Three tiers, three thresholds: the structure that works for 90% of businesses

Yesterday you measured your repeat rate. Today we design the tier structure that's going to move it. We will use a three-tier system because it's the only structure that:

1. Gives customers a reward fast enough to hook them 2. Creates aspirational progression for medium customers 3. Recognizes VIPs without bankrupting you 4. Is simple enough that customers and staff actually understand it

The three tiers:

Tier 1: Welcome (every customer who enrolls) - Reward: small, immediate, low-cost - Threshold: enrollment only - Goal: hook them into the program in their first visit

Tier 2: Regular (3-5 visits or $50-$150 spend in 90 days) - Reward: medium, status-signaling - Threshold: realistic for a typical regular - Goal: move customers from "visited a few times" to "this is my place"

Tier 3: VIP (10+ visits or $300+ spend in 90 days, or annual amount) - Reward: large, experience-based, exclusivity-based - Threshold: only your real top customers reach this - Goal: deepen the relationship with people already worth 5-10x your average customer

Setting your thresholds. Here is the simple way:

Step 1: Look at your top 10% of customers from the last 90 days. What did the lowest-spending customer in that group spend? That's your Tier 3 threshold.

Step 2: Look at the top 30% of customers. What did the lowest-spending customer in that group spend? That's your Tier 2 threshold.

Step 3: Enrollment is automatic for tier 1 — anyone in the program.

Example for a coffee shop: - Average ticket: $6.50 - Top 10% spend $300+ in 90 days - Top 30% spend $100+ in 90 days - Tier 1 threshold: enrollment - Tier 2 threshold: $100 in 90 days (~15 visits) - Tier 3 threshold: $300 in 90 days (~45 visits, i.e., daily regulars)

Example for a salon: - Average ticket: $85 - Top 10% spend $850+ in 90 days - Top 30% spend $300+ in 90 days - Tier 1: enrollment - Tier 2: $300 in 90 days (~4 visits) - Tier 3: $850 in 90 days (~10 visits)

Why visits vs. spend. Use whichever metric your customer naturally tracks. Coffee shop customers think in visits. Salon customers think in dollars. Match the metric to how the customer thinks.

The 60-20-5 distribution check. After a well-designed program runs for 90 days, this is what you should see: - 60% of enrolled customers reach Tier 1 (basically everyone — it's free) - 20% reach Tier 2 (your regulars) - 5% reach Tier 3 (your VIPs)

If your numbers are wildly different — say 50% reach Tier 3 — your thresholds are too low and you're giving away margin. If under 5% reach Tier 2, your thresholds are too high and customers will quit before reaching the reward.

The naming layer. Don't name them "Tier 1, Tier 2, Tier 3." That's accountant talk. Use names that match your brand: - Generic: Member / Regular / VIP - Coffee shop: Sip / Brew / Roast - Restaurant: Friend / Local / Insider - Salon: Member / Stylist's Pick / Studio Circle - Yoga: Practitioner / Devotee / Sangha - Boutique: Shopper / Stylist / Front Row

Names matter because customers feel them. "VIP" is generic. "Front Row" sounds exclusive in a way that makes a person want to be it. Spend 10 minutes today picking three names that fit your brand voice.

The status visibility rule. Tier status only matters if it's visible. Customers should know what tier they're in every time they visit. Three ways to surface it:

1. In your POS — the customer's tier shows up when their card swipes or email is entered 2. On their receipt — printed in the footer ("Tier 2 / Regular") 3. In email — every transactional email mentions their tier

Without visibility, the program is invisible to the customer and they won't behave differently.

The grace period. Set a 30-day downgrade grace period. If a Tier 3 customer drops below the threshold for one quarter, don't downgrade them immediately — give them 30 days to come back. This dramatically reduces the negative "you took away my status" emotion and gives you a natural reason to send a "we miss you" email.

Tomorrow: rewards. The biggest mistake owners make is offering rewards customers don't actually want. We'll cover what customers say they want vs. what they actually use, and why "free product" is rarely the best reward.