How to design outstanding membership tiers and levels?
Membership tiers and levels are not just about having something to offer your customers; it's also about providing the right customer experience to the right segment. Exclusive membership privileges show that you care about the customer: membership is a way of saying "you matter", which will make customers want to come back again and again and drive more revenue. If done right, membership can help you gain new customers by building trust with potential clients who might otherwise have been too nervous to buy from you in the past.
Here are some key recommendations to keep in mind for membership tiers and levels design :
Know your customer
An overused statement in marketing is that a retained customer costs less than acquiring a new customer, which stems from the principle that through repeated interactions, brands get to know their customers better. As a result, membership tiers and membership levels can be specifically designed to match the needs of your most loyal customers. This benefits both business sides by increasing revenues, but also customers as they will receive better treatment.
So before you start designing membership tiers, it is most important to understand your customer base. This is the foundation of membership tiers and levels design because it will allow you to choose membership levels that are right for your customers.
You can use user analytics (e.g. tracking customer data such as lifetime value, retention rate, and revenue generated, etc) to see which membership tier might work best with certain types of customers. Another way is through feedback and customer surveys. This is a great way to get in touch with your customer base and see what they think about membership levels, whether or not the membership levels you currently have -if any- meet their expectations, and what membership levels they would like to see. With the help of your Database and transaction data, these types of surveys allow you to capture your customer’s attitude and purchase behavior towards your brand so that it could help you determine your rewards' objectives.
Furthermore, to be successful and selective in developing attitudinal loyalty -which impacts purchase behavior- businesses must have a thorough understanding of their customers. Customer profile information, which includes psychographic and demographic data, is essential in predicting future customer profitability. Another approach is to figure out the future customer profitability is by applying the metric of customer lifetime value (CLV). For example, If a loyal client has a CLV of $ 100 and is at risk to churn, you may consider giving him a maximum incentive of $ 100 worth to retain him.
Clearly define your tier structure objectives
The membership tiers and levels you choose should help you achieve your business goals. They need to be linked to specific marketing and business objectives, so they need to be measurable. The membership tiers should be clearly defined to match the objectives of your loyalty program and business type and goals as well as your customers' spending behaviors so that you know which membership tier will work best.
The membership tiers should also be designed to bring in more revenue, while at the same time not causing any harm or reducing revenues for lower membership tiers. When membership levels are not designed to be profitable for businesses, it is easy to become confused about the number of membership levels that should have, which membership level should come first, and what membership levels should be created.
For example, in a structure where you could choose to have 2 membership tiers reward strategy :
1 — The first tier, which we'll call silver, would be designed for the objective of offering a standard and explicit baseline to reward customers for their past and current purchase, regardless of their shopping patterns (e.g., high-margin, low margin products, etc..). This ensures accessibility to a wide range of customers, as well as new ones, serving as a way for instant gratification, and scaling your loyalty program by rewarding spending. Another objective is to capture customer data and purchase behavior in your store so that you can move to your second tier. For example, in an eCommerce store where most customers are first-time purchasers, a membership level that is designed to be rewarding on the first purchase might exist as the first tier.
2 — The second, which we'll call bronze, would have an objective of influencing current and future purchase behavior, given the past data of the customer. As such, this tier will reward fewer selected customers than tier 1. Here, you can have more control over who gets and what types of rewards and incentives are given to your customers (Medium CLV). Moreover, you'll have more control over how much these rewards should be worth.
3 — The third we'll call gold, would take the Bronze tier to another level, with a higher degree of control -centered around profitability- and higher-value and differentiated rewards, to cultivate a positive attitudinal loyalty and offer rewards that feel "fair" to your most profitable and loyal customers (High CLV). Armed with customer knowledge, the rewards would be tailored to these customers' needs, and provide exceptional value. This tier could help customers feel special and cared for, and reinforce the reciprocity norm mentioned earlier.
Membership tiers and levels must be designed with a clear objective in mind, both for the short term and long-term. To do so, you must first be able to define membership tier goals in line with your company's profitability.