How to set up paid and tiered loyalty programs

While planning a points-based program, you can choose between either a basic model, where every member is eligible for the same rewards (like Pizza Hut’s system), or a multilevel membership program.

Let’s explore a few ways to organize a tiered loyalty program.

Set tier based on annual spending level

The most common type of tiered loyalty program determines a member’s status based on how much they spend per year.

Moosejaw is an online-only store that follows this model. As a customer’s spending amount increases, they reach certain thresholds that unlock more exclusive rewards.

Notice how Moosejaw carefully designed all aspects of their High Altitude loyalty program — from its name and the names of each tier, to the images on the graphic—to reflect the aesthetic of their brand.

Using your loyalty program to heighten the positive associations customers have with your brand and the lifestyle that accompanies it is an excellent way to kill two birds with one stone and make your program more than worth the investment.

Set a “freemium” model, with a free basic tier and paid upgrades

A less common way to set up a tiered loyalty program is by offering customers a way to enroll for free while also making premium upgrades available.

For example, AMC Stubs members can start earning points for free—but instead 0f earning their way from tier to tier, customers must pay directly for a more exclusive membership that involves more perks.

Set a paid-only loyalty programs

Barnes & Noble is among a smaller portion of businesses that only offer exclusive discounts and perks to customers who purchase an annual membership.

REI also charges a fee for entry into their rewards program. Unlike Barnes & Noble, though, customers pay a one-time fee of $20 in exchange for a lifetime membership with REI.

Businesses who go this route typically put more effort into playing up the value of their perks so as to reassure customers that the program will save money in the long run.

Some businesses (including AMC) communicate the value of their premium memberships by estimating how few purchases it will take to pay them off.

REI keeps it simple and sophisticated by letting an appealing photo do most of the talking — accompanied only by an effortlessly persuasive headline and a signup link.