What makes good relationships last?
Of course, I won’t surprise you with the word “love” but I think a true emotional bond is always behind any long-term successful marriage, deal or purchase. And who else can appreciate a customer’s emotional bond with the brand, if not a marketer?
This bond sustains loyalty, which is the main key to repeated and frequent purchases of the same person and his referrals. Just like in human relationships, it takes so many efforts to achieve and maintain an emotional bond between a brand and a customer.
This is how the term Relationship Marketing came to be, which values not intrusive sales strategies, but customer satisfaction and retention techniques. One of them is a long-term and efficient tiered rewards program.
The psychology behind tiered rewards programs
If you want to retain your customer, make him climb your loyalty program ladder. With the help of tiers, a consumer receives rewards following your rules of the game. But instead of just collecting loyalty points until the end of time, the customer gets a status which makes him stand out and feel more acknowledged and connected to the brand. And more importantly: it also provides a goal for the customer to shoot for, and therefore an incentive to keep his interest up longer in your loyalty program. Just think about the video games where you beat monsters and collect treasures to unlock a higher level. Once you reach that higher level, more awesome rewards are unlocked for you. You kind of got addicted to this game mechanism, because it lets you experience a series of achievements.
If we try to portray reward programs’ benefit according to Maslow’s Hierarchy of needs, then we see that customer tiers satisfy the ‘Esteem Needs’.
Okay. We see now what importance loyalty tiers hold for customers. But what about you, the eCommerce business owner?
How tiers can influence customer loyalty in a rewards program
1. Exclusivity that differentiates you from competitors
Let’s start with some concrete examples. MLife Rewards – Las Vegas’s most famous Casino rewards program – and tiered rewards program – includes five tiers. Notice the name of their loyalty program – “MLife Rewards”. It adds exclusivity to the card owner and gives him a feeling of superiority when he receives the Gold benefits. A customer who obtains the sapphire benefits will push his way up through the tiers to achieve more and get the higher status. That is how a tiered rewards system unobtrusively prevents your customer from choosing your competitor’s loyalty program.
MLife rewards clearly shows the benefits of all of their tiers in positioning their loyalty program. The program’s name also lets them stand out from competitors.
2. Fun level names that increase the feeling of belonging to a community
But don’t stop the flow of creativity at your program’s name. Find fun level names that reflect your business’s personality AND really speaks the language of your target audience, to increase brand engagement. For example, in the case of a nutrition supplement store, the level names can be: Rookie, Hardcore Builder, Shredded Superstar, etc. Be as fun and engaging as possible. Just see below how Marvel follows this great advice with their recently launched loyalty program, Marvel Insider.
In Marvel’s loyalty program, participants can achieve four levels: Insider, Agent, Elite and True Believer. These statuses reflect on how comic book fans may define themselves in the comic book community. And it also allows fans to showcase their level of commitment to the community.
3. The effect of value and exclusive status
Every customer is a child at heart and expects to be rewarded for what he/she has done. And that means customers compare their gained value with other customers’ achievements. Hence, you as a smart parent of a brand should underline and visualize the difference in benefits your customers can reach. The gold status must have at least 2-3 more privileges than lower membership tiers. It’s also worth noting that customers can (and will) be looking at your competitors’ loyalty program. So when you’re planning out perks and rewards, don’t disappoint, or more shoppers may end up knocking at the competition’s door.
Once you have your benefits laid out, you can put them in a table like AHAVA has, below. This way rewards are clear, concise and easy to compare.
To feel valued and special, your customer needs to clearly see the difference between his privileges and others.
4. The power of subscription fee based status
Unlike your own child, who won’t go to other parents when you forget to reward another one of his squiggly drawings, a customer with even a long history of frequent purchases can simply change from your brand to a competitor. That’s why your system of rewards should have enough gifts, benefits, points or services to surprise, satisfy and as a result retain a loyal customer.
