Editor’s Note: this post was originally published on November 19, 2014 and has been updated for accuracy and comprehensiveness as of February 6, 2018.
The best reward programs in the world utilize the power of VIP tiers to increase customer loyalty. Tiers are a phenomenal way to get your customers more engaged by gamifying your rewards program and making it exclusive.
Tiered programs are customer loyalty programs that offer different rewards depending on which tier a customer is in. In order to progress to the next tier, customers must pass a pre-determined milestone. Typically, these milestones are measured by how many dollars a customer has spent, but they can be anything!
Setting milestones based on loyalty points earned encourages your customers to interact with every aspect of your program and has the added bonus of increasing your reward program’s engagement. Here are four reasons why tiers should become a part of your program.
Benefits of a Tiered Program
Tiered programs are a great way to differentiate your loyalty program, and come with a few great benefits! That being said, it’s important to remember that simplicity is key when starting a program. In general, tiers are typically added to an existing program rather than as a starting feature.
However, whether you choose to start with tiers or introduce them later, here are 4 benefits of tiered programs:
1. Gamification Makes Earning Points Fun
Gamification is an exciting trend that can level up your rewards program. By using addictive elements originally designed for video games such as progress bars and milestones, tiered reward programs are designed to keep customers hooked.
These customers will keep coming back to your store again and again to earn points because it’s more fun (and rewarding) to shop with you than your competitors.
The Topps Now Rewards Program does a phenomenal job of using points and progress bars to get customers excited. These visual indicators make it easy for customers to understand how their actions get them closer to the next level.
There are many gamification strategies that can be used, but you want to focus on the ones that provide value for your customer. We always recommend visual aids such as progress bars and milestones to make it more fun for customers to shop more at your store.
2. Tiers Make Your Program Social
Tiered programs are a great way to add a social aspect into your rewards program. By adding tiers, you are allowing customers to gain social status by having a higher rank than others. This adds another layer of motivation to your program that keeps customers earning points.
A customer’s motivation to reach the next tier in your program is twofold: they want the additional rewards offered and the boost in social status. Science has shown that it’s natural for humans to want to know where they stand relative to others, and this desire is what fuels our drive to reach new tiers. This need to compare is referred to as the Local Ladder Effect.
As humans we are constantly comparing ourselves to those around us. That is why we obsess over leaderboards when we play games, want to know what our co-workers make annually relative to us, and why we want to compare ourselves to stated averages.
A tiered program plays on the idea of the “Local Ladder Effect” because it lets your customers see where they stand in your program. You can supercharge a tier’s effectiveness by showing what percentage of your members are in each level. Just make sure that your top tier is reserved for an exclusive minority to get maximum customer engagement!
3. Exclusivity Makes Customers Feel Valued
Your tiered program also has the benefit of making your most valuable customers feel, well, valued! By giving better rewards to customers in your upper tiers, you are showing them that you value their business more than a regular one time shoppers.
Consequently, when customers feel valued they are much more likely to become brand advocates. A brand advocate is someone who loves your company so much that they want to tell everyone about it.
Your upper tier members have exclusive status in your program which makes them feel valued and they will want to tell the world about it. Starbucks and Sephora have done a fantastic job of developing exclusivity within their programs, and people are constantly talking about it on social media. In many ways, this social status is the best reward your customers can receive. To take this above and beyond, consider incentivizing customer referrals with loyalty points or monetary discounts.
4. Offers the Best Rewards Only to Those Who Earn It
A tiered program ensures that you are only awarding the best rewards to those who are providing the most value in return.
This value can be in the form of money spent on your site or sharing actions that are driving new business.
Whatever metric you decide to use to determine your program’s milestones, be sure you know the value each customer in that tier is providing. This way you can reward loyal customers with rewards that reflect the value they are providing to your store.
Tiered Program Examples (Online)
Now that you know the benefits of a tiered program, let’s look at some examples of loyalty programs that are putting tiers to use. We will start with some online examples and then move onto a few retail ones.
e.l.f. Cosmetics’ Beauty Squad
This first example is e.l.f. Cosmetics' Beauty Squad, a New York-based makeup retailer. e.l.f. sets their tier milestones based on the number of loyalty points a customer has earned, and has divided their customers into three groups: glow getters, rising stars, and a-listers. Customers earn points for every dollar they spend, and can achieve a-lister status after spending $400 within 12 months.
Beauty Squad is an excellent example of the “reward only your best customers” principle at work. While customers at any level can receive a birthday gift and dollars-off discount on certain purchases, only the most loyal customers are given access to new products, early access to sales, and additional gifts.
North Face VIPeak Rewards
The VIPeak rewards program is great for those who love the great outdoors and need the right gear to conquer their adventures. Not only does North Face have a super creative name for their rewards program, but they also offer customers generous rewards. Additionally, new shoppers should have no issue learning about VIPeak rewards because it’s very visible on every product page.
If only North Face applied the same effort in their weak areas as they did on their genius tier names, they would have a much higher rating in our books. Although there are a few issues that need to be resolved before we call this tiered program perfect, overall it’s still an amazingly-crafted example of a tiered VIP program.
LEGO VIP Program
LEGO has perfected the simple and sleek approach to building a VIP program. The benefits of the program are well-communicated across the site and their rewards program is extremely easy to use. LEGO has done this in a fun way that encourages their customers to engage with the loyalty program.
This example shows us the importance of having clear explanations, a good variety of valuable rewards, and organization-wide support. The end result is a program that is easy to use, engages customers to participate, and rewards customers for shopping online, in-store, and over the phone.
Tiered Program Examples (Retail)
While tiered programs have become very popular in online loyalty programs, there are also some great examples in the retail space. These two programs are considered leaders in retail customer loyalty.
Sephora’s VIB Rouge & Beauty Insider
Sephora’s Beauty Insider program is one of the best examples of a tiered program in retail. The program sets milestones based on dollars spent in a calendar year. The VIB Rouge tier is highly coveted amongst Sephora customers and motivates customers to continue shopping for more cosmetics.
This program does a fantastic job of establishing exclusivity, and in turn makes each of their customers feel special and valued. Sephora is able to do this by offering valuable rewards at each new tier they enter.
When a customer becomes a VIB Rouge they begin to receive exclusive rewards. These loyal customers receive free custom makeovers, invitations to exclusive events, and access to a private customer hotline. These rewards serve as a status symbol and reward customers for their commitment to Sephora.
Another premier example of a tiered program is Starbucks Rewards. The Starbucks Rewards program is consistently regarded as the leader of in-store loyalty programs.
To enroll in the program, customers must register for a Starbucks card or download the rewards app. Once they have registered, they are able to collect “Stars” by paying for purchases with the card or the app. This is genius because it reduces the amount of transaction fees that Starbucks pays while making transactions easier for customers.
Customers are automatically added to the Green level when they sign up for Starbucks Rewards but they require 300 Stars to move to Gold status. While there are many benefits given at each level, many customers will strive to reach the top simply for the prestigious Gold Card.
Costing Starbucks next to nothing to offer, this reward is viewed by many as a prestigious measurement of social status. The card makes a customer feel entitled and special, and is a great way for Starbucks to increase visibility. In these ways, the value of this reward is truly double-sided.
Taking It to the Next Level with a Tiered Program
In summary, tiered programs are a great way to differentiate your program and add an element of gamification to your shop. They provide a number of benefits like increasing customer engagement, controlling expenses, and offering targeted rewards. We have many resources available to help you start building your own tiered VIP program.