer Program, where every purchase earns ALOHA Miles, redeemable on future orders. Customers begin earning by creating an account, accumulating 1 ALOHA Mile for every $1 spent.
The program is tiered, with customers reaching different statuses as they spend more. The “Business Class” is attained by spending $200, offering a 1.5x point multiplier and early access to sales. Spending $400 elevates customers to “First Class,” providing a 2x point multiplier, early access to sales, and surprise discounts.
This structured, tiered approach, facilitated by Friendbuy, not only incentivizes purchases but also encourages higher spending to unlock exclusive benefits and discounts, fostering customer loyalty and enhancing overall customer experience.
Cora introduced a tiered referral program that allows Advocates to advance to higher tiers depending on how many Friends they refer. While referring just 1 friend places them in tier 1 and rewards them $5, they have the opportunity to unlock additional tiers and even more money per Friend referred.
As soon as an Advocate successfully refers at least 6 friends, they’re rewarded $10 per friend instead of the original $5. Many referral programs give out money per referral, but the introduction of tiers incentivizes Advocates to keep referring so they can achieve higher status and better rewards.
This type of program not only brings in more customers through referral marketing — it increases customer loyalty. Advocates are going to have a positive relationship with Cora and keep coming back since they’re accumulating more credits.
As a way to encourage larger purchases, Interior Define started a dual tier program. For the highest tier, when a Friend spends more than $2,000 on an order, they get a $300 discount and the Advocate that referred them gets a $150 discount.
If a Friend’s order is less than $2,000, then both the Friend and Advocate receive a $100 discount. With these 2 tiers and 2 rewards, Advocates have a reason to encourage larger purchases and Friends are also incentivized to spend more.
Nuuly has a similar program to Cora where they allow Advocates to receive better rewards if they refer more Friends.
Advocates can advance to the second and third tier if they refer a second and third Friend. If they accomplish this, they enjoy an increase in discounts — from $10 off the first friend to $30 off the third friend. In total, they can get $60 off if they advance through all 3 tiers.
Sephora boasts a highly successful tiered loyalty program in the beauty sphere. It’s structured into 3 different tiers — Insider, VIB, and Rouge. They make it very clear what each tier rewards, and how to unlock higher tiers.
As you can see, the rewards get better depending on what tier you fall into. While Insider tier members — customers who can join the loyalty program as free members — enjoy 10% off seasonal savings events, Rogue customers can take 20% off.
They do a great job with exclusivity, saving their best rewards for their highest value customers, those who spend $1000/year. These tier members get special benefits like the Rogue Reward, and first access to products.
Southwest airlines implemented a tiered loyalty program that allows program members to accumulate loyalty points they can use for flights.
Members join the first tier when they take 25 one-way qualifying flights. They advance to the second tier if they take 50 one-way qualifying flights. This loyalty program is smart because frequent flyers will opt to fly with Southwest so they can earn more points and advance tiers.
Southwest also offers the option to gain points by making Rapid Rewards credit card purchases. Plus, once program members take 100 qualifying one-way flights, they earn the Companion Pass. It’s not considered a tier, but it allows members to take one person to fly with them for free whenever they purchase or redeem points for a flight.
With 6 different tiers — 5 that come with elite status and 1 that’s free to join — Marriott has a variety of rewards for all of their program members.
Pictured above, the Silver Elite tier is the second tier and is achieved when a member stays 10 nights per year at Marriott. The first tier is available to anyone, from those who spend 0-9 nights per year. Marriot does a great job offering diverse rewards, from late checkouts to free wifi to room upgrades and more.
They offer a few ways to earn points that can be redeemed as well. Members accumulate points from credit card spending, dining with affiliated restaurants, hosting events, and staying nights. Marriott lets members redeem points for everything from gift cards to flights to car rentals. It’s a truly diverse program, meaning there’s likely to be something of value for every member.
A tiered rewards program is one way to stand out from the sea of competitors surrounding you. Make your customers feel valued and give them an exciting, modern way to connect with your brand and forge a strong relationship.
Ready to start your own tiered rewards program? Friendbuy can assist you with every step and help you launch your own loyalty program or referral program that rewards Advocates and Friends automatically, while also preventing fraud.