It wouldn’t take much for anyone who understands the power customers wield to see that there is a blistering potential for tier loyalty programs. 

Many business people think of it the other way around. To them, these programs only benefit customers since they get to earn rewards while the business maintains the responsibility of supplying these rewards. 

For what it’s worth, the first benefit of a tier loyalty program is that it teaches businesses what loyalty really is. They get the commitment of patronage and referrals from their customers but at the same time, they also dedicate themselves to giving rewards based on merit. 

So what other benefits are there about tier loyalty programs and how could a business create one that will turn out successful? Find out by reading through the article. 

What is a Tiered Loyalty Program?

Tiered loyalty programs are incentive-based programs that deliver increasing rewards to customers as the value and frequency of their patronage, commitment, and loyalty grows. 

These programs introduce tiers or levels that customers ‘rise’ through as they continue to prove their loyalty. It is usually structured in three levels. First is the free or basic tier which is followed by an exclusive middle or average tier and then a more exclusive and highly rewarding tier dubbed as premium.

What are the Benefits of having a Tiered Loyalty Program?

Tiered loyalty programs hold interesting benefits for businesses. Some of them are

Increased Engagement from Customers:

Tiered loyalty programs succeed at getting customers to make more engagements. These engagements could be in the form of product purchase or usage, or participation in everyday activities. It may also extend to include referrals from existing customers or some great new business partnerships. 

Whatever the case, businesses that have set up tiered loyalty programs usually experience high volumes of customer support inquiries. This crucial form of engagement goes a long way to determine the success of the tiered loyalty program itself, as well as the image and growth of the business.  

Increased Brand Valuation:

Customers make up a brand - and this is true for every single brand you can think of. So with tiered loyalty programs driving customer awareness, interest, and massive engagements, these programs can also be said to directly build brand influence and authority. 

You can think of this as creating a thriving environment for business growth. In fact, that is what it is. Tiered loyalty programs - when they work exactly as they should - could yield benefits that amount to an increase in brand valuation. 

The Customer Psychology Behind Tiered Programs

Tiered loyalty programs have proven to be a magic wand in the hands of business marketers.

Wondering what exactly makes the magic? We would say that it is the customer psychology behind it. These are:

Positive Reinforcement and the Power of Habit:

Habits are formed from consistently repeated actions. In tiered loyalty programs, the idea of actions turning into a habit is applied extensively. Customers are influenced to make repeated and frequent purchases or promotional actions and perhaps even build a habit out of it. But you don't just expect people to go around making purchases - unless something is driving them to do that. This is where the positive reinforcement psychology comes in.

Positive reinforcement psychology tries to promote/encourage a desired action by giving subjects the impression that they will earn a reward when they perform the desired actions. Typically, the expectation of a reward causes subjects to repeat the desired action. Going on and on with this helps stack up the rewards for customers but it also builds a habit that comes back to profit the business. 

Goal Anticipation and the Motivation to Earn Rewards:

There's a huge swing of inspiration that comes when one has a goal, as against just taking actions with random or no clear targets or milestones. Tiered loyalty programs, therefore, imitate the concept of goal setting to give customers something to look up to and a reason to follow through with building their loyalty. 

New entrants into a tiered loyalty program may be considered to be unloyal (when they are testing a brand’s product for the first time and even within the time of their first few purchases). Being so, these fresh customers are placed in the basic tier of a program. 

Their goal is then painted for them. It usually has to reach the very top of the company’s customers list and this painting is careful to carry along the idea that there are appealing rewards at every step of the way. 

The Illusion of a Head Start:

The illusion of a head start is another major customer psychology that comes into play in many tiered loyalty programs. According to research, people feel more enthusiastic about pursuing achievements if they sense that they have already made progress with it. In turn, they tend to do less about entirely new ones. This is the reason why tiered programs create the impression that a customer or potential customer has already taken their first step towards a reward or goal. 

Exclusivity and Social Status:

The different tiers in a loyalty program are designed to sport exclusivity and progressively high rewards. Users are introduced to earning rewards quite early, from their entry into a loyalty program. Nevertheless, the feel of exclusivity is usually reserved for those who have proven their loyalty through countless patronage, referrals, and the likes - and have found their way to the coveted premium tier. 

Exclusivity in one of these loyalty programs might mean access to an invite-only club, special discounts on purchases, or even company-to-customer gifts and appreciation packages.

The aspect of a high social status comes on when a large number of people within a population or social group become interested in attaining the premium tier in a brand’s loyalty program. The brand in this case is often very highly placed among the references group of people, with outstanding products, a good enough valuation, and a generally impeccable brand. 

How to Create a Successful Tiered Loyalty Program

Looking to create a tiered loyalty program? Here’s what you need to know before jumping in: 

Create Measurable Value

No business creates a tiered loyalty program just for the fun of it. Therefore, while setting up one of these you need to ensure that significant value is being created both for the customers whom you seek to reward and for your business which serves as the program organizer. 

To create value, your loyalty program must succeed at reaching truly committed customers. It must also operate without any form of bias and must serve to promote even more interest, commitment, and patronage from customers.  

You can take measurements of the value created by simply asking questions. Try a general survey or a one-on-one interview to reach groups of customers and single individuals respectively. 

Offer Rewards 

Of course, rewards are an essential element in tiered loyalty programs. But you should also know that giving incentives and gifts to customers will be more fulfilling when you’re offering something that the customer cherishes. 

You don’t necessarily have to personalize rewards to fit each individual customer on your loyalty list as this would consume a lot of time and resources. Instead, you can simply identify a reward that appeals to a large number of your customers and introduce that as the reward for your loyalty program. 

An in-depth study of your user persona or customer analytics data could help you choose rewards and we have to say that this could be really worth a shot. 

Design Each New Tier to be Unique and Provide Relatively Increased Benefits

Assume that your tiered loyalty program has the standard three levels we spoke about. Customers would be extremely disappointed to move from basic to mid-tier level or from mid-tier to premium level only to discover that the promise of increased rewards doesn’t really exist. 

This implies that there must be a purposeful effort to make each loyalty tier distinct and unique. Customers must be able to feel like they’ve changed levels - when they actually do. They should not feel like they are not being rewarded enough or that other less loyal customers are enjoying the same benefits as them. 

Foster Customer Bond and Engagement

Customer loyalty begins with one little act of engagement. Beyond that, loyalty only exists with continuous and even increased engagements. Businesses need to take advantage of this by creating a steaming environment where loyal customers can meet each other and maybe even encounter the business team. By building engagements, it will be easy to get customers to develop interest in a business. This one thing quickly creates a bond which in turn builds loyalty. 

Conclusion

The two focus points of a tiered loyalty program are loyalty and rewards. Tiers only come in to rev up the participation and inputs of both customers and businesses. Loyalty goes from customers to a business while the rewards go from a business to its customers. If there will be a balance, and if such a program should succeed, then businesses need to properly register the efforts and dedication of their customers and also be sure to deliver rewards when due.  

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