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MARKET INSIGHTS

Effective tiered loyalty programs

Discover the art of effective tier differentiation and maximize profits with a tiered loyalty program. Engage, reward, and retain customers better with market-proven tiered programs.

Effective tiered loyalty programs

Contributors
Karl Bzik
CPO, co-founder
Monika Motus
Loyalty Expert (formerly Starbucks, iSpot, and Douglas)
effective tiered loyalty programs - cover image
Monika Motus
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Building strong and lasting relationships with customers has become more critical than ever. A well-designed tiered loyalty program with strategically crafted tiers can be a big deal, offering a powerful incentive for clients to stay loyal to your brand. This piece provides valuable insights and practical tips for configuring and implementing an impactful tier-based loyalty scheme that will meet your business objectives.

Key takeaways:

  • Loyalty program tiers are a powerful tool to enhance engagement, increase retention, and drive long-term allegiance.
  • Tier schemes are known for their easy-to-understand mechanisms, thanks to which members can quickly grasp the benefits associated with each tier, making it more likely for them to strive for higher ones.
  • Loyalty tiers naturally segment customers, enabling you to target different groups with personalized offers and experiences.
  • Successful tiered programs follow these steps: deciding on clear reward methods, determining the optimal number of tiers, differentiating benefits, engaging through direct communication, and monitoring and optimizing.¬†

What will you find in this tiered loyalty program guide?

In this guide, we'll explore the concept of a tiered loyalty program and its various advantages. You'll learn the main loyalty mechanisms that drive customer engagement and motivation. What's more, you'll discover the value of optimizing for profitability when managing loyalty benefits and how tiers contribute to natural customer segmentation.

This guide also explains what is a tiered loyalty program matrix and shows you the best practices for preparing it. You'll be walked through establishing clear loyalty scheme objectives, identifying and segmenting your customer base, and determining your business's most suitable tiers.

To provide you with practical insights, the guide concludes with the five best examples of loyalty program tiers implemented by successful businesses. These real-world examples will inspire you to design your own tiered loyalty scheme tailored to your unique needs and client's expectations.

Without further ado, let's dive into the world of loyalty program tiers and discover the immense potential they hold.

Loyalty tiers definition 

Loyalty tiers, also known as membership levels, are a system used by businesses to reward and incentivize their faithful customers. These levels are structured based on the client's engagement and spending behavior, to foster long-term allegiance and encourage repeat transactions. As participants move up through the tiers, they unlock increasingly attractive benefits.

You can choose the name of each loyalty level based on your brand's image, creating a more personalized experience. However, traditional tier names (such as brown, silver, and gold) clarify the customer's position in the loyalty journey.

Naming nomenclature examples from Marvel Insider. Source: https://www.marvel.com/insider 

Main benefits of loyalty tiers

Let's discover the significant benefits of properly set loyalty levels, from better retention and increased customer value to obtaining actionable data.

1. Increased engagement and motivation

Program tiers act as a source of motivation for clients to stay connected with your brand. As consumers progress through the tiers, they unlock valuable rewards and benefits, creating a gamified experience. This progression-based approach taps into human psychology, triggering a desire for status and recognition and incentivizing customers to maintain their loyalty and repeat purchases.

Visible progress tracking in tier loyalty programs is a key factor to motivate customers, as seen in examples from Starbucks, Booking, and Hyatt. Source: Private collection.

2. Easy-to-understand mechanisms 

Loyalty tiers offer members both simplicity and transparency by categorizing benefits into different levels, each representing a specific degree of fidelity or spending. This straightforward approach replaces complex reward structures, making it easy for customers to understand the program's setup and what they need to do to move up to a higher tier and unlock better benefits. 

Clear tier achievement and maintenance conditions proposed in the H&M loyalty program. Source: https://www2.hm.com/en_gb/member/info.html 
Transparency is key in loyalty programs. Your customers need to understand the requirements for achieving and maintaining each tier. Communicate the actions or spending thresholds necessary to advance or stay in a specific tier. Whether based on the number of purchases, total spending, or other criteria, participants must be assured of what they have to do and when to reach/maintain a tier. Additionally, they should be informed when the conditions change. Providing clear messaging in this area is demanding for marketers, but it's vital.

3. Optimized profitability and discount management

Tiers enable you to optimize your scheme's profitability and effectively manage discounts. You can target your most valuable and active clients by reserving premium benefits and exclusive offers for higher tiers. This strategic allocation ensures that discounts and rewards are distributed where they'll have the greatest impact, maximizing the return on investment for your loyalty program.

The best tiers' benefits that customers can get
  • Free delivery is essential in e-commerce programs and remains one of the most valued benefits for customers. Offering free delivery within the loyalty program has often successfully driven member acquisition.
  • Early/exclusive access is prevalent in the fashion, events, and hospitality industries. It provides loyal customers with a VIP experience, granting them access to sales or limited collections before others, creating a sense of exclusivity.
  • Birthday gifts are a common feature highlighted in most tiered loyalty programs. The range of birthday benefits is broad, including free rewards (e.g., Starbucks), discounts (e.g., Peek&Cloppenburg, Douglas, Adidas), and bonus points (e.g., Sephora).
  • Prolonged periods for returns/guarantees provide the most loyal customers with an extended window for returns or additional guarantees on products.
  • Special events/services are highly popular, especially for higher/VIP tiers. Brands invite their loyalty program members to exclusive events they organize or sponsor, further enhancing the sense of exclusivity and appreciation.
  • Additional discounts/points include more opportunities to collect bonus points on designated days or extra discounts (e.g., an additional 5% off on sale products). These benefits enable members to reach rewards quicker or save more on their purchases.
  • Welcome-to-tier benefit is a one-time customer reward upon reaching a higher tier in the loyalty program. As tiered programs aim to motivate members to engage more and unlock more excellent benefits, this one-time benefit is an essential event in the customer journey.
  • Anniversary benefit rewards members who maintain their higher tier status beyond the initial achievement. To appreciate the member's loyalty, brands offer additional benefits for keeping the tier for the next period.
Examples of tiers' benefits according to loyalty experts and usage popularity. Source: Internal presentation prepared by Open Loyalty.

