I am a 12 year diamond (on 10th consecutive this year and will get lifetime in 20 more nights) I find that new properties just treat me as a regular guy. Once I stay a few times, they get to know me and I almost always get the upgrades. So, I believe it to be one more tier on the hierarchy - they treat their regular/return guests higher than Joe-Diamond staying for the first time.
I honestly do not care too much for the upgrades unless I am on vacation. The extra points and small extras mean more to me.