Tiered Loyalty Program: Definition and Points-Only Alternative
By Alva Chew · Updated
Definition A tiered loyalty program groups customers into levels, such as silver, gold and platinum, based on spend or visits, and gives each level better rewards. Every level adds a threshold, a time period and a rule for what happens when a customer falls short. A single points balance rewards bigger spenders with more points and needs none of those rules.
What is a tiered loyalty program?
A tiered loyalty program sorts customers into levels. A common set is silver, gold and platinum. Customers reach a level by spending a set amount or visiting a set number of times in a period, and each level gets better rewards. Typical benefits are a higher earn rate, free delivery, early access to new items or a birthday reward.
The design comes from airlines and hotels, where millions of members make status a practical way to sort customers. In a tiered program a customer’s level, not just their balance, decides what they receive.
How does a tiered loyalty program work?
Five rules sit behind every tier structure.
| Rule | Example | Question it raises |
|---|---|---|
| Qualifying threshold | Gold at US$500 spent | What counts toward it? |
| Qualifying period | Over a calendar year | When does the count reset? |
| Benefits per tier | Gold earns 1.5 points per US$1 | Which benefit applies at this till? |
| Downgrade rule | Drop a level after a quiet year | Do you warn the customer first? |
| Status expiry | Gold lasts 12 months | Who checks, and how often? |
Source: Gimify analysis of what a tiered design requires.
Customers have to learn the same list the owner wrote. A 2019 KPMG survey of more than 18,000 consumers in 20 countries found that 60% agreed programs are too hard to join or that earning rewards is a challenge (KPMG via PR Newswire, 2019).
What does research say about tiers?
Two findings matter most to an owner.
| Finding | Scope | Source |
|---|---|---|
| Moving a customer down a tier hurts loyalty more than moving them up helps it | Experiment plus sales data from a real company | Wagner, Hennig-Thurau and Rudolph, Journal of Marketing, 2009 |
| Adding members to the top tier dilutes its perceived status, while adding a lower tier strengthens it | Consumer experiments on tier structure | Drèze and Nunes, Journal of Consumer Research, 2009 |
The first finding means a regular who has a slow month can lose a level and feel that loss strongly. You then either enforce the rule and annoy a good customer, or waive it and make the tier mean less. The second means a top tier only holds its value while it stays small, so most of your members sit below it.
Neither study tested a small café or shop. The evidence for tiers comes mostly from large programs.
How do tiers compare with points?
A tier gives your best customers a better deal. Points already do that. At 1 point per US$1, a customer who spends US$40 a visit earns four times as many points as one who spends US$10. The reward grows with spend and no one can be demoted. The earn rate page shows how to set the numbers.
Our guide on tiered loyalty programs for small businesses works through when tiers can make sense, for example a large chain with a big member base and staff to run it. The wider argument for one simple balance is in the case for points only.
How Gimify handles this
Gimify runs a points-based loyalty program with no tiers, by design. Customers scan a QR code to join, the card sits in Google Wallet, and staff add or redeem points on any phone. The free plan covers one outlet with unlimited members.
Questions owners ask
What is a tiered loyalty program?
A loyalty program with levels, such as silver, gold and platinum. Customers reach a level by spending a set amount or visiting a set number of times in a period. Each level gets better rewards than the one below it.
What are examples of tiered loyalty program benefits?
A higher earn rate, free delivery, early access to new items or a birthday reward. The benefit list grows with each tier, and staff need to know which benefit applies to which customer.
What is the downside of a tiered loyalty program?
The customer has to learn thresholds and periods, and you have to decide what happens at a downgrade. A study of real sales data found that demotion damages loyalty more than promotion builds it.
How is a tiered program different from a points program?
A points program has one balance and one earn rate, so a customer who spends more earns more. A tiered program adds status levels on top of that balance, each with its own rules.
Do small businesses need tiers?
Rarely. Tiers work best with a large member base and a team to run them. A shop with one to a few outlets can reward its best customers through points alone.
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