January 22, 2021
Tiered loyalty programs satisfy the inherent human need for exclusivity by engaging them within a fun, exciting gamification framework.
Customer loyalty programs are packaged in so many ways. Whether it’s a loyalty program for customers or one specifically targeting your employees, a customer loyalty program must be specifically tailored to respond to a company’s persisting needs for the moment. You can design your program in so many creative, engaging formats, but probably hailing as the most popular are tiered loyalty programs. So much so that three of the brands who made it to our list of best loyalty programs for 2019 incorporate a tiered loyalty system.
But what exactly is with tiered loyalty programs and why do users (and brands) gravitate towards this format?
A tiered loyalty program is a loyalty program type under the gamification system. What it does is that it essentially offers perks to members depending on their level and rank within a loyalty system. Basically, it christens active members with higher statuses. The ranking system is defined by the points a member earns along the way and is usually marked by an increase in value as the member’s ranking progresses.
If we go back to the basics and ask ourselves the “why” behind the success of the most popular loyalty programs, we’d see the psychology of it all at play. A loyalty program with a VIP status—where every action leads a user closer to an ideal higher level or a “goal”—carries with it an air of exclusivity. It's human nature to crave things only a few people have access to, or to want to be a part of the “chosen few”. This desire for exclusivity fuels a member’s motivation to do more and achieve more, therefore inspiring them to spend more or do more in order to earn points and achieve higher levels within the program. Say what you want about this, but tiered loyalty programs tickle our inherent human need for “getting ahead of others”. So, don’t forget to design your top tier worthy of the elite members’ attention!
Everyone who has tried the tiered format for themselves can attest to this—it works within a familiar gamification framework. It’s challenging enough to keep people coming back for more but not too complicated to turn them off completely. There’s nothing more frustrating than logging into a loyalty program, looking to find an easy, good time to earn more points and then seeing how poorly the user interface was crafted, or how complicated the instructions are. Tiered loyalty programs utilise a familiar framework, one that challenges users and keeps their engagement high until they arrive at the highest tier. Taking your own goals into consideration, the tiered system would work perfectly only when you craft it in a familiar manner and make it as exciting for your members as possible.
The gamification part of tiered systems is usually determined by “milestones” you pepper at each stage. This could be determined by the number of purchases your members hit within a specific period, or the number of friends they’ve managed to invite over. Whatever “perks” you decide to give out, it must be properly doled out to different segments. Members are usually segmented through a three-tiered customer segmentation based on three spending groups. A study also revealed a very pronounced tendency of some members to feel more superior when they see their place in relation to a lower level status holder. They consequently feel more inclined to spend and do more to keep their statuses, while lower level members also become more competitive and do exactly what those in higher tiers are doing just to progress. These milestones help engage members throughout the whole process, until they achieve the highest level you’ve established.
Essentially, tiered systems are part of the gamification feature of loyalty programs. And the barest, most essential premise of games is that it’s fun and engaging! Tiers are exciting because it displays a load of exciting elements peppered throughout the whole member journey. If anything, it’s a simple yet fun “respite” that members can occasionally get into. Not only is it fun and exciting, the fact that they earn points within each level makes it irresistible to users!
Loyalty remains as an indispensable part of customer journey. Not only that, it’s cost-effective and is proven to attract a horde of existing customers who are more likely to make repeat purchases. Because of this, customer loyalty programs almost always end up as an essential part of a business’s strategy.
Try “gamifying” your loyalty program by incorporating a tiered system that tickles your customers competitive nature and love for exclusivity!