THE CLARUS Blog

Why You’re Looking at Tiered Loyalty Programs All Wrong

Are your most loyal customers the ones who shop with you the most?

Sure, some of them are, but you also have loyal customers who don’t shop with you nearly as often.

Many retailers use a tiered loyalty program to make sure they are rewarding their most loyal customers, but does basing their tiers on purchase frequency really make sense?

Where does this leave your loyal customers who shop less frequently?

 

Do Tiered Loyalty Programs Reward Your Best Customers?

Tiered loyalty programs offer different rewards based on milestones that members cross. These milestones are usually measured in dollars.

For example, the more a member spends, the higher the tier they enter.

But your most loyal customers aren’t necessarily the ones that spend the most.

For example, one of your customers could be a true evangelist for your brand but have less overall income to spend throughout the year.

Or he or she may simply be a newer member and hasn’t had time to accrue a higher status with more benefits.

Tiered loyalty programs are meant to reward your best customers, but do they really?

Depending on the year, various members can get kicked in and out of tiered programs. For someone new to your brand, he or she needs to work hard to achieve a higher tier before they start receiving any benefits.

This doesn’t make sense in a world where consumers crave instant gratification.

 

What is a Better Way to Manage a Tiered Loyalty Program?

If basing loyalty on how much someone spends isn’t ideal, what is a better way?

What if there was a way to just ask your customers?

This is one of the benefits of a premium loyalty program (programs where members pay a fee to join).

When retailers offer premium loyalty tiers on top of their free loyalty programs, you are giving you best customers the option to self-identify, regardless of how much they spend each year.

This is the reason more retailers are turning to premium loyalty tiers over traditional tiered loyalty programs because they allow your customers to raise their hands and tell you they are your loyal customers.

No matter the amount a customer spends with you every year, they can choose to opt in.

Much like a traditional tiered loyalty program, the premium loyalty program tier offers greater benefits for someone who spends more and will reward them more, but they also reward people who shop less frequently.

What’s even better is customers who join your premium loyalty program shop with you more often, regardless of where they started.

We routinely see purchase frequency increase by over 40% for members of the premium loyalty programs we create for our clients.

This is also why Amazon promotes Prime Day so heavily.

Yes, they want people to shop at Amazon, but what they want more than anything is more Prime members.

They know that Prime members are twice as valuable as non-prime members.

 

Is It Time to Rethink Your Tiered Approach to Loyalty?

Traditional tiered loyalty programs make sense on paper. The more someone spends, the better we should reward them. But, in reality, these programs aren’t the most customer-centric.

Yes, you will give your highest spending customers the best rewards, but you’re missing a huge opportunity to also reward and motivate your loyal customers who aren’t spending as much with you.

Or should I say, the customers who aren’t spending as much with you — yet.

Premium loyalty is different and, in many ways, a better complement to your free program than a spend-based tier.

We know that customers who are members of your free program are more likely to join your premium loyalty program.

If they see value, they are more likely to join your premium program than they are to try and spend their way up to the next tier in your traditional tiered program.

Nobody has ever said, “I’ll just spend $500 more, so I can get to silver status.”

You don’t need to gamify your tiers. As a retailer, you want to offer the best possible brand experience to your most loyal customers and premium loyalty gives you a better way to achieve this.

If you want to get more from your best customers, offer them more.

Offer your customers the ability to raise their hands, engage your premium offering, experience the desired benefits, and become your best customers.

 

Have You Considered a Tiered Approach for your Loyalty Program?

  • Our 2020 Premium Loyalty Data Study shows that 70% of consumers would pay to join a premium loyalty program if their favorite retailer offered one and the benefits were valuable.
  • Ninety-four percent of premium loyalty members shop at that retailer at least once a month.
  • Nearly 90% of respondents would recommend a retailer to family or friends if the retailer’s premium loyalty program offers valuable benefits.
  • Eighty-eight percent of consumers are likely to choose a retailer whose premium loyalty program they belong to over a competitor that is offering a lower price.

Don’t you want to be one of those “favorite retailers”?

Are You Ready to Go Premium?

If you want to become a 24/7 presence in your best customers' lives, it's time to get started.