Looking for More Loyal Customers? Try a Tiered Strategy

With so many retail options available to consumers, it’s more important than ever for brands to offer incentives to retain and grow their share of loyal customers. A tiered loyalty strategy is an effective way for brands to level-up engagement.

What's a Tiered Strategy and Why Does it Matter?

Customers’ expectations change over time. The Lacek Group’s global research report shows that today’s consumers seek personalized service, offers, and rewards — and view these as a baseline expectation. One-size-fits-all is no longer the best approach.

A tiered loyalty strategy allows retailers to provide consumers with a range of personalization levels, from basic to advanced. Brands can define customer tiers based on various data points and segmentation criteria such as customer purchase frequency, spending value, and engagement activity. Location-based data can refine these segments, enabling retailers to further customize tiered messaging and benefits according to regional, cultural or historical norms.

A tiered approach allows brands to provide personalized, targeted offers, along with customized rewards, based on an individual's behavior and personal choice. A simple example is national fast-casual chain Potbelly’s recently announced tiered-style perks program. In the program, customers collect coins per dollar spent and redeem them for menu items or other benefits throughout the year. The tiered approach? Customers earn more coins per dollar as they reach different spending levels, driving repeat purchases to access additional perks.

How to Implement a Tiered Strategy

With data at the forefront of a tiered strategy, companies need a plan to capture and analyze customer data to identify, track and recognize members’ tier status. When should a customer be recognized? A few natural touchpoints are immediately after a transaction — whether online or in-store — through regular communications like monthly status emails or reminders of important milestones such as a birthday or anniversary of joining the rewards program. The key is determining which level of engagement individual customers desire, and more importantly when they want to be engaged.

Brands must realize not all customers like being recognized in the same way — even if the reward is the same in the end. Tailored communication strategies and channels, based on customer preference and generational trends, attract customers to different brands. For example, while Gen Z grew up in the age of social media, they prefer to shop and interact with brands in person. Therefore, a mixture of communications — social media to deliver recognition along with personalized messaging via traditional channels — is appealing to Gen Z consumers but may not resonate with older customers.

Is a Tiered Strategy Right for Your Brand?

There are many factors to consider before implementing a tiered loyalty strategy. First, determine if a tiered strategy would support and enhance your brand's goals and better serve its most valuable customers. Next, think about differentiated benefits and if your brand has the financial and service bandwidth to offer different levels of rewards. Finally, consider the long-term viability of a tiered strategy and the expected return on investment.

If your brand is ready to elevate its CRM strategy, consider implementing three foundational elements for a successful tiered program: a compelling value proposition to motivate customers to achieve their next tier status, a financially viable goal that results in a positive ROI, and an operationally feasible structure that ensures the company will be able to realistically support a tier structure across all departments.

A successful tiered program requires planning, strategy and dedication, but the effort can pay off with increased revenue, retention and customer devotion.

Francesco Favazza is vice president, strategic services for The Lacek Group, a Minneapolis-based data-driven loyalty, experience, and customer engagement agency. Robyn Zeller is director, strategic services for The Lacek Group.