A recent study by Clarus Commerce makes a strong case for premium or paid loyalty programs,
According to their 2021 Premium Loyalty Data Study:
79% of consumers say they don’t want to accumulate points anymore and retailers’ loyalty programs should provide immediate benefits to maintain their loyalty.
81% of traditional loyalty members say they would join a premium loyalty program at their favorite retailer, assuming that the benefits were valuable.
90% of consumers say they’re likely to choose a retailer where they’re a premium loyalty member over another one offering a lower price
What exactly is premium loyalty?
Premium or fee-based loyalty offers members immediate or ongoing benefits without having to wait to accumulate points. Even though they are paying a fee to join, customers perceive enough value from membership that they are encouraged to sign up. Further, having made that “investment” in a business by paying to join, they are compelled to continue to patronize that business.
Examples of some of the most popular premium loyalty programs are:
Amazon Prime is the mother of all premium loyalty programs in which customers pay an annual fee to receive unlimited free 2-day delivery.
Barnes and Noble offers 40 percent off pricing on hardcover bestsellers, 10 percent off almost all other purchases and free express shipping on all online purchases for $25 year.
Bed Bath and Beyond charges $29 a year, to receive 20 percent off each full purchase plus free shipping.
Based on the Clarus survey, it appears consumers are very open to premium loyalty and there is certainly proof of concept that this type of program is working for large brick and mortar and online retailers. But does it translate to your small business? The answering is a resounding yes IF the benefits, product and customer behaviors align.
Take a look at your product/service and how customers buy when evaluating whether or not a premium
program would work for you. What would appeal to them and add value? What would give you a fierce competitive edge? Would an automatic and ongoing discount encourage greater frequency of purchase or a broadening beyond typical purchase categories? Perhaps adding a premium service like free shipping, or wardrobe styling would work. What about VIP events and opportunities to make members feel like they were receiving special treatment?
Can you offer an immediate and equivalent upfront reward that would eliminate any risk of joining? For example, LuLuLemon is testing a premium program for $100 per year that awards members a free pair of leggings of approximately the same value upon joining. Absolutely no risk!
If you’re worried about the cost of these rewards, structure your fees so the upfront membership cost allows you to fund the initial benefits.
It’s important to remember this type of program won’t appeal to all customers. But it might be an opportunity to add a VIP tier to your existing loyalty program and appeal to your top customers, especially those who appreciate status and exclusivity. This elite tier would appreciate benefits like “early release,” educational opportunities or exclusive invitations.
Another advantage of a premium loyalty program is the opportunity to really drill down to the needs and wants of members and offer more personalized and relevant offers.
If you’re thinking giving your loyalty program an upgrade, consider the following:
Will you offer a one-time fee or a renewable annual membership?
What is the value proposition you’ll be offering that your customers will find irresistible?
When promoting, highlight the ideas of instant gratification and status. Start using your benefits today! Become one of our elite customers!
Promote regularly to members after they join not just to keep awareness high, but to remind them they are part of a special club. Adopt a tone of community and inclusion.
Change/add rewards regularly to help maintain member excitement and engagement.
Research your POS capabilities to administer the program.
Do you need to appoint a staff ambassador or create a special email address to service members?
If you think a premium program might work for your business, run a trial membership campaign to a portion of your customer base or customer survey to test response. It won’t cost you anything and will give you a reasonable basis for making a decision on whether or not to move forward.
Loyalty rewards are high on a consumer’s list of reasons for choosing which stores and restaurants to patronize. Even if you decide against a premium option, be sure to keep your loyalty program fresh, monitor metrics frequently and train your staff to promote consistently.