In our last blog post, we discussed how you can calculate Customer Lifetime Value, or CLV. Determining this metric is crucial to understanding which customers are most valuable to your store, but now that you've figured that out, what next?
If you currently have an active rewards program, you have a wealth of options in front of you. If your best customers are active with your social media pages, maybe start incentivizing social media shares and follows. If your best customers tend to read certain content you are publishing, reward customers who are reading that content.
But what if your CLV calculations don't reveal such an obvious trend that defines your best customers? Or what if you've set up campaigns to maximize CLV and now you're looking for something more to really grow your bucket of high volume spenders?
Swell has now built the ideal feature to make sure you are encouraging your customers to be as profitable for your store as possible: VIP Tiers.
What are VIP Tiers?
VIP Tiers have been growing rapidly in popularity in recent years. Most notably, major brands like Starbucks and Sweetgreen have implemented tier based programs to encourage customers to strive for more frequent purchases and a higher total spend. Entire apps and companies have been built around supporting the desire for tiered programs, most notably, Level Up.
So how exactly do tier-based programs work?
Tiered Programs take many shapes and sizes, but share a common goal of encouraging customers to take more of a certain action in order to reach a higher status, or "tier". Once the customer reaches that next tier, they might receive certain additional perks as a reward for their loyalty to the brand.
Let's take a look at a couple examples of tiered programs to get a better understanding of the some of the possibilities out there.
Sweetgreen Status Levels
Sweetgreen's program reflects their understanding of the decision faced by their customers each day.
What do I feel like eating today?
The process of answering that question is much less structured than most restaurant owners would hope, and Sweetgreen takes advantage of this. By focusing on a spend-based program, Sweetgreen keeps it simple and gives customers a low hanging fruit to get them involved in their tiers.
Sweetgreen decided to split up their program into three tiers. They define them as "Green Status," "Gold Status," and "Black Status." Each incremental level requires more money to be spent at Sweetgreen to achieve and offers unique perks to its members. Achieving "Green Status" for example, requires a customer to spend a total of $100 within a calendar year at Sweetgreen (less than 10 meals on average). Once a customer reaches "Green Status," they'll receive a free salad on their birthday and a percentage of their total spend will be donated to Sweetgreen's social impact partners.
The perks are simple and enticing to make "Green Status" a feat that a casual Sweetgreen goer might be excited about reaching. As you spend more with the chain and progress to the higher levels within the Sweet Green Program, you receive more enticing perks, making earning "Gold Status" or "Black Status" an achievement that is worthwhile to customers.
Latitudes Rewards from Norwegian Cruise Line
Latitudes Rewards is a more conventional, all-out tiered rewards program, and Norwegian Cruise Line designed it perfectly to encourage higher customer lifetime value. Norwegian built their program around the fact that cruises enjoy an extremely high return purchase rate especially for a high-cost luxury purchase.
Based on a study by the Wind Rose Network, Only 15% of the US population has ever taken a cruise before. Of that population, a whopping 50% of cruise goers are likely to go on a cruise yearly. This makes it crucial for cruise lines to lock in customers and keep them coming back year after year because new customers are difficult to come by in the industry.
Norwegian's Latitudes Rewards sets up 6 tiers that accumulate such great perks that their best cruisers are nearly royalty when they're on board. These perks and the esteem of reaching the higher tiers makes customers highly unlikely to try another cruise line. Here's how it works:
For each night onboard a Norwegian ship, customers earn one Latitude Point. They have the opportunity to earn two points per night by booking a suite onboard as well. As customers cruise for more nights with Norwegian, they are earn higher status with the cruise line.
An important decision Norwegian made was to immediately award "Bronze" status to anyone who has cruised for 1 or more night. This immediately establishes a sense of loyalty in first time customers who inherently might be more excited to enjoy their "Bronze" perks than to try out a brand new cruise line. The perks predictably get more and more exciting including access to exclusive events, discounts on excursions, and free gifts from Norwegian.
How Swell Does VIP Tiers
Now that we've described how a couple more famous tiered programs work, lets talk about Swell's take on VIP Tiers. As you can tell from this blog post so far, we believe tiered programs can and should take on all forms, shapes, and sizes. A smart tiered program should be customized to reward your customers for whatever actions are most important to your store and should segment customers based on what levels (or tiers) make sense for you.
For this reason, we've built our VIP Tiers feature to be as flexible as possible. VIP Tiers with Swell allow you to choose when your tiers set in, and the points benefit customers get for reaching subsequent tiers. We allow you to decide whether you'd like customers to reach new tiers based on either points earned or total spent depending on which option makes most sense for your business.
As we stated, the point of VIP tiers is to earn higher customer lifetime value, and a program that doesn't allow you this level of customization isn't doing justice to your store or the potential of tiered programs.
Why VIP Tiers?
We've covered the logistical benefits of VIP tiers for your store, but one of the biggest reasons VIP tiers have become so popular in today's market is the phenomenon of social inclusion.
We all have that friend who can't stand being out of the loop. They have to be in on every secret, know the latest updates on everyone's life, and need to be invited to every event (including those they have no intention of attending). While that description may seem a bit extreme upon first glance, it actually describes the majority of consumers out there. People really want to be included.
VIP tiers capitalize on this psychological phenomenon by creating a feeling of exclusivity within your store that evokes a sense of desire amongst your customers. Customers see higher level tiers and instinctively want to reach those levels to prove themselves and evaluate themselves against their peers. Its human nature.
Beyond the physical incentives customers get for reaching higher levels, they also satisfy this need to feel included, which often can be stronger than any incentive your store can reasonably offer.
VIP tiers are a great way to boost CLV for your store, because they make customers want to take extra steps to gain additional exclusivity.
How can I get VIP Tiers set up for my store?
Getting your store set up with VIP tiers is as easy as getting a few campaigns running in Swell. Within minutes you can have your tiered program launched and live on your website.
The VIP Tiers feature is reserved for merchants on our Gold plan and above. Once you make the decision to upgrade, you'll be able to fully engage in the setup process in the "VIP Tiers" section of your Swell account. Simply enable VIP Tiers, determine earning period within which customers can obtain each tier, and decide on a start date. Once those general parameters have been set, you can go ahead and begin creating the actual tiers your customers can earn and determining how they can earn them by clicking "Add a Tier."
Getting the right VIP tiers set up will help your store treat your best customers right, and encourage more of your customers to become your best customers. Once your customers are excited about spending more with your store, you'll see your average CLV skyrocket to new levels and make new heights attainable for your business.