Tiered Loyalty Programs: Examples + How to Set Up

One of the most effective strategies for keeping customers coming back is implementing a tiered loyalty program.

Even the numbers say so. By retaining customers and promoting repeat purchases, loyalty programs with tiers lead to a 25%-95% profit boost.

This comprehensive guide will explore the ins and outs of tiered loyalty programs, their benefits, real-world examples, and how to create one for your business.

What is a Tiered Loyalty Program?

A tiered loyalty program is a rewards system that offers escalating benefits to customers based on their level of engagement or spending. Unlike traditional loyalty programs that offer the same rewards to all members, tiered programs provide increasingly valuable perks as customers move up through different levels or tiers.

Key Features of Tiered Programs :

• Multiple membership levels (e.g., Silver, Gold, Platinum)
• Increasing rewards and benefits for higher tiers
• Clear criteria for advancing to higher levels
• Exclusive perks for top-tier members

How does a Tiered Loyalty Program Work?

Tiered loyalty programs operate on a simple principle: the more a customer engages with a brand, the more benefits they receive. Here’s a basic overview :

1. Enrollment: Customers join the program, usually starting at the lowest tier.
2. Earning Points: Members earn points or rewards through purchases or other activities.
3. Tier Advancement: As customers accumulate points, they progress to higher tiers.
4. Unlocking Benefits: Each tier offers increasingly valuable rewards and perks.
5. Maintaining Status: Members must typically maintain a certain level of activity to keep their tier status.

For example,

Imagine a coffee shop with three levels of a tiered loyalty program: Bronze, Silver, and Gold.

• Bronze Tier: For every 5 coffees bought, get 1 coffee free.
• Silver Tier: (Reach after buying 30 coffees) For every 4 coffees bought, get 1 coffee free + a 10% discount on snacks.
• Gold Tier: (Reach after buying 60 coffees) For every 3 coffees bought, get 1 coffee free + a 20% discount on snacks and access to special promotions.

Benefits of Tiered Loyalty Programs

Here are some key tiered loyalty program benefits:

• Enhanced Customer Engagement: Customers are motivated to interact more with the brand to reach higher tiers and earn better rewards. Different levels of rewards, based on customer engagement, pull in 67% of consumers to join loyalty programs.
• Enhanced Customer Retention: By offering increasingly valuable rewards, tiered programs motivate customers to stay loyal and continue purchasing from your brand.
• Boosts Customer Spending: The desire to reach the next tier encourages customers to spend more. In fact, 74% of customers prefer brands with loyalty program tiers based on how much they spend per year.
• Increased Customer Lifetime Value: As customers strive to reach higher tiers, they’re likely to spend more, increasing their overall value to your business.
• Reduced Price Sensitivity: Loyal customers in higher tiers are often less sensitive to price increases due to the perceived value of their status and rewards.

5 Best Tiered Loyalty Program Examples

1. Starbucks Tier Rewards
2. Sephora Loyalty Program Tiers
3. Marriott Tiered Loyalty Program
4. H&M tiered Loyalty Program
5. Ulta Beauty’s Ultamate Tiered Rewards

1. Starbucks Tier Rewards

Starbucks Rewards offer a loyalty program with tiers designed to reward customers for making purchases at Starbucks. Every time you buy something, you earn stars, which can later be exchanged for free items.

Starbucks Tier Structure and Benefits

The program has three levels: Welcome, Green, and Gold, each with its own set of perks. The more you spend, the more stars you earn, and the higher you climb in tier levels, unlocking more rewards and benefits.

• In the Welcome tier, customers will get one free tall beverage during your birthday month + One free size upgrade on a handcrafted beverage.
• In the Green tier (Should earn 5 stars within 12 months), customers will get all Welcome tier benefits + One additional free tall beverage with a purchase of 250g Whole Bean coffee + One additional free size upgrade on a featured beverage.
• In the Gold Tier (Should earn 25 stars within 12 months after Green level), customers will get all Green Tier benefits + two free customizations on any handcrafted beverage + One free tall-size drink after every 10 additional stars earned.

Why is it best?

Already, Starbucks as a premium brand has tiers or levels to attract customers, and this loyalty program presents an even more enhanced offering.