4. Natural segmentation

Loyalty program tiers provide a seamless and natural segmentation to your analytics tool. As participants move through the tiers, you can gain valuable insights into their behaviors, preferences, and spending patterns. This data-driven segmentation allows for personalized and targeted marketing efforts, tailoring promotions and offers to specific segments. 

The result is an enhanced customer experience, greater relevance of marketing communications, and improved retention rates.

5. Customer retention and long-term loyalty

Loyalty program tiers foster long-term devotion among customers. Creating a multi-tiered structure can cultivate a deeper emotional connection with your most dedicated audiences. 

As loyalty scheme participants progress and unlock higher-tier benefits, they develop a sense of commitment to the brand. This emotional bond helps protect your business from competitive forces and reduces the likelihood of clients switching to competitors.

Additionally, tiers within the loyalty scheme play a crucial role in preventing churn. By offering escalating rewards and exclusive perks as customers move up the tiers, you incentivize them to stay engaged and continue patronizing your brand. The desire to maintain and enjoy the privileges of their current tier encourages clients to remain loyal over time, and this way, reduces the chances of churn.

6. Enhanced customer experience

The ongoing loyalty management at different levels enables you to deliver a more personalized and rewarding experience. 

With each tier, clients can access exclusive perks, customized offers, and unique events tailored to their preferences. This elevated and immersive approach strengthens your relationship with your valued customers.

7.Fuel for data-driven decision-making

Program levels provide valuable data insights you can use to leverage data-driven decision-making. Analysis of tier-related data helps identify trends, behavior patterns, and the effectiveness of different rewards. 

Armed with this information, you can refine your loyalty scheme strategies, tailor benefits, and continuously improve the program to meet people's expectations and preferences better.

How to prepare a good loyalty program tier matrix? (5 top practices)

A well-structured and enticing tier matrix lies at the heart of any impactful scheme. To put it simply, a tier matrix is the table that lists the tiers and the corresponding benefits. This carefully crafted framework encourages customer commitment and paves the way for increased retention and higher revenue.

In this part, we'll delve into five best practices and strategies to create a compelling loyalty program tier matrix that will leave your clients eager to climb the ladder of rewards and benefits while, at the same time, driving your business toward new heights of success.

1. Decide on clear rewarding methods

When designing the tier matrix, the first step is deciding on the specific behaviors you want to reward. These can include customer purchases, engagement actions (such as writing product reviews or referring friends), or a combination of both.

The primary rewarding mechanism you choose will drive the most important behaviors for your organization. For example, if you want to increase customer referrals, you might offer more rewards for successful referrals. On the other hand, if you aim to boost repeat purchases, you may offer points for every dollar spent.

Clearly defining the rewarding methods will help align your program with your goals and encourage the desired customer actions.

2. Set up an optimal number of tiers

Determining the number of tiers and their corresponding thresholds is crucial for creating an effective loyalty program tier matrix. The number of levels should strike a balance between simplicity and effectiveness. Too few tiers might not offer enough differentiation to motivate customers, while too many of them can make the program overly complex and challenging to manage.

Start by defining a basic structure, such as three to five levels, with increasing benefits as members advance. The lowest tier should be easily accessible to all new customers, while the highest tier should be reserved for your most valuable and loyal buyers.

The dynamic tiering provided by Nordstrom inside the Nordy Club loyalty program. Source: https://www.nordstrom.com/browse/nordy-club

Consider using your knowledge about average customer behaviors, such as purchase frequency, average basket value, and engagement frequency, to set achievable thresholds that motivate members to strive for higher levels.

Utilizing customer data and insights is crucial in designing an appealing loyalty program. Analyze purchase patterns, customer preferences, and the overall profitability of the program at each tier. By understanding people's behaviors and their value to the business, you can tailor benefits that align with their interests and your brand's objectives. Data-driven estimations also enable you to allocate resources more effectively, ensuring that the company's rewards are sustainable while still providing significant value to end users.

3. Differentiate the benefits

Each tier in the loyalty program should offer unique and desirable benefits that entice participants to move up the ranks. Benefits and perks should reflect the increasing value of each tier and provide clear incentives for customers to achieve higher status.

For instance, the entry-level tier might offer modest discounts or exclusive access to sales, while the top tier should provide significant rewards, such as VIP treatment, personalized offers, and enhanced customer service.

By clearly differentiating the benefits between tiers, you encourage members to engage with your brand more frequently, as they can see the tangible rewards they will receive for their affiliation.

Distinctive benefits for each loyalty tier create a sense of exclusivity and achievement in customers. As they progress, they receive better rewards, such as higher discounts, valuable rewards, premium services, or unique experiences. Offer early access to products, priority customer service, extended return periods, and personalized gifts on special occasions to enhance the program's appeal and encourage long-term loyalty.

4. Engage through direct communication

A tiered loyalty program introduces various milestones and events along the customer journey such as reaching a new level, being close to reaching the next one, or facing a potential downgrade. If you want to enhance the customer experience, it's essential to establish direct communication channels to engage with your members during these critical moments.

Use targeted messaging and notifications to keep customers informed about their progress and the benefits they can unlock at higher levels. Additionally, personalized communication can help incentivize members to take specific actions to maintain or upgrade their status. 

An example of a communication path for the tiers' validity. Source: Private collection.

5. Monitor and optimize

The work doesn't end there once your tiered scheme is live. Regularly monitor the program's performance to understand how it's influencing customer behavior and loyalty. Analyze redemption rates and overall loyalty program metrics to make data-driven decisions.

Also, keep track of the distribution of members across different tiers, as this can give insights into the program's appeal and effectiveness. Analyze whether customers are achieving the various tiers and if they're taking advantage of the advantages granted.

If you notice that customers are struggling to reach higher levels or not enjoying the benefits, consider adjusting the program. Regularly optimize your tiered program based on collected insights to ensure it remains relevant, engaging, and aligned with your objectives. But remember that balancing tiers will likely affect the progress of users that spent time and money to reach their current stage. At this stage, it’s critical to communicate upcoming changes clearly so users don’t feel blindsided.

By continuously refining the tier matrix, you can enhance the loyalty scheme's impact and drive better results for both your customers and your organization.

