Enhancing Reward Relevance and Value for More Effective Tiered Loyalty Programs

Toju Ometoruwa · November 1, 2023
Enhancing Reward Relevance and Value for More Effective Tiered Loyalty Programs


  • Enhancing Reward Relevance: Addressing reward relevance is vital for tiered loyalty programs' success. By forming partnerships with complementary non-competitive products and services, brands can expand the reward spectrum, making the program more appealing to a diverse customer base.
  • Balancing Reward Value and Costs with NFTs: NFTs offer a novel way to navigate the challenge of providing valuable rewards while managing costs. They can have intrinsic value as unique digital assets or extrinsic value when redeemable for tangible rewards, offering a realm of possibilities for creating high-value rewards without incurring high costs.
  • Improved Engagement through Web3 Technologies: By leveraging Web3 technologies like NFTs, brands can refine the structure and offerings of their tiered loyalty programs, which not only controls costs but also enhances customer engagement, leading to more robust and effective loyalty programs.

In an era where customer retention is paramount for business sustainability, Tiered Loyalty Programs have emerged as an effective tool in cultivating customer loyalty and engagement. These programs are structured in a way that rewards customers based on their level of engagement or spending with a brand. 

In this article, we delve into the mechanics and benefits of tiered loyalty programs, emphasizing the challenges in ensuring reward relevance and value. Using Web3 technologies like NFTs, we demonstrate how brands can refine loyalty programs to align with customer preferences, control costs, and enhance engagement, paving a way towards better loyalty programs for both brands and customers.

#What is a Tiered Loyalty Program?

A Tiered Loyalty Program is a customer retention strategy where businesses provide incentives to customers with every purchase to encourage higher spending. The rewards, which could range from discounts to exclusive offers, improve as customers ascend the tiers through more spending or engagement with the brand. 

According to the Global Customer Loyalty Report 2022, tiered program owners witnessed a 1.8 times higher return on investment compared to their non-tiered counterparts. The allure of ascending to a higher tier, endowed with more enticing rewards, keeps customers engaged and incentivizes repeat business.

#How Tier-Based Loyalty Programs Work

Tier-based Loyalty Programs work by segmenting customers into different tiers based on their spending or engagement level. As customers reach higher tiers, they unlock better rewards. The tiered structure develops an emotional bond with customers, improving long-term engagement and motivating them to reach higher tiers to enjoy better rewards. It's a win-win situation as customers feel valued and recognized for their loyalty, while businesses enjoy increased customer retention and spending.

#Boosting Reward Relevance Through Variety

A pressing challenge in crafting a successful tiered loyalty program is ensuring reward relevance. With diverse customer segments, each having distinct preferences, it becomes an uphill task for brands to design rewards that resonate with everyone. Traditional loyalty programs often view customers through the prism of their interaction with the brand, overlooking the fact that a typical consumer is enrolled in about 18 loyalty programs but actively engages with less than half of them.

This narrow view can lead to a misalignment between the rewards offered and the actual preferences of the customers, undermining the effectiveness of the program. Lack of reward relevance plays a critical role in over half of consumers abandoning loyalty programs.

A pragmatic approach to amplify Reward Relevance is by forging partnerships with a network of complementary non-competitive products and services. This approach widens the reward spectrum, making the program more appealing to a diverse customer base. 

For instance, Delta Air Lines, grappling with escalating liabilities from unredeemed points in its SkyMiles Program, could mitigate this by creating a marketplace where local Hotels, Museums and Concert venues can tokenize their services as Non-Fungible Tokens (NFTs), enabling SkyMiles members to seamlessly exchange points for various perks from different vendors on a single platform, thereby enhancing reward relevance and customer satisfaction.

#Balancing Reward Value and Costs with NFTs

Reward Value, the other side of the loyalty program coin, often puts brands in a dilemma. Striking a balance between offering valuable rewards and managing the costs thereof is crucial. An innovative way to navigate this is by leveraging NFTs, which are digital assets that can instill both intrinsic and extrinsic value in rewards:

  • Intrinsic Value: These NFTs are valuable for their own sake. For instance, a beautifully designed digital artwork or a limited edition virtual collectible. Their value is often determined by the market, based on demand and rarity. The ability for brands to create marketplaces for customers to trade brand NFT rewards allows customers to assign economic value to these items at no cost to the brand.

  • Extrinsic Value: These NFTs act as vouchers or tickets, redeemable for tangible rewards. They could offer VIP access to events, physical merchandise, or unique experiences that are exclusive to the NFT holder.

NFTs usher in a realm of possibilities for creating high-value rewards without exorbitant costs. For example, brands can launch NFT collections, where higher-tier members can acquire more NFTs of extrinsic value with exclusive privileges, thereby incentivizing greater participation. 


Ultimately, the journey towards crafting a robust Tiered Loyalty Program that resonates with a diverse customer base entails a meticulous examination of Reward Relevance and Value. By embracing partnerships with a broader ecosystem of vendors and leveraging the ingenuity of Web3 technologies, brands can construct a more appealing, valuable, and engaging loyalty program that stands the test of time.

Let's make some magic!