Latest / The Retention Marketing Podcast with Fexingo: Email, SMS, and Loyalty for Repeat Customers / How a Beauty Brand Uses Tiered Loyalty to Triple Repeat Rate
Transcript
- Lucas: So there's this beauty brand called Glow Theory — about sixty million in annual revenue, mostly DTC, skincare and makeup. They had a perfectly fine loyalty program: earn one point per dollar, redeem for discounts. Classic flat-points setup. Problem was, only twelve percent of their customers ever engaged with it. Luna: Twelve percent? That's almost nothing. What were they doing wrong? Lucas: Right, it's basically a ghost program. The issue was that the points felt low-value — you needed to spend two hundred dollars to get a five-dollar discount. No urgency, no excitement. So they scrapped it entirely and built a tiered program. And within twelve months, their repeat purchase rate went from eighteen percent to fifty-four percent. Luna: That's a triple. Three times the repeat rate. What were the tiers? Lucas: They went with four tiers: Standard, Silver, Gold, and Platinum. Entry threshold for Silver is three hundred dollars spent annually, Gold is seven hundred fifty, Platinum is fifteen hundred. But the key wasn't the thresholds — it was the surprise upgrades. If a customer hit, say, two hundred ninety dollars, Glow Theory would auto-upgrade them to Silver and send an SMS saying 'Congratulations, you've been upgraded to Silver status.' No points grind, just a moment of delight. Luna: So the SMS is part of the experience, not just a receipt. That's smart. What do the tiers actually get you? Lucas: Silver gets free shipping and a birthday gift. Gold gets free shipping, a birthday gift, plus early access to new product launches and a free full-size product every quarter. Platinum gets all that plus a dedicated customer service line and an annual in-person event invite. But the real driver was the psychological effect of moving up a tier. Once customers hit Gold, their average order value jumped forty percent compared to Silver. Luna: Status works. But I wonder — if you're a new customer looking at three hundred dollars to hit Silver, doesn't that feel daunting? How do you get them started? Lucas: Great question. They introduced something called the 'Welcome Accelerator.' For the first thirty days after a customer's first purchase, every dollar spent earns double points toward tier qualification. So if someone spends fifty dollars on their first order, that counts as one hundred toward Silver. It lowers the perceived barrier and hooks them early. They saw a twenty-five percent increase in second purchase rate among new customers who got that accelerator email. Luna: That's clever — it's like a loyalty onboarding funnel. And I assume the SMS notifications are critical for the surprise upgrades. What's the text look like? Lucas: Short and celebratory. Something like 'Hey Sarah, you've been upgraded to Gold status at Glow Theory. Enjoy free shipping, early access, and a free product each quarter. Your first quarterly gift ships tomorrow.' They also include a link to a 'status page' that shows the benefits. The open rate on those upgrade SMS messages was over eighty percent. Luna: Eighty percent open rate? That's absurdly high. So the upgrade itself is the reward, not just the perks. Lucas: Exactly. The upgrade triggers a dopamine hit. And Glow Theory found that customers who received an upgrade SMS were sixty percent more likely to make a purchase within the next week compared to customers who just earned enough points organically. The surprise element is crucial. They deliberately don't tell customers the exact thresholds — it feels like a gift, not a transaction. Luna: Let's talk about the cost side. Free shipping for Silver and above — that eats into margins. Did they bake that into the model? Lucas: They did. They calculated that the average Silver customer spends about four hundred fifty dollars a year. The free shipping cost them roughly twelve dollars per customer annually. But the increased order frequency and basket size more than offset it. Plus, they reduced churn by eighteen percent in the first year. The program's net lift in lifetime value was about thirty percent. So the free shipping is a feature, not a loss leader. Luna: That's a solid ROI. But I'm curious — did they see any negative behavior? Like customers gaming the system or feeling pressured to spend? Lucas: They did see a small segment — about five percent of customers — who would make a large purchase right before year-end to hit the next tier, then return a bunch of items after the new year reset. They had to adjust their returns policy: returns count against tier status retroactively. If you return items that pushed you over a threshold, you get downgraded. That stopped most of the abuse. Luna: Makes sense. So the program isn't just about spending — it's about sustained engagement. That's a good lesson for any brand thinking about tiers. Lucas: And it's worth noting that the flat-points program they had before was actually costing them money — they were giving away discounts to people who would have bought anyway. The tiered program shifted rewards toward the behaviors they wanted: higher frequency, higher basket size, and long-term loyalty. The twelve percent engagement rate became fifty-four percent repeat rate. That's the kind of before and after that gets a CFO's attention. Luna: If these marketing conversations have sparked something you've actually used at your own brand or business, that's exactly why we do this show. The way we keep these episodes ad-free and focused on what works is through listener support — buy me a coffee dot com slash fexingo. It's a simple way to say this is valuable, and it keeps us independent. Lucas: Yeah, and honestly, we love digging into case studies like this one. If you've gotten even one idea from today's episode — maybe the surprise upgrade SMS or the Welcome Accelerator — that's worth more than a five-dollar coffee. So thanks to anyone who chips in. Luna: Alright, back to Glow Theory. One thing I want to dig into — how did they roll this out to existing customers without upsetting anyone? Lucas: Smartly. They grandfathered all existing loyalty points into a one-time 'status credit' that counted toward tier qualification. So if someone had earned two hundred points, that counted as two hundred dollars toward Silver. They also gave every existing customer a free one-month trial of Silver status regardless of spending. That way, people got to experience the benefits before they had to earn them. The opt-out rate was less than one percent. Luna: Trial run of status — that's a great onboarding tactic. And it probably created urgency to maintain that status after the trial ended. Lucas: Exactly. During the trial month, Gold members saw a thirty percent increase in purchase frequency. They wanted to keep the benefits. And the SMS reminders about 'your Silver trial ends in seven days' drove a lot of that behavior. They used a countdown-style text: 'Your Silver status expires in 7 days. Keep it by spending just $50 more this year.' That converted at a twenty-two percent rate. Luna: So SMS is the delivery mechanism, but the program itself has to be compelling. That's the takeaway: you can't just slap a tier on a bad rewards program. Lucas: Right. The structure matters. Glow Theory also introduced 'bonus point days' for Platinum members — double points on the first of every month. That gave high-spenders a reason to time their purchases. And they used email to preview those days, but SMS to confirm activation. It felt exclusive. Luna: I want to ask about the measurement side. How are they tracking whether a customer is 'engaged' versus just transacting? Lucas: They define an engaged customer as someone who interacts with at least two of three channels per quarter: email opens, SMS clicks, or site visits. And they found that tiered members are three times more likely to be engaged than non-tiered customers. The status page I mentioned earlier — that's a key engagement metric. They track how many times customers visit their status page per month. Platinum customers check it about eight times a month. Luna: Eight times? That's almost twice a week. They're checking their status like a credit score. That's the psychology of tiers — you want to see your progress. Lucas: And that creates stickiness. Glow Theory now has a loyalty program that isn't just a cost center — it's a growth driver. They attribute about twenty-two percent of total revenue to the tiered program, up from four percent under the old points system. And that's with the same customer base, just a better mechanism. Luna: One last thing — do you think this works for every brand? Or are there categories where tiers don't fit? Lucas: I think any brand with a repeat-purchase model can adapt this, but it works best when the product has some emotional connection. Beauty, coffee, pet food — categories where people feel a sense of identity. For commoditized products like paper towels, tiers might feel forced. But even then, you could use a 'spend-based' tier with experiential rewards like early access to sales. The key is making the status feel earned, not just bought. Luna: Great point. And Glow Theory's example shows that the surprise element — not grinding for points — is what drives the emotional engagement. That's a powerful insight for any marketer. Lucas: It really is. And the data backs it up: a fifty-four percent repeat rate from eighteen percent is the kind of outcome that makes you rethink everything you thought you knew about loyalty programs. Sometimes the best retention strategy is to make customers feel like they're winning, not just accumulating.