Adjust for average shopping frequency and basket value. Analyze how often shoppers make purchases and the average value of their carts to set realistic and attainable tier requirements. These metrics provide valuable insights into customer spending habits and what is considered typical within the industry. Setting tier targets that align with these averages ensures that a wide range of clients can engage with the rewards program and find value in participating.

What are the five best examples of loyalty program tiers?

In this part, we'll explore five exceptional examples of tiered loyalty programs that have truly captured consumers' hearts (and wallets). From enticing perks to exclusive benefits, these programs set a benchmark for enhancing customer retention, increased spending, and higher customer lifetime value (CLV).

1. ALDO Crew, the engaging expense-based tiered loyalty program 

ALDO Group, a Canadian multinational corporation retailer, owns and operates a global chain of shoe and accessory stores. Founded in 1972 by Aldo Bensadoun in Montreal, it now has nearly 3,000 stores in 100 countries under three retail banners: ALDO, Call It Spring/Spring, and GLOBO.

The ALDO Crew scheme aims to recognize and reward customers while encouraging them to engage and shop more frequently at ALDO stores or online platforms.

One of ALDO Crew's key differentiating features is its expense-based tier system, which increases customer benefits based on their expenditures. Participants must spend a certain amount of money within 12 months, or they'll be downgraded.

As of writing, there are three tiers of the ALDO Crew customer loyalty program:

  1. Crew
  2. Plus
  3. VIP

All these tiers bring various benefits to the participants, such as:

  • A welcome offer. Upon registration, members receive a discount on their next purchase of ALDO Products.
  • Lowered free shipping threshold. Participants can enjoy free shipping on orders over $50.
  • Birthday treat or gift. Every member gets a discount on the next purchase of ALDO Products during the birthday month.‚Äć
  • 15% reward voucher. Clients receive a 15% off voucher for their next ALDO Products purchase, issued once within 12 months.‚Äć
  • Lowered free shipping threshold. Members can enjoy free shipping on orders over $50.‚Äć
  • 20% Reward Voucher. Members receive a 20% off voucher for the next ALDO Products purchase, once within 12 months.‚Äć
  • Free shipping. Consumers can enjoy free shipping on all their orders.‚Äć
  • Shareable Reward Voucher. Clients can share the 20% Reward Voucher with up to five friends, allowing them to enjoy the same discount on their ALDO Products purchases.
  • And many more.
ALDO Crew loyalty program's benefits. Source: https://www.ALDOshoes.com/us/en_US/crew/benefits 

Explore how ALDO achieved a full omnichannel loyalty solution that was launched in the US, UK, and Canada within three months. Read the case study.

2. MSI Rewards, the active point-based tiered loyalty program

MSI is a world leader in gaming, content creation, and business solutions, with a strong global presence in over 120 countries. They offer top-notch laptops, graphics cards, monitors, motherboards, desktops, and peripherals, shaping the future of technology through quality, user-friendly design. MSI sells their hardware through online and offline partners and resellers.

The MSI Rewards is a comprehensive customer rewards program designed to enhance customer engagement and foster brand loyalty. This point-based tier system incentivizes gamers to make repeat purchases, engage with the brand, and participate in various activities, all while earning valuable points that can be redeemed for exclusive rewards.

This program actively engages members by encouraging and incentivizing specific brand activity. As a result, members have numerous opportunities to accumulate points, including:

  • Enrolling in the official online store, where they can sign up and become an official part of the brand's community.
  • Registering a purchased product, which allows members to not only activate their product's warranty but also gain points for their engagement.
  • Sharing a review of a product they've purchased, enabling them to provide valuable feedback while earning points in the process.
  • Referring a friend to the brand, creating an opportunity for members to introduce others to the brand and earn points for successful referrals.
  • And many more actions to explore, providing a range of engagement possibilities for members to accumulate points through their interactions with the brand.
Ways to earn points in the MSI loyalty program. Source: https://www.openloyalty.io/clients/msi 

Currently, there are four main tiers with names straight from the gaming world:

  1. Bronze 
  2. Silver 
  3. Gold 
  4. Platinum 

All of them bring various benefits to the participants, such as:

  • Access to exclusive product information, newsletters, and occasional promotions. Program participants gain exclusive access to product updates, informative newsletters, and special promotions tailored to their preferences.
  • Early access to new product launches or beta testing opportunities. Members can enjoy early product access, get a first look at new releases, and even participate in beta tests, contributing valuable feedback.
  • Priority service, extended warranties, and occasional discounts. Members receive prioritized customer support, extended warranties for purchased items, and occasional discounts for added value.
  • Access to gaming events, tournaments, or online forums. Gamers can partake in exclusive gaming events, tournaments, and online forums, connecting with peers and competing for prizes.
  • Additional perks like free shipping on all orders, personalized recommendations, and loyalty rewards in the form of points or credits.
  • And many more.
MSI's points-based loyalty program tiers. Source: https://rewards.msi.com/

Find out how MSI quickly and seamlessly migrated to a centralized loyalty app in just three months. Read the case study.

3. U.S. Soccer Insiders, the passionate expense-based tiered loyalty program 

The United States Soccer Federation (USSF) is a nonprofit organization and the official governing body of soccer in the United States. It oversees soccer at all levels, including national teams, professional and amateur leagues, and various other soccer-related activities. USSF is a FIFA member and organizes events like the U.S. Open Cup and the SheBelieves Cup.

The U.S. Soccer Insiders, a loyalty program with expense-based tiers, is a fresh initiative to engage and reward soccer enthusiasts who actively support the sport and contribute to its growth. This scheme is designed to provide various benefits to fans, players, and stakeholders based on their level of financial commitment to U.S. Soccer.

This particular tiered loyalty program offers three different types and subtypes of levels:

1. Insiders

Presently, members start free and can advance to fuel their fandom with unique experiences and unparalleled rewards.

The key benefits of this tier are:

  • Presale access to tickets
  • Player of the Match voting
  • Quarterly Insiders newsletter
  • Access to Insiders Rewards
  • Access to World Cup tickets
  • Premium presale access to tickets
  • Invitation to Insiders-only events
  • Free shipping at the U.S. Soccer Store
  • And so on
The benefits of Insiders level in the U.S. Soccer Insiders loyalty program. Source: https://www.ussoccer.com/insiders 

2. Family Insiders

Participants are required to make an annual financial commitment of $85, which grants them and their entire family the same experience and benefits as Premium Insider.

