Customer loyalty has become more complicated this year. Consumer surveys show that 55% have switched from a former preferred brand since the start of the pandemic, and 28% of those have said they plan to make the change permanent. If you thought a good product and solid customer service meant you could take customer loyalty for granted, this year has shown otherwise.
But one thing 2020 has taught all of us is the value of being adaptable and getting creative. And some brands have started to pursue a path to customer loyalty that feels counter-intuitive at first glance: charging for loyalty programs.
What is a Paid Loyalty Program?
A paid loyalty program is one offered to customers for a fee. It may offer perks similar to those of a free loyalty program—discounts, free shipping, early access to new products, and exclusive events, for example—but brands find some way to sweeten the deal enough to make the program worth paying for.
The most high-profile example of a brand that’s successfully done this is Amazon. Many people signed up for Amazon Prime for the fast, free shipping. But over the years the membership has grown to include a streaming service, access to free music, free Kindle books, and exclusive deals.
But your business isn’t Amazon, and you may be thinking there’s no way you could offer the vast array of products and services they do. You don’t have to be Amazon for a premium loyalty program to make sense. They’re not the only brand offering this type of program:
- CVS now offers Carepass, which for $5 a month gets members free shipping, exclusive discounts, a $10 monthly promo, and a 24/7 pharmacist helpline.
- REI has a co-op membership program, where a one-time fee of $20 earns members co-op dividends, discounts, exclusive products, and members-only events.
- Naked Wines has a membership program where by agreeing to monthly automatic payments of $40 (which are then applied toward any orders you make), members get deep discounts on wines (up to 60%), a gift bottle every month, and access to a member community.
You can see a lot of variety in how different premium loyalty programs look. Every brand has room to craft a program that makes sense for your business and target audience.
Why to Consider a Premium Loyalty Program
For customers to consider spending money on a loyalty program, you need to offer benefits that are worth more than what they pay in. You should expect putting together a lucrative paid loyalty program—and offering enough to make it worth sticking with—to require a big investment.
So what makes this kind of program worth it?
You’ll be an early adopter.
Loyalty programs are common. But paid loyalty programs that create a higher class of customer that gets premium benefits are still relatively new. You’ll likely be one of the first—if not the first—to offer one in your industry.
People are more likely to use something they’re paying for.
People value things they pay for more than those they get for free. When it comes to loyalty programs, that means they’re more likely to spend more with your brand to make the fee they paid worth it. McKinsey found that members of premium loyalty programs are 60% more likely to spend more with the brand after joining—a number twice as high as with free loyalty programs.
And premium loyalty programs really do increase loyalty. McKinsey also found customers are 59% more likely to choose a brand over their competitors once they’re in a paid loyalty program.
It gives you a chance to identify and reward your top customers.
Customers are good. But enthusiastic customers that are truly loyal to your brand have a whole extra kind of value for your business. Anyone that chooses to pay to participate in a loyalty program is precisely the kind of customer you want to be able to recognize and reward. A premium loyalty program provides opportunities to make loyal customers feel special, while also incentivizing them to take the kind of actions you most want them to.
You’ll gain data on what your top customers respond to.
By seeing the kind of people who sign up for a premium loyalty program, you can better understand who your target audience is and where your marketing focus should be. In addition, a loyalty program gives you more opportunities to track how your best customers behave. When customers in the program click a link in an email or use an exclusive discount code, you learn something about what products and offers appeal most to your top customers.
5 Tips for a Successful Premium Loyalty Program
If you decide to create a paid loyalty program for your business, you want to do it right.
1) Make sure the benefits are good enough.
If customers are going to pay, they want to get their money’s worth. The CVS CarePass program charges $5 a month, but members get $10 in-store promo rewards every month on top of other benefits. That may seem like it wouldn’t pay off, but it ensures the deal looks good enough to sign up for. And it means that once members do, they’re likely to keep all their prescriptions with CVS and buy more items in store than they did before.
If you’re not offering benefits that are worth more than the fee to join, customers won’t see any reason to do so.
2) Consider a beta rollout.
You can test out your initial ideas for a paid loyalty program by launching a beta version first. Put together a list of some of your most loyal and enthusiastic customers to invite to join at a fee lower than you intend to price the eventual program. Check in with them throughout the beta period to gain feedback and look for ways to improve your program before you launch it to a bigger audience.
This helps you get things right before the program has more members, and gives you a way to make your top customers feel special for gaining early access.
3) Promote it. A lot.
Your premium loyalty program will be both a product in its own right and a way to promote your other products. Getting members to sign up will be valuable to your brand, so give the program priority in your marketing and promotions.
4) Check in with members.
Once you have members, proactively ask for their feedback as you go. You want to make the program valuable enough that customers will not only sign up, but also stick with it for the long term. Your first members are valuable in helping you understand how best to do that. And learning what they’re thinking will help you make sure they’re happy, so you can take steps to improve retention.
5) Continually improve.
The initial offerings of your program should be good, but that doesn’t mean you can’t make them better as you go. Constantly look for ways to make your loyalty program more valuable to members. Think about better deals, exclusive events, or other perks you can provide.
Make It So Good People Pay For It
As counterintuitive as it seems at first glance, paid loyalty programs can be appealing to customers that want to be rewarded for their loyalty. Give them something to make the fee more than worthwhile, and many customers will reward you with more purchases and a greater enthusiasm for your brand.