Climbing the Loyalty Ladder: 5 Strategies for Maximizing ROI with Tiered Programs

Improve returns on investment by optimizing tiered loyalty programs

Amrith G.

SVP, Marketing & Customer Analytics | Sept 19, 2023

Loyalty – hard to achieve, but yearned by many.

Have you ever wondered why some businesses manage to create fiercely loyal customer bases while others struggle to maintain interest? The answer lies in the power of tiered loyalty programs.

Tiered Loyalty Programs

What are They?

A tiered loyalty program is a rewards system that allocates customers into different levels (or “tiers”) based on their purchase frequency, recency, and monetary value.

From there, each tier then receives specific benefits commensurate with their level of engagement and contribution.

By focusing on personalization, these programs are specifically designed to elevate the customer experience, enabling brands to innovatively enhance customer engagement.

To better understand this concept, let’s use Sephora as an example.

Based on annual monetary spend, Sephora’s loyalty program – Beauty Insider – assigns customers into one of 3 tiers (Insider, VIB, and Rouge). From there, each tier then gets access to a distinct set of perks and incentives that they can’t get elsewhere. Below outlines several examples of the types of benefits that each tier would receive.

Insiders – Customers spending up to $349 a year enjoy benefits such as:
- 10% off seasonal savings events
- 5 options for their free birthday gifts
- Twice the points during point multiplier events
VIBs – Customers spending between $350 and $999 a year enjoy benefits such as:
- 15% off seasonal savings events
- 6 options for their free birthday gifts
- Thrice the points during point multiplier events
Rouges – Customers spending at least $1000 a year enjoy benefits such as:
- 20% off seasonal savings events
- 6 options for their free birthday gifts
- Quadruple the points during point multiplier events

Why are They Important?

The power of tiered loyalty programs lies in the fact that they ignite consumers’ healthy competitive spirits. By ensuring that the highest tier receives the best rewards, brands seamlessly motivate customers to engage with them more frequently. This then offers them the opportunity to build longer-lasting customer relationships, foster more positive customer experiences, and better understand customer preferences.

The 5 Strategies

Below lies a curated list of 5 strategies that can help you maximize your return on investment (ROI) with tiered loyalty programs.

1. Gamify the Program

Before all else, the strength of a tiered loyalty program lies in its ability to uniquely engage and retain its consumers. For this, gamification may be the key.

Gamification is a stimulating feature of loyalty programs that taps into users’ natural competitive spirits to boost engagement and drive conversions, thereby enhancing ROIs. It incorporates common game elements such as progress bars, scores, and levels to keep customers hooked.

In fact, as of 2022, studies have indicated that game-based motivations managed to increase user-engagement by 48%.

2. Choose Personalized Incentives

By enabling firms to demonstrate a genuine understanding of consumer preferences, the selection of personalized rewards can make all the difference in maximizing ROI. Not only does personalization enhance customer experiences, it also cultivates a sense of individualized value and appreciation that fosters a stronger emotional bond, increasing the likelihood of long-term loyalty. In fact, studies have shown that customers who have emotional relationships with a brand have a 306% higher lifetime value.

Ultimately, businesses that are able to offer tailored incentives that truly resonate with each customer segment within the tiered program are likely to witness more frequent spending, resulting in heightened ROIs.

3. Offer Seamless Navigation Experiences

Customers value convenience. If a program is too difficult to navigate, consumers may grow frustrated, incentivizing them to switch. By providing an intuitive, easy-to-use, and seamless experience, businesses can ensure consumer satisfaction, hence increasing loyalty and driving ROI.

With this, it is hence important to ensure that the sign-up and rewards earning processes are effortless and easy-to-do. Take Sephora, for example, they offer a point per dollar spent. This straightforward approach allows their customers to easily understand how they can earn rewards, motivating them to make repeat purchases.

4. Utilize Data-Driven Insights

By continuously monitoring and analyzing a program’s performance, businesses can make informed adjustments to optimize their offerings. This ensures that their tiered loyalty program remains relevant and enticing for the long-run, hence maximizing ROI.

In the pursuit of program optimization, actively collecting customer feedback via surveys may be an effective approach.

Not only does it enable businesses to gain important insights into their customers’ true desires, it also showcases a genuine commitment to listening and understanding consumers, fostering a deep sense of appreciation and recognition among them.

5. Experiment with New Rewards

Customers have a natural tendency to get bored easily. To get ahead of this, periodically offering fresh and exciting rewards is a powerful way to maintain their interest and ensure continued loyalty.

By regularly introducing new rewards, businesses can create a sense of anticipation and novelty, enticing customers to actively engage with the program. By constantly keeping customers excited to discover what new benefits they can unlock, this element of surprise hence helps businesses stay top-of-mind.

Conclusion

Looking to build long-lasting customer relationships? Consider exploring the Perx Platform. Its innovative and easy-to-navigate system supports loyalty programs by offering detailed insights that keep businesses well-informed. Book a demo today to discover how Perx can enhance your tiered loyalty program and maximize your ROI.