Editor’s Note: This post was originally published on September 13, 2016 and was updated for accuracy and comprehensiveness on January 19, 2018.
If you are looking to create a loyalty program, chances are that you have stumbled across a program that takes advantage of VIP tiers. These are programs that offer additional benefits as customers become more loyal. They are an amazing way to boost both enrolment and engagement in your loyalty program. If you need a good example, take a look at Starbucks VIP program, or the VIP tiers in Sephora’s Beauty Insider.
VIP programs work exceptionally well for fashion, cosmetics, and luxury brands. That said, an effective VIP program can benefit a loyalty program in any industry. Here are 5 tips to create the perfect VIP program for your store.
1. Make the Highest Tier Exclusive
The purpose of a VIP program is to make your best customers feel more valued than the average shopper. Your top shoppers must feel special in order to maximize the effectiveness of your rewards program.
Your VIP program loses its effectiveness when too many people are valuable. If everyone is special is anyone truly special? The key is to find the happy medium of getting enough people to reach your VIP level without allowing too many people in.
Here is my recommendation for what percentage of your members should be in your top tiers:
Your top tier will be dependent on how many tiers you decide to include in your program (more on that later). You want your VIPs to be sitting at the top feeling like they are only one of a few there. In a two tier program you should look to have 25% of your total loyalty members in that upper tier, and in a three tier system make it even more exclusive with around 5%.
2. Set Challenging But Attainable Milestones
A milestone is what a customer has to reach to qualify for the next tier of your VIP program. For example, in Sephora’s Beauty Insider program the milestone for the highest tier (Rouge) is $1,000 spent in a year. This milestone is achievable but only a small percentage of customers will reach it, even though many will try. However, if the milestone was $100,000 then no one would even attempt to reach it, rendering the milestone useless.
You can make your milestones based on pretty much anything, but in our experience loyalty points earned seems to be the most effective. Customers are rewarded points for making purchases and completing other profitable actions, making it an amazing combo for triggering milestones! Using a points system is a great way to ensure customers can easily visualize their progress to the next milestone to keep them engaged in the program.
This example clearly demonstrates that the number you set for your milestones should be challenging but also attainable. While you want to keep your highest VIP tier exclusive, you also can’t make it too difficult to reach or no one will even try. Say you came across a program that requires you to spend 1,000,000 loyalty points to be a VIP. If this program gives 1 point per dollar spent, you would need to spend $1 million to be a VIP member. This would not be motivating, and as a result very few people would actually want to join.
Using your customer data is the best way to determine your program’s milestones. Take a look at the average lifetime/yearly spend of your top 5% and convert that to points. This can be used for your highest VIP milestone! This will ensure that you are setting milestones that are achievable without being too easy and gives your VIP tiers the difficulty level that maximizes spending.
3. Use 3 Tiers Because It’s the Magic Number
Since humans love the number 3, that’s the number of tiers we’d recommend for creating a successful VIP program. There are many theories as to why this is the case, but my 3 favorites are:
- The number three can be traced back to religious stories
- It’s related to the strongest shape, which is a triangle
- It’s considered to be the first number to form a group
Regardless of why we like the number 3, I do think that three tiers is the optimal number for a VIP program. It gives more separation between your general members and your top tier, while also adding an additional step of gamification.
4. Name Tiers Based On Your Brand
Your loyalty program should be an extension of your brand, not an afterthought. The easiest way to establish your program as being “on brand” is to use names that are reflective of your overall brand. You should name your program, your points, and your VIP tiers.
The example above is from e.l.f’s “Beauty Squad” rewards program. They have done an amazing job creating a loyalty program that is truly on brand, and that extends to their VIP Tiers. They have given each tier in the program a unique name that is relevant to the industry they are in.
Not only is this a prime example of using 3 VIP tiers, but each tier that e.l.f. has used sounds a little more prestigious than the last. As you move from “Glow Getter” to “Rising Star” and finally to “A-lister”, you really get the sense that you’re moving up in the program. Overall, a perfectly on-brand rewards program will ensure your customers have a great experience across your entire store.
5. Display Progress to the Next Tier
Customers like to see how far they have come, and how much further is left to go when pursuing a VIP status. You should always let them easily see their current status in your program.
In this example from e.l.f, you can easily see how many points you have (70), and a progress bar shows you how close you are to reaching the next level. Since nobody wants to fall just short of a goal, tiers act as a motivational tool that increase spending to ensure the target is reached.
Another good engagement tactic is to set your program’s points to expire after a year. This provides a time frame for customers to act and will give them the extra nudge necessary to get them spending. When paired with progress indicators, this can be a powerful tool to increase customer loyalty and repeat purchases.
Incorporating a VIP Program Into Your Loyalty Strategy
VIP programs are the perfect blend of gamification, customer experience, and retention. They offer companies a way to make shopping fun and give status-based rewards on top of their tangible ones. There is a reason that many of the world’s best loyalty programs incorporate VIP tiers into their programs, and creating your own will allow you to reap similar benefits.