Red dots, why?

While a red dot in this game is usually a good thing - pressing it might give you your rewards etc. I would like to state that red dots that appear on your body are normally a worrying sign. Don’t press those.
However I can’t figure out what the red dots indicate when you see them in this context:

Pretty sure those pips mean that those are items in the loot table for that particular level that one or more of your heroes need for a promotion item.

So for example, you need 3 of those grenade belts. You chose this level because it said it was a farmable for them. It just so happens that the chest piece and boots are also potential loot items from this level that some other hero you have (not necessarily the same one that you are farming the grenade belt for) needs and you don’t have enough of them to craft whatever item that is.

Alternatively, the rifle and helmet pieces don’t have a red dot which indicates that either none of your heroes needs those items to craft a promotion piece, or you have enough of them in inventory to cover all potential crafting needs.

It’s actually pretty handy. If you have a choice between three levels where you can get those grenade belts and two of them have a bunch of other items you don’t need but this one has a couple that you need for other heroes, you may as well play this one. Even if you don’t get the grenade belt you still could potentially advance another hero.

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That is correct. Fourfingers got it 100% right.

If the gear is needed by at least 1 hero it gains a red pip.

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