Tiers in a loyalty program show members appreciation for their activity and simultaneously increases the effectiveness of the program by providing easy segmentation of customers, which allows brands to give benefits based on defined rules. Tiers are also referred to as loyalty statuses or membership levels.
The higher the tier a member belongs to, the more benefits they get, as each rank offers special perks. Over time or after meeting defined requirements, such as the value of a total spend or number of transactions made, the customer will level up to a higher tier with more valuable benefits.
Why is member recognition important? The answer to this question lies in the fundamental human needs of recognition and appreciation, as they encourage the customer to strive towards higher engagement and build a system of positive relationships.
Another fundamental human need is social belonging. People desire a sense of belonging and acceptance among other social groups. When companies offer a tier system, they can show their loyalty program members that they are part of a community of people with similar behaviors. This approach creates a strong and emotional bond with the brand. The loyalty program operator may increase this feeling by organizing tier-exclusive events.
This value represents the human desire to be accepted and valued by others. Reaching a new tier inspires a feeling of uniqueness and recognition. People like to see where they stand relative to the group – particularly when they exceed others. Premium or luxury brands often distinguish customers who want to be perceived as prestigious. In a loyalty program, success is ensured by providing extraordinary customer experience, emotional rewards, dedicated content, and even by naming particular tiers.
The higher level of needs refers to the realization of full personal potential; a desire to achieve everything achievable. In the loyalty program world, that means reaching the highest tier. To satisfy a member’s needs, the tiering system should create a challenging goal to achieve the highest status level, thereby increasing the member’s interest for longer. As the reward at the very end, high-valuable benefits should fulfill the customer's dreams and compensate for the effort related to leveling up.
Because it’s based on human psychology, is the tiering system a perfect mechanism for all loyalty programs? No. Implementing a tiered system depends on brand identity, its target group, and goals. Each marketer should explore how best to introduce and maintain their specific target group.
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