Loyalty Blogs

A loyalty program is no longer a choice but an essential aspect for businesses to build stronger customer relationships & retain them in the long run. However, choosing the right type of loyalty program is difficult as it can make or break your business. One of the most common program types is a tier system that helps reward customers with better rewards as they move towards higher tiers.  

In this blog, we will learn about the tiered loyalty program along with all the benefits and drawbacks it offers for a business. This will help in evaluating whether your business needs a tiered loyalty program or not.     

Advantages of Using Tier-Based Loyalty Programs

A tiered loyalty program can be a loyalty approach that offers different levels of rewards and benefits based on how much the customer spends or interacts with the brand. If you want to motivate customers to spend more and unlock more benefits, go for a tiered loyalty program.

• Provide Continuous Motivation for Loyal Members to Stay

One of the best benefits of using a tiered loyalty program is that it helps motivate dedicated customers, which helps in increasing their spending, keeping them engaged, and staying loyal to the particular brand. By making use of a well-crafted tier structure, your business can encourage customers to move to higher levels and unlock exclusive benefits. Also, it helps customers safeguard their tier status and enjoy the best member benefits.

For instance, you can consider the example of a frequent flyer who is constantly reminded via the loyalty app that he/she is just 100 points away from unlocking a new tier, which means better benefits like priority boarding, extra legroom seats, or lounge access. Without a second thought, he/she will consider booking additional flights or spending more at the airport to unlock these perks available at the next tier.

• Better Customer Segmentation and Personalization

Another advantage of tiers is that they enable brands to sort their customer base effectively based on different aspects such as purchase behavior and engagement journey. This is very beneficial for business owners to deliver more personalized communication, targeted promotions, and customized experiences.

Businesses must know how to focus on high-spending customers as they are the ones that not only contribute more financially but also engage more frequently. A tiered system enables you to both recognize and elevate these customers by customizing your messaging, rewards, and tier benefits to align with their expectations. However, it’s also equally important not to overlook new members.

• Gain a Competitive Advantage

By investing in reliable tiered loyalty software, you can create a customized tier system that aligns with your audience’s needs and helps your brand differentiate itself in a crowded marketplace. Customers today have immense options in the market, which is why making them feel valued from the moment they join the loyalty program is important, along with encouragement to earn more points and access better rewards.

Additionally, you must focus on understanding what rewards and benefits resonate with your audience before building a tiered loyalty program. You can offer experiences based on lifestyle preferences while giving priority to comfort and exclusivity.

Drawbacks of Using Tiers in Your Loyalty Program

The tiered program can offer a wide range of benefits to businesses that include higher customer retention, an increase in customer lifetime value, motivation for customers to stay engaged and unlock higher tiers, etc. However, some of the potential drawbacks include complexity in managing tiers, customer frustration if rewards are not good enough for higher tiers, and more.

Here are some of the drawbacks of using a tiered loyalty program for your business-

• Complexity and Confusion

One drawback of implementing a tiered program is that it involves using multiple tiers in a rewards program, which can occasionally lead to confusion among customers, especially if the tiers lack significant differentiation or if the benefits and requirements are similar and only slightly different.

One thing that must be kept in mind while launching a tiered loyalty program is that you must ensure that each tier offers meaningful value, different from other ones. You can consider incorporating experiential perks and complimentary services in higher tiers rather than just offering mere rewards like discounts. Transparency is the key to making your program successful in the long term. Take time to communicate the rules of the program to your customers.

• Risk of Exclusivity

Though exclusivity can help incentivize customers, it can also alienate the customers who find it challenging to attain higher tiers, which can lead to disengagement or abandonment.

Rather than keeping focus on just the high-spending customers for rewards, it is advisable to appreciate all participants in the program, irrespective of their spending ability. A tiered program that fails to cater to the needs of all customers can make customers feel the program is very exclusive and not welcoming.

• Challenges in Managing  Costs and Resources

To truly differentiate your tiers in the loyalty program, they must be thoroughly researched and effectively managed. Ensure that you create a tiered program after considering different aspects such as cost of execution, potential adjustments, human resources, etc.

Take time to evaluate the costs involved in running a tiered program to attain its long-term benefits. Explore options like a freemium approach if you have a tight budget.

Closing Statement

After going through the blog, it has become quite clear that the development of the tier-based loyalty program can bring significant value to your business if it is implemented in the right way. Before making a decision, make sure that you consider the financial requirements and human resources. Apart from that, you must understand the benefits of tiered loyalty programs that your audience will not be able to resist.

If you want to grow your business with a winning loyalty program, Novus is the top AI-powered loyalty software that has all the capabilities to offer enhanced rewards for your customers. Our loyalty experts can help you analyze your business needs and choose the desired tier program that focuses on increasing value and better experiences in each tier. Book a demo today to learn more about Novus.