The key benefits of this tier are: 

  • Early ticket presales
  • Exclusive insider events
  • Free shipping at U.S. Soccer Store
  • Insiders Pregame Lounge Passes
  • Access to exclusive U.S. Soccer content
  • Fan Council voting
  • Premium Insiders Rewards
  • Priority World Cup ticket access
  • Free one-year Sports Illustrated subscription
  • Free one-year Sports Illustrated Kids subscription
  • And more
The benefits of the Family Insiders level in the U.S. Soccer Insiders loyalty program. Source: https://www.ussoccer.com/insiders 

3. Circle Insiders 

Members are required to make an annual financial commitment of $500 and $10,000. They can also choose from four levels of unforgettable behind-the-scenes access and one-of-a-kind U.S. Soccer services.

The key benefits of this tier are:

  • Early access to presale tickets and World Cup purchases
  • Postgame field access for family photos
  • U.S. Soccer Leadership Teleconferences access
  • Fan Council voting rights
  • 100% tax-deductible ($500)
  • Field-level warm-up viewing
  • At-cost participation in select Patrons Programs for you and a guest (VIP travel packages)
  • VIP pre-game tour passes
  • Priority suite purchase rights
  • And many more
The benefits of four levels of Circle Insiders in the U.S. Soccer Insiders loyalty program. Source: https://www.ussoccer.com/insiders 

Recipients can easily compare the benefits of all U.S. Soccer Insiders tiers and, with such transparency, they're mobilized to spend even more.

Comparison of all tiers in the U.S. Soccer Insiders loyalty scheme. Source: https://www.ussoccer.com/insiders#compare-levels 

Discover how the soccer federation created a multi-tier, omnichannel loyalty solution to guarantee year-round fan engagement. Read the case study.

4. World of Hyatt, the adventurous point-based tiered loyalty program

Hyatt Hotels Corporation is a multinational hospitality company with luxury hotels and resorts worldwide, offering various brands catering to different market segments, including Hyatt Regency, Park Hyatt, Andaz, Grand Hyatt, Hyatt Place, Hyatt House, and Hyatt Centric. Headquartered in Chicago, Illinois, it was founded in 1957.

World of Hyatt is a tiered loyalty program, allowing guests to earn loyalty points and enjoy various benefits when staying at Hyatt hotels and resorts and using certain partner services.

The World of Hyatt scheme offers four different tiers with names related to the travel industry:

  1. Member
  2. Discoverist 
  3. Explorist
  4. Globalist
Upgrading status in the World of Hyatt loyalty program. Source: https://world.hyatt.com/content/gp/en/program-overview.html 

As participants reach higher levels through qualifying activities each year, they unlock additional rewards and benefits. These benefits include:

  • Free accommodation
  • Resort fees¬†
  • Small Luxury Hotels of the World Benefits
  • Premium internet
  • Bottled water
  • Room upgrade
  • Elite check-in
  • And so on

See the highlights of benefits provided for every tier below.

Tier benefits in the World of Hyatt loyalty program. Source: https://world.hyatt.com/content/gp/en/tiers-and-benefits.html?icamp=woh_hometier_member_en#charts 

Members can also redeem points for free nights, upgrades, unforgettable experiences, and more.

Benefits for redeeming points in the World of Hyatt's loyalty program. Source: https://world.hyatt.com/content/gp/en/redeem.html 
Benefits for redeeming points in the World of Hyatt's loyalty program. Source: https://world.hyatt.com/content/gp/en/redeem.html 

5. Sephora Beauty Insider, the unique expense-based tiered loyalty program

Sephora, a renowned retail brand in the personal care and beauty industry, boasts a rich history since its establishment in France back in 1970. With an impressive global presence, the company now operates more than 2,700 stores across 35 countries. Not content with this achievement alone, Sephora further expanded its reach, establishing over 500 stores in the Americas, complemented by a world-class eCommerce platform.

Recognizing the immense loyalty of its customer base, Sephora introduced the free Beauty Insider Program, an expense-based tiered program, in the United States and Canada in 2007. This popular scheme allows customers to accumulate loyalty points with their purchases and redeem them for attractive rewards.

The Beauty Insider Program features three tiers, with naming adapted to the brand’s image:

  • Insiders
  • VIB (Very Important Beauty Insider)
  • Rouge

As of now, for every dollar spent, loyal customers earn one Beauty Insider point, and the tier they belong to is directly linked to their spending.

Clients can easily attain the Insiders tier at no cost, but if they desire to elevate their status to VIB or Rouge, they must consistently make purchases totaling $350 or $1,000, respectively.

Depending on the tier, each offers a range of enticing benefits across three key areas:

  1. ‚ÄćSavings. This includes benefits like Beauty Insider cash, seasonal saving events, free standard shipping, and points for discount events.‚Äć
  2. Samples. Members receive various samples as perks, such as free birthday gifts, sample rewards, and exclusive gifts.‚Äć
  3. Experiences. The program offers exciting experiences, such as point multiplier events, meet & greets with beauty experts, loyalty points for services, sweepstakes opportunities, and early access to new products.
Sephora Beauty Insider benefits comparison. Source: https://www.sephora.com/beauty/profile-beautyinsider

Summary

To sum up, successful tiered loyalty programs offer companies numerous customer engagement and long-term loyalty benefits. These levels provide clear and motivating rewards, easy-to-understand mechanics, and natural segmentation. Effective loyalty programs can be created by configuring the optimal number of tiers, differentiating benefits, and using direct communication.

Examples such as ALDO Crew, MSI Rewards, U.S. Soccer Insiders, World of Hyatt, and Sephora Beauty Insider demonstrate successful multi-level loyalty programs. It makes sense to follow in their footsteps and implement such practices to strengthen customer relationships, increase profitability and make data-driven decisions to continuously improve your own tiered loyalty program.

Download the "10 Market-proven loyalty campaign templates" and run only high-impact loyalty activities from now on.

