THE CLARUS Blog

3 Megatrends Creating the Rise in Premium Loyalty

Premium loyalty programs aren’t new.

In fact, Amazon Prime is the best known premium loyalty program and it was released in 2005.

If that’s the case, why are we hearing so much about it recently?

And more important, why are consumers adopting premium loyalty programs so rapidly?

The answer is – Your consumers have changed.

All the best ideas combine the right place, right audience, and right timing.

If you created Uber 15 years before Uber, there might have been a market for the product, but the timing wasn’t right. Internet access and mobile phone technology weren’t nearly as advanced as today.

Premium loyalty is experiencing a similar moment in time.

The concept isn’t new, but there are many reasons why these programs are beginning to take off.

There are three megatrends that we’re tracking that are leading to the rise in premium loyalty.

  • Customers are empowered and have more choices
  • Customers want and expect things to be instant
  • Customers are comfortable with subscriptions

Each megatrend is important and builds on the other.

One important note: We call these megatrends because they are influencing every industry. These are not limited to retail, travel, banking, etc. These are not limited to loyalty programs.

Every industry is feeling these trends. If you start to look for them after reading this, you’ll begin seeing them everywhere.

 

Customers are Empowered and Have More Choices

Your customers have more power than they’ve ever had in the past.

We see this with price comparisons. We see this with showrooming and then ordering online.

On top of that, there is more competition than ever before.

DTC brands are popping up overnight. Google is taking traffic from competing sites. Amazon continues to be a behemoth.

In addition, it’s become harder to differentiate with products.

Many stores carry name brands where they compete on pricing. Many others create unique designs and then have them copied by competitors, since production speed has increased.

All of this leads to brands needing to find unique ways to connect with customers. It used to be enough to sell good products at a fair price, but that doesn’t work anymore.

Differentiation has become a non-negotiable.

This is where premium loyalty programs can help. Most loyalty programs still focus on points and don’t create benefits unique and powerful enough to pull people in.

Your premium loyalty program can be a differentiator for you.

 

Your Customers Want and Expect Things to be Instant

We live in an instant society.

It’s not that we want things quickly — it’s that we expect it.

This trend has progressed over decades, but the ubiquity of smartphones has caused this trend to skyrocket.

You don’t have to look far to see this trend, but it’s been largely ignored by the loyalty industry. Traditional loyalty rewards slowly, which no longer makes sense.

This worked in a world where consumers didn’t have as many choices, but that’s not the world we live in today.

Much of the industry has begun to realize points programs aren’t as effective as they were in the past. They’ve moved over to focusing on experiences.

This is a good shift.

The only issue is retailers are leaving benefits on the table that customers love. It’s not that customers don’t value discounts. They don’t value waiting for discounts.

Where premium loyalty helps here is providing instant discounts. Some of the best programs offer discounts on every purchase, free shipping or expedited shipping, and more.

While experiences are important, the transactional benefits that many companies are walking away from are the benefits your customers will encounter the most frequently.

And more importantly, these benefits are the ones where your customers will join your program for.

Ignoring these benefits isn’t the best strategy, but we do have to rethink these benefits keeping a focus on “instant” in mind.

 

Your Customers are Comfortable with Subscriptions

Subscriptions are not new. We’ve used subscriptions for everything from newspapers to milk. In fact, milk delivery dates to the 1800s.

The difference now is how many parts of our lives include subscriptions.

Media has always been at the forefront of subscriptions.

This includes cable and news but has shifted to include DTC offerings like Netflix and Hulu. We’ve also seen the entire music industry shift to a subscription model.

This trend goes far beyond media though. Many applications we once purchased and owned have moved to subscription.

You can purchase almost any disposable item via subscription, from razors, to contacts, to diapers, to pet food.

An interesting example of this is TSA Precheck.

Customers pay a fee to join this program and receive enhanced benefits. They experience these benefits instantly every time they go to the airport after joining the program.

They get to move through lines quicker and keep their shoes and belts on.

On the other hand, these are airports’ most frequent customers. It makes sense they would want to let them opt into a better experience.

TSA Precheck isn’t a premium loyalty program. But these same trends are the reason why frequent travelers love being a member of TSA pre-check.

Your customers are comfortable with subscriptions and understand that they are paying for better benefits. The key is benefits need to be better though.

This applies to premium loyalty as well.

You can’t just charge for the program and call it a premium loyalty program. All you have then is a traditional loyalty program that costs your consumers money.

Successful subscriptions are two-way commitments and premium loyalty programs need to be structured that way as well.

 

You Will See These Three Trends Everywhere

As I mentioned, these three trends are some of the reasons we’re seeing a rise in premium loyalty, but they are far from exclusive to the loyalty industry.

These trends are impacting every industry.

And that’s why loyalty marketers should keep these three trends in mind moving forward.

You won’t always see all three at once, but you will see all three — and they are changing peoples’ behavior.

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