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Should Your Retail Business Offer A Paid Loyalty Program?

tags Loyalty Programs CRM & Analytics

As more and more retailers offer paid loyalty programs, some are asking themselves if they should consider adding the model to their repertoire. This approach can completely change the traditional loyalty model of transactions-first for benefits later. In a paid loyalty program, members agree to pay a recurring membership fee upfront for great benefits they can use immediately and all the time.

Is paid loyalty right for your brand?

A lot of brands are asking that question because customers are more likely to buy your products and choose your brand over your competitors if they've become a member of a paid loyalty program. That's the conclusion of recent research showing customers who join these programs are 60% more likely to spend with their favorite brands. And, if they join free programs, they're only 30% as likely to do so. Paid loyalty can feel very attractive because it can be an incremental revenue source for the business if done right. It also can drive deeper brand affinity and improve spend across customers. One of the other benefit it gives brands is more meaningful data capture and the opportunity for more personalization. So, there’s a lot to consider in determining whether paid loyalty is right for your brand.

How are brands getting a better understanding of their higher-tier customers and what are the opportunities for personalization?

We often think about personalization in the way of first name or providing someone's point balance and how close they are to an award, but there’s more to that. Brands that do it well, provide solutions for everyday problems or challenges their customers face while providing benefits (paid or otherwise) that truly fit their customers' lifestyles.


Screenshot showing difference between spend of Amazon Prime members vs. non-Prime members.


For instance, Amazon Prime members spend more than non-members. They want a solution that provides convenience without having to leave their home. In return, Amazon is able to capture personal data and tailor their shopping recommendations and more ultimately increasing basket size and purchase frequency.

What are customers saying about paid loyalty and what do they want?

Customers expect to get at least a 150% return on their subscription fee and the benefits have to outweigh the cost of them joining the program. They really want access to the brand that other members of the program aren't getting. They're paying for that access, they want to be able to have that status with the brand, and they want to be recognized for it. The element of choice is also critical. Customers want to be able to decide the value they receive. What is valuable to one customer may be less valuable to another. For instance, do they prefer to stack up loyalty points to redeem for items or would they much rather enjoy an experience in store that is customized just for them? And it’s important to make sure that those customers feel like they're getting value in order to buy in. There is no revenue stream if customers don't like the concept of paying for the benefits they receive within a program.

How do you create the right benefits for your paid loyalty program?

There’s no magic number, and there are many types of benefits a brand can offer customers. It's important to provide tangible benefits with a mix of soft and experiential benefits. Customers should be able to easily see how they're benefiting from a program and feel like they're getting more out of it than just money spent.

How do you set up a paid loyalty program?

Every industry, company, and customer base is unique. But if you’re considering adding a paid loyalty program it’s important to keep in mind how any introduction of a benefit will affect your customer tiers. Focusing on customer data and analytics to gain a better understanding of your customer base will help you lay a solid foundation for your brand that makes you better positioned to implement a paid loyalty program.

What are the tools and resources you need to start a paid loyalty program?


1. Data

Data is essential to everything you do to assess whether a paid tier is right for you. This includes not just the quantitative data that you've collected on the customer and their spending behaviors, but also focus group data, anything qualitative that you've heard in social media polls, surveys, or other types of information.

2. Your marketing channels

Your existing marketing channels are also important if you're considering paid loyalty. They will be used in the launch and rollout of the program. It's important to have some ideas about how you might leverage those channels to your advantage.

3. A team of highly skilled analysts and strategists

Tap into those teams members who can help you with things like financial modeling and help you tell the story of what you're seeing from the customer today, and dissect the key elements and factors that will make a paid loyalty program either a success for your business or show why it doesn't make sense.

Find an experienced and knowledgeable partner.

A good partner can help you take the right steps. For example, Baesman marketers and technologists can work with your team from initial decisions about the structure of your program’s launch to its ongoing management.

Customer Loyalty Program eBook


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