‚Äć

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Building strong and lasting relationships with customers has become more critical than ever. A well-designed tiered loyalty program with strategically crafted tiers can be a big deal, offering a powerful incentive for clients to stay loyal to your brand. This piece provides valuable insights and practical tips for configuring and implementing an impactful tier-based loyalty scheme that will meet your business objectives.

Key takeaways:

  • Loyalty program tiers are a powerful tool to enhance engagement, increase retention, and drive long-term allegiance.
  • Tier schemes are known for their easy-to-understand mechanisms, thanks to which members can quickly grasp the benefits associated with each tier, making it more likely for them to strive for higher ones.
  • Loyalty tiers naturally segment customers, enabling you to target different groups with personalized offers and experiences.
  • Successful tiered programs follow these steps: deciding on clear reward methods, determining the optimal number of tiers, differentiating benefits, engaging through direct communication, and monitoring and optimizing.¬†

What will you find in this tiered loyalty program guide?

In this guide, we'll explore the concept of a tiered loyalty program and its various advantages. You'll learn the main loyalty mechanisms that drive customer engagement and motivation. What's more, you'll discover the value of optimizing for profitability when managing loyalty benefits and how tiers contribute to natural customer segmentation.

This guide also explains what is a tiered loyalty program matrix and shows you the best practices for preparing it. You'll be walked through establishing clear loyalty scheme objectives, identifying and segmenting your customer base, and determining your business's most suitable tiers.

To provide you with practical insights, the guide concludes with the five best examples of loyalty program tiers implemented by successful businesses. These real-world examples will inspire you to design your own tiered loyalty scheme tailored to your unique needs and client's expectations.

Without further ado, let's dive into the world of loyalty program tiers and discover the immense potential they hold.

Loyalty tiers definition 

Loyalty tiers, also known as membership levels, are a system used by businesses to reward and incentivize their faithful customers. These levels are structured based on the client's engagement and spending behavior, to foster long-term allegiance and encourage repeat transactions. As participants move up through the tiers, they unlock increasingly attractive benefits.

You can choose the name of each loyalty level based on your brand's image, creating a more personalized experience. However, traditional tier names (such as brown, silver, and gold) clarify the customer's position in the loyalty journey.

Naming nomenclature examples from Marvel Insider. Source: https://www.marvel.com/insider 

Main benefits of loyalty tiers

Let's discover the significant benefits of properly set loyalty levels, from better retention and increased customer value to obtaining actionable data.

1. Increased engagement and motivation

Program tiers act as a source of motivation for clients to stay connected with your brand. As consumers progress through the tiers, they unlock valuable rewards and benefits, creating a gamified experience. This progression-based approach taps into human psychology, triggering a desire for status and recognition and incentivizing customers to maintain their loyalty and repeat purchases.

Visible progress tracking in tier loyalty programs is a key factor to motivate customers, as seen in examples from Starbucks, Booking, and Hyatt. Source: Private collection.

2. Easy-to-understand mechanisms 

Loyalty tiers offer members both simplicity and transparency by categorizing benefits into different levels, each representing a specific degree of fidelity or spending. This straightforward approach replaces complex reward structures, making it easy for customers to understand the program's setup and what they need to do to move up to a higher tier and unlock better benefits. 

Clear tier achievement and maintenance conditions proposed in the H&M loyalty program. Source: https://www2.hm.com/en_gb/member/info.html 
Transparency is key in loyalty programs. Your customers need to understand the requirements for achieving and maintaining each tier. Communicate the actions or spending thresholds necessary to advance or stay in a specific tier. Whether based on the number of purchases, total spending, or other criteria, participants must be assured of what they have to do and when to reach/maintain a tier. Additionally, they should be informed when the conditions change. Providing clear messaging in this area is demanding for marketers, but it's vital.

3. Optimized profitability and discount management

Tiers enable you to optimize your scheme's profitability and effectively manage discounts. You can target your most valuable and active clients by reserving premium benefits and exclusive offers for higher tiers. This strategic allocation ensures that discounts and rewards are distributed where they'll have the greatest impact, maximizing the return on investment for your loyalty program.

The best tiers' benefits that customers can get
  • Free delivery is essential in e-commerce programs and remains one of the most valued benefits for customers. Offering free delivery within the loyalty program has often successfully driven member acquisition.
  • Early/exclusive access is prevalent in the fashion, events, and hospitality industries. It provides loyal customers with a VIP experience, granting them access to sales or limited collections before others, creating a sense of exclusivity.
  • Birthday gifts are a common feature highlighted in most tiered loyalty programs. The range of birthday benefits is broad, including free rewards (e.g., Starbucks), discounts (e.g., Peek&Cloppenburg, Douglas, Adidas), and bonus points (e.g., Sephora).
  • Prolonged periods for returns/guarantees provide the most loyal customers with an extended window for returns or additional guarantees on products.
  • Special events/services are highly popular, especially for higher/VIP tiers. Brands invite their loyalty program members to exclusive events they organize or sponsor, further enhancing the sense of exclusivity and appreciation.
  • Additional discounts/points include more opportunities to collect bonus points on designated days or extra discounts (e.g., an additional 5% off on sale products). These benefits enable members to reach rewards quicker or save more on their purchases.
  • Welcome-to-tier benefit is a one-time customer reward upon reaching a higher tier in the loyalty program. As tiered programs aim to motivate members to engage more and unlock more excellent benefits, this one-time benefit is an essential event in the customer journey.
  • Anniversary benefit rewards members who maintain their higher tier status beyond the initial achievement. To appreciate the member's loyalty, brands offer additional benefits for keeping the tier for the next period.
Examples of tiers' benefits according to loyalty experts and usage popularity. Source: Internal presentation prepared by Open Loyalty.

4. Natural segmentation

Loyalty program tiers provide a seamless and natural segmentation to your analytics tool. As participants move through the tiers, you can gain valuable insights into their behaviors, preferences, and spending patterns. This data-driven segmentation allows for personalized and targeted marketing efforts, tailoring promotions and offers to specific segments. 

The result is an enhanced customer experience, greater relevance of marketing communications, and improved retention rates.