The tiered structure would render a feeling of achievement and exclusivity that would make clients increase their spending levels to reach up to higher tiers and better rewards.

2. Sephora Loyalty Program Tiers

Sephora’s beauty insider tiered loyalty program rewards customers with escalating points and discounts for shopping at Sephora. Members earn points for every purchase and can later exchange the points for products, discounts, or other exclusive rewards.

Sephora Tier Structure and Benefits

The Beauty Insider program has three levels: Insider, VIB, and Rouge, each offering distinct perks. The more customers spend, the more points they accumulate, allowing them to move up the tiers and unlock greater rewards and benefits.

• Insider Tier: For entry-level customers, earn one point for every dollar spent. Offers include free shipping, birthday gifts, 10% off on seasonal savings, 2X points multiplier, Beauty insider cash, end-of-year discounts, access to (app exclusives, auto-replenish, reward bazaar), and exclusive events.
• VIB Tier: Customers reach this level after spending $350 in a year. Benefits include all other Insider rewards, 15% off on seasonal savings, 3X points multiplier + exclusive gifts.
• Rouge Tier: This is the highest level, accessible after spending $1,000 in a year. Customers receive all VIB benefits, 20% off on seasonal savings, 4X points multiplier + Rouge rewards, and first access to products.

Why is it best ?

The tiered program of Sephora excels with its diverse, beauty-focused rewards, which are made to fit the makeup enthusiast. The tiered structure offers tangible benefits-things such as exclusive product access and higher discounts-which directly align with incentive opportunities for increased spending.

3. Marriott Tiered Loyalty Program

Marriott Bonvoy’s tiered loyalty program was formulated to reward guests for choosing Marriott’s range of hotels for their stays. For every stay, guests earn points and can later redeem them for free nights, upgrades, or other exclusive benefits.

Mariott Tier Structure and Benefits

The program comprises several levels: Member, Silver Elite, Gold Elite, Platinum Elite, Titanium Elite, and Ambassador Elite, each offering its unique array of privileges. As guests stay more frequently, they accrue more points and progress through the tiers, unlocking enhanced rewards and advantages.

• Member Tier: Guests start earning points right from the first stay. They get access to complimentary Wi-Fi and member rates.
• Silver Elite (10 nights/year): Along with Member Tier benefits, guests get a 10% bonus on points earned during stays, and priority late checkout.
• Gold Elite (25 nights/year): Guests enjoy all Silver Elite benefits plus a 25% bonus on points, enhanced room upgrades, and a welcome gift of points upon arrival.
• Platinum Elite (50 nights/year): In addition to Gold Elite perks, guests receive a 50% bonus on points, lounge access, guaranteed room type, and a welcome gift of points + breakfast or amenities
• Titanium Elite (75 nights/year): Alongside Platinum Elite benefits, guests get a 75% bonus on points, additional hotel amenities, and 48-Hour guarantee prior booking access.
• Ambassador Elite (100 nights and $20k/year): On top of Titanium Elite benefits, guests have access to a personal ambassador, Your24™ (flexibility to choose check-in and checkout times), and an invitation to an exclusive event.

Why is it best ?

Marriott Bonvoy has been very successful and well-received because it makes guests want to keep coming back. By offering lots of different tiered rewards, it keeps current customers happy and brings in new ones, helping Marriott stand out in the hotel business.

4. H&M tiered Loyalty Program

H&M Loyalty Program is a tiered loyalty scheme aimed at rewarding shoppers for their purchases at H&M stores and online. Each time customers shop, they accumulate points which can later be redeemed for discounts or special offers.

H&M Tier Structure and Benefits

H&M’s loyalty program operates on two tiers: Core tier and Plus tier, with each level offering its distinct set of rewards. The more customers shop, the more points they acquire, allowing them to progress to higher levels and unlock additional perks.

• Core Tier: Customers enter as members and can earn 1 point for every $1 spent. Customers with 0 – 499 points belong to the Member tier. They receive a 10% discount, Flexible payment options, Birthday treats, Invites to shopping events, Free shipping over $40, Double points days and more.
• Plus tier: Customers should reach 500 points to become a Plus tier member. In this level, customers will receive all Member tier benefits along with access to Free shipping and returns, pre-access, and Unique experiences.