Moreover, according to a recent study, 65% of millennials think it’s worth joining a fee-based loyalty program if the owner offers more relevant rewards for them. The further value of fee-based loyalty programs, according to Pamela Sullins:
- Faster ROI delivery, because money comes into the program right after a member signs up, instead of driving revenue over a longer period of time.
- Pay-to-play incentives motivate customers to stay active, because they don’t want to throw money out the window.
- Qualified membership allows you to avoid having loyalty members who sign up once, but don’t actually have a real interest in your loyalty program.
It’s all good so far. But be cautious! AMC Theaters – the movie theater chain – was rumored to have the best performing fee-based loyalty program in the market for many years. But! From summer 2016, they started offering loyalty member registration for free (it’s currently in test phase). One thing is for sure: for a fee-based loyalty program you need to be aware of your competitors and target market. What works for Amazon Prime, may not be the right strategy for your business.
The best working example of fee-based loyalty programs is that of Amazon Prime. In different tiers, you can gain different rewards based on your subscription fee, which can be $8.99 per month, $10.99 per month or $99 per year.
5. Gamification that increases customer engagement
Another great example comes from our all-time favorite coffee chain: Starbucks. They have a gold status, and also involve a little gamification in their loyalty program, by allowing gold card owners to earn more points on Monthly Double-Star Days. Why is it a good step from their part? According to the 2016 Maritz Study, more than 45% of consumers buy a product to gain rewards in a loyalty program. However, this report suggests that some loyalty programs actually don’t help to strengthen emotional bond with the brands, because they only focus of discounts. This is precisely when gamification swoops in to save the day, because it allows you to involve fun elements into your loyalty program. And where there is fun, there are emotions.
In Starbucks’ loyalty program, Gold members can earn more points on monthly Double-Star Days, and can even get a pretty, personalized gold card that they can treasure.
6. Take advantages of loyal referrals
The Bond Brand Loyalty marketing agency conducted a comprehensive study and in a 2016 report revealed that 73% of their reward program customers would recommend brands to others if they consider a loyalty program good and satisfying. Thus, if you strive to get new customers with the help of your old ones, try to match your current consumers’ expectations.
However, you can get new customers through a tiered program offering your regular ones benefits for referrals, those are friends or relatives who also wish to enter your exclusive club. Most likely, these newcomers will become regular and loyal to your brand. Of course, if the quality of your service or product is below the buyer’s expectations, you won’t be able to retain one-item buyers long after your amazing freebies run out.
It’s quite common that customers from tiered programs bring potentially loyal referrals, since word-of-mouth marketing still works for the brand’s reputation. New purchasers can contribute to high retention rates, due to the positive experience of their friends and relatives.
This example from Athens Family Dental clearly demonstrates how the word “VIP” stands out in a loyalty program. This tiered rewards system offers a special rewards status to customers who bring in 3 referrals.
7. Email personalization based on customer tiers
By involving levels in your rewards program, you automatically have a way to send more personalized offers based on the tier your customers are currently in. For example, let’s say big spenders are crowned with gold membership, in other words, they’ve achieved the highest level in your loyalty program. You already know they are big spenders, so to encourage their next purchase you can offer them a higher discount (e.g.: 20%) for a limited time, compared to the standard discounts you use. Or, you can set up automated email campaigns to nurture silver members. The goal here is to incentivize customers by offering helpful advice and showing the benefits of higher levels, encouraging customers to engage and reach the next level. Literally encourage them to move from their current customer life cycle stage toward the ultimate goal, real loyalty. Want some more tips on getting there? You can read more about customer life cycle-based loyalty offers from this blog post.
The next step to engage your loyal customers is to send them personalized emails based on their membership level. Century 21 has three customer tiers in their loyalty program. Each tier has a different color scheme which they can also include in their emails.
How to get started
Before you start planning your loyalty program tiers, it’s best to get back down to the basics and examine how you should create a loyalty program, step-by-step. This infographic – in case you missed it – describes you how to build a successful and flawless loyalty program in 7 steps.
If you want to see how a loyalty program with customer tiers can work for your business, sign up for a VIP demo. We’d love to show you how it works in our loyalty solution.