5. Customer retention and long-term loyalty

Loyalty program tiers foster long-term devotion among customers. Creating a multi-tiered structure can cultivate a deeper emotional connection with your most dedicated audiences. 

As loyalty scheme participants progress and unlock higher-tier benefits, they develop a sense of commitment to the brand. This emotional bond helps protect your business from competitive forces and reduces the likelihood of clients switching to competitors.

Additionally, tiers within the loyalty scheme play a crucial role in preventing churn. By offering escalating rewards and exclusive perks as customers move up the tiers, you incentivize them to stay engaged and continue patronizing your brand. The desire to maintain and enjoy the privileges of their current tier encourages clients to remain loyal over time, and this way, reduces the chances of churn.

6. Enhanced customer experience

The ongoing loyalty management at different levels enables you to deliver a more personalized and rewarding experience. 

With each tier, clients can access exclusive perks, customized offers, and unique events tailored to their preferences. This elevated and immersive approach strengthens your relationship with your valued customers.

7.Fuel for data-driven decision-making

Program levels provide valuable data insights you can use to leverage data-driven decision-making. Analysis of tier-related data helps identify trends, behavior patterns, and the effectiveness of different rewards. 

Armed with this information, you can refine your loyalty scheme strategies, tailor benefits, and continuously improve the program to meet people's expectations and preferences better.

How to prepare a good loyalty program tier matrix? (5 top practices)

A well-structured and enticing tier matrix lies at the heart of any impactful scheme. To put it simply, a tier matrix is the table that lists the tiers and the corresponding benefits. This carefully crafted framework encourages customer commitment and paves the way for increased retention and higher revenue.

In this part, we'll delve into five best practices and strategies to create a compelling loyalty program tier matrix that will leave your clients eager to climb the ladder of rewards and benefits while, at the same time, driving your business toward new heights of success.

1. Decide on clear rewarding methods

When designing the tier matrix, the first step is deciding on the specific behaviors you want to reward. These can include customer purchases, engagement actions (such as writing product reviews or referring friends), or a combination of both.

The primary rewarding mechanism you choose will drive the most important behaviors for your organization. For example, if you want to increase customer referrals, you might offer more rewards for successful referrals. On the other hand, if you aim to boost repeat purchases, you may offer points for every dollar spent.

Clearly defining the rewarding methods will help align your program with your goals and encourage the desired customer actions.

2. Set up an optimal number of tiers

Determining the number of tiers and their corresponding thresholds is crucial for creating an effective loyalty program tier matrix. The number of levels should strike a balance between simplicity and effectiveness. Too few tiers might not offer enough differentiation to motivate customers, while too many of them can make the program overly complex and challenging to manage.

Start by defining a basic structure, such as three to five levels, with increasing benefits as members advance. The lowest tier should be easily accessible to all new customers, while the highest tier should be reserved for your most valuable and loyal buyers.

The dynamic tiering provided by Nordstrom inside the Nordy Club loyalty program. Source: https://www.nordstrom.com/browse/nordy-club

Consider using your knowledge about average customer behaviors, such as purchase frequency, average basket value, and engagement frequency, to set achievable thresholds that motivate members to strive for higher levels.

Utilizing customer data and insights is crucial in designing an appealing loyalty program. Analyze purchase patterns, customer preferences, and the overall profitability of the program at each tier. By understanding people's behaviors and their value to the business, you can tailor benefits that align with their interests and your brand's objectives. Data-driven estimations also enable you to allocate resources more effectively, ensuring that the company's rewards are sustainable while still providing significant value to end users.

3. Differentiate the benefits

Each tier in the loyalty program should offer unique and desirable benefits that entice participants to move up the ranks. Benefits and perks should reflect the increasing value of each tier and provide clear incentives for customers to achieve higher status.

For instance, the entry-level tier might offer modest discounts or exclusive access to sales, while the top tier should provide significant rewards, such as VIP treatment, personalized offers, and enhanced customer service.

By clearly differentiating the benefits between tiers, you encourage members to engage with your brand more frequently, as they can see the tangible rewards they will receive for their affiliation.

Distinctive benefits for each loyalty tier create a sense of exclusivity and achievement in customers. As they progress, they receive better rewards, such as higher discounts, valuable rewards, premium services, or unique experiences. Offer early access to products, priority customer service, extended return periods, and personalized gifts on special occasions to enhance the program's appeal and encourage long-term loyalty.

4. Engage through direct communication

A tiered loyalty program introduces various milestones and events along the customer journey such as reaching a new level, being close to reaching the next one, or facing a potential downgrade. If you want to enhance the customer experience, it's essential to establish direct communication channels to engage with your members during these critical moments.

Use targeted messaging and notifications to keep customers informed about their progress and the benefits they can unlock at higher levels. Additionally, personalized communication can help incentivize members to take specific actions to maintain or upgrade their status. 

An example of a communication path for the tiers' validity. Source: Private collection.

5. Monitor and optimize

The work doesn't end there once your tiered scheme is live. Regularly monitor the program's performance to understand how it's influencing customer behavior and loyalty. Analyze redemption rates and overall loyalty program metrics to make data-driven decisions.

Also, keep track of the distribution of members across different tiers, as this can give insights into the program's appeal and effectiveness. Analyze whether customers are achieving the various tiers and if they're taking advantage of the advantages granted.

If you notice that customers are struggling to reach higher levels or not enjoying the benefits, consider adjusting the program. Regularly optimize your tiered program based on collected insights to ensure it remains relevant, engaging, and aligned with your objectives. But remember that balancing tiers will likely affect the progress of users that spent time and money to reach their current stage. At this stage, it’s critical to communicate upcoming changes clearly so users don’t feel blindsided.

By continuously refining the tier matrix, you can enhance the loyalty scheme's impact and drive better results for both your customers and your organization.

Adjust for average shopping frequency and basket value. Analyze how often shoppers make purchases and the average value of their carts to set realistic and attainable tier requirements. These metrics provide valuable insights into customer spending habits and what is considered typical within the industry. Setting tier targets that align with these averages ensures that a wide range of clients can engage with the rewards program and find value in participating.

What are the five best examples of loyalty program tiers?