Why is it best ?

H&M’s Loyalty Program has worked really well in getting customers excited and making them feel special. It encourages people to shop more at H&M by offering rewards and making them feel valued, which helps in building a stronger and positive relationship between the customers and the brand.

5. Ulta Beauty’s Ultamate Tiered Rewards

Ultamate Rewards is Ulta Beauty’s tiered program designed to reward customers for making purchases at Ulta Beauty stores. Every time you buy a product, you earn points, which can be later redeemed for discounts or free items, making the shopping experience even more enjoyable.

Ulta Beauty Tier Structure and Benefits

The program has three levels: Member, Platinum, and Diamond, each offering its unique perks and benefits. The more you spend, the more points you earn, and the higher you ascend in tier levels, unlocking more rewards and exclusive benefits.

• In the Member tier, customers earn 1 point for every $1 spent, and they receive a birthday gift, bonus points, redeem for discounts, and can earn double points during their birthday month.
• In the Platinum tier (Customers must spend $500), customers earn 1.25 points for every $1 spent. They receive all Member tier benefits plus a $10 birthday coupon and exclusive deals, gifts & early access.
• In the Diamond tier (Customers must spend $1200), customers earn 1.5 points for every $1 spent. They receive all Platinum tier benefits plus a diamond gift, $25 beauty service reward card and free shipping on orders over $25.

Why is it best ?

Ulta Beauty’s program stands out with its hybrid drugstore-prestige product range, offering broader appeal. The Diamond tier’s free shipping and beauty service rewards uniquely blend online convenience with in-store experiences.

How to Set Up a Tiered Loyalty Program

1. Identify the business objective
2. Create a simple points system
3. Set up the reward structure
4. Determine the tier levels and benefits
5. Create terms and conditions
6. Market the tiered program to customers

1. Identify the business objective

Before creating a tiered loyalty program, you must know what you want to achieve. It could be things like attracting more customers, keeping the existing ones happy, or making people buy more products.

2. Create a simple points system

Now, think about how customers will earn points. Will they get points every time they buy something? Or when they refer to a friend? Keep it simple. For example, 1 point for every dollar spent. Make sure the rules are easy to understand.

3. Set up the reward structure

Next, think about what rewards your customers would really like. Discounts are great, but they may also enjoy a special gift or a unique experience. The rewards system can be points, discounts, gifts, or special access to new products. Mix it up and offer a variety of rewards to keep things exciting.

4. Determine the tier levels and benefits

Here, you can decide how many levels or ‘tiers’ to have in the program and what benefits or rewards to give at each level. For example, you might have three levels: Silver, Gold, and Platinum, each offering better rewards than the last.

5. Create terms and conditions

Every program needs rules. Create rules, or terms and conditions, that explain how the program works, how people can earn and use rewards, and other important information. It helps in avoiding misunderstandings and problems later on.

6. Market the program to customers

Once the tier program is ready, you need to tell people about it. It is done through various marketing strategies. Use advertisements, email marketing, social media, or other ways to inform customers about the new program and encourage them to join.

Challenges and Considerations

While tiered loyalty programs offer many benefits, they also come with challenges:

• Complexity: Ensure your program isn’t too complicated for customers to understand.
• Maintaining Engagement: Keep customers motivated to reach the next tier.
• Balancing Costs: Ensure the rewards offered are sustainable for your business.
• Meeting High Expectations: Top-tier members often have high expectations for service and benefits.

Industry-Specific Tiered Loyalty Programs

Different industries create tiered programs to their unique characteristics:

• Retail: Focus on exclusive products, discounts, early access to sales, and personalized shopping experiences.
• Hospitality: Offer room upgrades, late check-outs, and exclusive amenities.
• Airlines: Provide seat upgrades, lounge access, and priority services.
• Restaurants: Feature chef’s table experiences, priority reservations, and customized menus.
• Financial Services: Offer higher cashback rates, waived fees, and concierge services.

Final Words

Tiered loyalty programs are a powerful way for businesses to encourage repeat purchases and nurture customer loyalty. It’s important to make your program simple, fun, and valuable to your customers. Always be ready to make changes to your program to keep up with what your customers like.