In a previous blog post, we discussed seven of the best loyalty strategies https://www.azpiral.com/7-different-types-loyalty-programs-designed-retain-customers/
Today we look a tiered loyalty strategy in more detail.
How it works
Tiered loyalty systems are a relatively new type of Loyalty program.
A tiered system offers basic rewards and offers for participation but then encourages repeat purchase and customer engagement by increasing the value of the rewards as the customer moves up the loyalty ladder.
This type of strategy appeals to the natural competitive human instinct similar to a gamification strategy in that sense.
Two examples of brands that have successfully implemented a tiered loyalty strategy are Starbucks and Sephora.
Case study: Sephora
Sephora, a French cosmetic retail store, known worldwide, has a broad range of product categories including skincare, fragrance, body and haircare, in addition to Sephora’s own private label.
In 2007, Sephora launched their customer loyalty program, ‘Beauty insider’ which is a points-based program that categorises their customers based on their point balance and offers them gifts and exclusive experiences in return.
In 2009, Sephora launched V.I.B. [Very Important Beauty Insider], the third tier and most elite level of Beauty insiders. Sephora has experienced continued success with their ‘Beauty insiders’ loyalty program and has over 10 million users to date.
The ‘Beauty insider’ program:
The Sephora ‘Beauty insiders’ loyalty program is divided into three tiers. Every dollar spent equates to a point.
Tier one is the Beauty insiders, these customers are loyal but have a lower spend. Beauty insiders are rewarded with free products, personal recommendations and birthday gifts.
Tier two are the VIB loyalty customers, these customers have a higher spend and more frequent spend.
They are rewarded with access to a seasonal savings club, where they can save money on their loyalty card and spend at a later date, handpicked gifts and free makeovers.
While the third tier, Sephora’s most valuable customers are rewarded with 2-day shipping, a private hotline and invites to exclusive events.
Sephora is constantly thinking of ways to reward loyal customers and offer them a little extra.
Sephora has recently embraced Snapchat as a means to communicate with their customers by sharing videos of their new Birthday gifts and free products.
Best practices for a successful tiered loyalty system
Keep it simple
Simplicity is very important when you implement this type of loyalty strategy first.
Start with three levels and add to them as your customer base is more engaged with the strategy.
Make it easy to understand and easier to move up tiers initially to encourage engagement and distinguish customer segments and their motivations.
VIP top tier
It’s important to keep your top tier exclusive to a minority that has truly earned that status.
Exclusivity makes your customer feel valued. These customers are more likely to become brand advocates and will promote your brand more than any marketing campaign.
Use your data
Ensure you use an integrated loyalty platform that can capture real-time data
and also segment your customers based on criteria or behaviours in order to understand and fine-tune your customer’s journey.
Review your tier rewards and use your data to understand what motivates customers in each tier to want to engage and progress to the next tier.
Also, review customers within the tiers and make sure they are still complying with the requirements of the tier.
This type of loyalty strategy works well for high commitment, high price-point businesses like airlines or hospitality businesses.
However, it can work well for retail brands particularly for brands with a strong millennial audience.