In this part, we'll explore five exceptional examples of tiered loyalty programs that have truly captured consumers' hearts (and wallets). From enticing perks to exclusive benefits, these programs set a benchmark for enhancing customer retention, increased spending, and higher customer lifetime value (CLV).

1. ALDO Crew, the engaging expense-based tiered loyalty program 

ALDO Group, a Canadian multinational corporation retailer, owns and operates a global chain of shoe and accessory stores. Founded in 1972 by Aldo Bensadoun in Montreal, it now has nearly 3,000 stores in 100 countries under three retail banners: ALDO, Call It Spring/Spring, and GLOBO.

The ALDO Crew scheme aims to recognize and reward customers while encouraging them to engage and shop more frequently at ALDO stores or online platforms.

One of ALDO Crew's key differentiating features is its expense-based tier system, which increases customer benefits based on their expenditures. Participants must spend a certain amount of money within 12 months, or they'll be downgraded.

As of writing, there are three tiers of the ALDO Crew customer loyalty program:

  1. Crew
  2. Plus
  3. VIP

All these tiers bring various benefits to the participants, such as:

  • A welcome offer. Upon registration, members receive a discount on their next purchase of ALDO Products.
  • Lowered free shipping threshold. Participants can enjoy free shipping on orders over $50.
  • Birthday treat or gift. Every member gets a discount on the next purchase of ALDO Products during the birthday month.‚Äć
  • 15% reward voucher. Clients receive a 15% off voucher for their next ALDO Products purchase, issued once within 12 months.‚Äć
  • Lowered free shipping threshold. Members can enjoy free shipping on orders over $50.‚Äć
  • 20% Reward Voucher. Members receive a 20% off voucher for the next ALDO Products purchase, once within 12 months.‚Äć
  • Free shipping. Consumers can enjoy free shipping on all their orders.‚Äć
  • Shareable Reward Voucher. Clients can share the 20% Reward Voucher with up to five friends, allowing them to enjoy the same discount on their ALDO Products purchases.
  • And many more.
ALDO Crew loyalty program's benefits. Source: https://www.ALDOshoes.com/us/en_US/crew/benefits 

Explore how ALDO achieved a full omnichannel loyalty solution that was launched in the US, UK, and Canada within three months. Read the case study.

2. MSI Rewards, the active point-based tiered loyalty program

MSI is a world leader in gaming, content creation, and business solutions, with a strong global presence in over 120 countries. They offer top-notch laptops, graphics cards, monitors, motherboards, desktops, and peripherals, shaping the future of technology through quality, user-friendly design. MSI sells their hardware through online and offline partners and resellers.

The MSI Rewards is a comprehensive customer rewards program designed to enhance customer engagement and foster brand loyalty. This point-based tier system incentivizes gamers to make repeat purchases, engage with the brand, and participate in various activities, all while earning valuable points that can be redeemed for exclusive rewards.

This program actively engages members by encouraging and incentivizing specific brand activity. As a result, members have numerous opportunities to accumulate points, including:

  • Enrolling in the official online store, where they can sign up and become an official part of the brand's community.
  • Registering a purchased product, which allows members to not only activate their product's warranty but also gain points for their engagement.
  • Sharing a review of a product they've purchased, enabling them to provide valuable feedback while earning points in the process.
  • Referring a friend to the brand, creating an opportunity for members to introduce others to the brand and earn points for successful referrals.
  • And many more actions to explore, providing a range of engagement possibilities for members to accumulate points through their interactions with the brand.
Ways to earn points in the MSI loyalty program. Source: https://www.openloyalty.io/clients/msi 

Currently, there are four main tiers with names straight from the gaming world:

  1. Bronze 
  2. Silver 
  3. Gold 
  4. Platinum 

All of them bring various benefits to the participants, such as:

  • Access to exclusive product information, newsletters, and occasional promotions. Program participants gain exclusive access to product updates, informative newsletters, and special promotions tailored to their preferences.
  • Early access to new product launches or beta testing opportunities. Members can enjoy early product access, get a first look at new releases, and even participate in beta tests, contributing valuable feedback.
  • Priority service, extended warranties, and occasional discounts. Members receive prioritized customer support, extended warranties for purchased items, and occasional discounts for added value.
  • Access to gaming events, tournaments, or online forums. Gamers can partake in exclusive gaming events, tournaments, and online forums, connecting with peers and competing for prizes.
  • Additional perks like free shipping on all orders, personalized recommendations, and loyalty rewards in the form of points or credits.
  • And many more.
MSI's points-based loyalty program tiers. Source: https://rewards.msi.com/

Find out how MSI quickly and seamlessly migrated to a centralized loyalty app in just three months. Read the case study.

3. U.S. Soccer Insiders, the passionate expense-based tiered loyalty program 

The United States Soccer Federation (USSF) is a nonprofit organization and the official governing body of soccer in the United States. It oversees soccer at all levels, including national teams, professional and amateur leagues, and various other soccer-related activities. USSF is a FIFA member and organizes events like the U.S. Open Cup and the SheBelieves Cup.

The U.S. Soccer Insiders, a loyalty program with expense-based tiers, is a fresh initiative to engage and reward soccer enthusiasts who actively support the sport and contribute to its growth. This scheme is designed to provide various benefits to fans, players, and stakeholders based on their level of financial commitment to U.S. Soccer.

This particular tiered loyalty program offers three different types and subtypes of levels:

1. Insiders

Presently, members start free and can advance to fuel their fandom with unique experiences and unparalleled rewards.

The key benefits of this tier are:

  • Presale access to tickets
  • Player of the Match voting
  • Quarterly Insiders newsletter
  • Access to Insiders Rewards
  • Access to World Cup tickets
  • Premium presale access to tickets
  • Invitation to Insiders-only events
  • Free shipping at the U.S. Soccer Store
  • And so on
The benefits of Insiders level in the U.S. Soccer Insiders loyalty program. Source: https://www.ussoccer.com/insiders 

2. Family Insiders

Participants are required to make an annual financial commitment of $85, which grants them and their entire family the same experience and benefits as Premium Insider.

The key benefits of this tier are: 

  • Early ticket presales
  • Exclusive insider events
  • Free shipping at U.S. Soccer Store
  • Insiders Pregame Lounge Passes
  • Access to exclusive U.S. Soccer content
  • Fan Council voting
  • Premium Insiders Rewards
  • Priority World Cup ticket access
  • Free one-year Sports Illustrated subscription
  • Free one-year Sports Illustrated Kids subscription
  • And more
The benefits of the Family Insiders level in the U.S. Soccer Insiders loyalty program. Source: https://www.ussoccer.com/insiders 

3. Circle Insiders 

Members are required to make an annual financial commitment of $500 and $10,000. They can also choose from four levels of unforgettable behind-the-scenes access and one-of-a-kind U.S. Soccer services.

The key benefits of this tier are:

  • Early access to presale tickets and World Cup purchases
  • Postgame field access for family photos
  • U.S. Soccer Leadership Teleconferences access
  • Fan Council voting rights
  • 100% tax-deductible ($500)
  • Field-level warm-up viewing
  • At-cost participation in select Patrons Programs for you and a guest (VIP travel packages)
  • VIP pre-game tour passes
  • Priority suite purchase rights
  • And many more
The benefits of four levels of Circle Insiders in the U.S. Soccer Insiders loyalty program. Source: https://www.ussoccer.com/insiders 

Recipients can easily compare the benefits of all U.S. Soccer Insiders tiers and, with such transparency, they're mobilized to spend even more.

Comparison of all tiers in the U.S. Soccer Insiders loyalty scheme. Source: https://www.ussoccer.com/insiders#compare-levels 

Discover how the soccer federation created a multi-tier, omnichannel loyalty solution to guarantee year-round fan engagement. Read the case study.

4. World of Hyatt, the adventurous point-based tiered loyalty program

Hyatt Hotels Corporation is a multinational hospitality company with luxury hotels and resorts worldwide, offering various brands catering to different market segments, including Hyatt Regency, Park Hyatt, Andaz, Grand Hyatt, Hyatt Place, Hyatt House, and Hyatt Centric. Headquartered in Chicago, Illinois, it was founded in 1957.

World of Hyatt is a tiered loyalty program, allowing guests to earn loyalty points and enjoy various benefits when staying at Hyatt hotels and resorts and using certain partner services.

The World of Hyatt scheme offers four different tiers with names related to the travel industry:

  1. Member
  2. Discoverist 
  3. Explorist
  4. Globalist
Upgrading status in the World of Hyatt loyalty program. Source: https://world.hyatt.com/content/gp/en/program-overview.html 

As participants reach higher levels through qualifying activities each year, they unlock additional rewards and benefits. These benefits include:

  • Free accommodation
  • Resort fees¬†
  • Small Luxury Hotels of the World Benefits
  • Premium internet
  • Bottled water
  • Room upgrade
  • Elite check-in
  • And so on

See the highlights of benefits provided for every tier below.

Tier benefits in the World of Hyatt loyalty program. Source: https://world.hyatt.com/content/gp/en/tiers-and-benefits.html?icamp=woh_hometier_member_en#charts 

Members can also redeem points for free nights, upgrades, unforgettable experiences, and more.

Benefits for redeeming points in the World of Hyatt's loyalty program. Source: https://world.hyatt.com/content/gp/en/redeem.html 
Benefits for redeeming points in the World of Hyatt's loyalty program. Source: https://world.hyatt.com/content/gp/en/redeem.html 

5. Sephora Beauty Insider, the unique expense-based tiered loyalty program

Sephora, a renowned retail brand in the personal care and beauty industry, boasts a rich history since its establishment in France back in 1970. With an impressive global presence, the company now operates more than 2,700 stores across 35 countries. Not content with this achievement alone, Sephora further expanded its reach, establishing over 500 stores in the Americas, complemented by a world-class eCommerce platform.

Recognizing the immense loyalty of its customer base, Sephora introduced the free Beauty Insider Program, an expense-based tiered program, in the United States and Canada in 2007. This popular scheme allows customers to accumulate loyalty points with their purchases and redeem them for attractive rewards.

The Beauty Insider Program features three tiers, with naming adapted to the brand’s image:

  • Insiders
  • VIB (Very Important Beauty Insider)
  • Rouge

As of now, for every dollar spent, loyal customers earn one Beauty Insider point, and the tier they belong to is directly linked to their spending.

Clients can easily attain the Insiders tier at no cost, but if they desire to elevate their status to VIB or Rouge, they must consistently make purchases totaling $350 or $1,000, respectively.

Depending on the tier, each offers a range of enticing benefits across three key areas:

  1. ‚ÄćSavings. This includes benefits like Beauty Insider cash, seasonal saving events, free standard shipping, and points for discount events.‚Äć
  2. Samples. Members receive various samples as perks, such as free birthday gifts, sample rewards, and exclusive gifts.‚Äć
  3. Experiences. The program offers exciting experiences, such as point multiplier events, meet & greets with beauty experts, loyalty points for services, sweepstakes opportunities, and early access to new products.
Sephora Beauty Insider benefits comparison. Source: https://www.sephora.com/beauty/profile-beautyinsider

Summary

To sum up, successful tiered loyalty programs offer companies numerous customer engagement and long-term loyalty benefits. These levels provide clear and motivating rewards, easy-to-understand mechanics, and natural segmentation. Effective loyalty programs can be created by configuring the optimal number of tiers, differentiating benefits, and using direct communication.

Examples such as ALDO Crew, MSI Rewards, U.S. Soccer Insiders, World of Hyatt, and Sephora Beauty Insider demonstrate successful multi-level loyalty programs. It makes sense to follow in their footsteps and implement such practices to strengthen customer relationships, increase profitability and make data-driven decisions to continuously improve your own tiered loyalty program.

Download the "10 Market-proven loyalty campaign templates" and run only high-impact loyalty activities from now on.

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Success stories

See how Open Loyalty helps brands grow their business

ALDO Crew

How ALDO used Open Loyalty to create a fully omnichannel loyalty program that went live in the US, UK, and Canada in 3 months.

MSI Rewards

How MSI used Open Loyalty services to implement a gamification-based loyalty program for gamers in 10 countries in just 3 months.

U.S. Soccer Insiders

How the U.S. Soccer Federation worked with Open Loyalty to create a multi-tier, omnichannel loyalty program to engage football fans.