THE CLARUS Blog

How Brands Are Rethinking Retail With Premium Loyalty Programs in 2021

Earning customer loyalty has gotten harder for retailers.

Consider that nearly two-thirds of consumers say their loyalty is more difficult for retailers to maintain than ever before.

COVID-19 has changed consumer behavior significantly in the past 11 months and, maybe, forever.

The task of earning customer loyalty was challenging for retailers before the pandemic. Now, it’s become exponentially more difficult as consumers have seemingly infinite options.

Finding that brand differentiation through your loyalty program is the goal.

But how do you achieve that goal in this environment?

Your answer could very well be with a premium loyalty program.

 

Why Premium Loyalty?

Traditional and one-size-fits-all loyalty programs, while still popular to many, struggle to forge the type of differentiation that truly impacts customer behavior and creates brand advocates.

Customers have many needs and expectations, ranging from transactional utility to emotional connection. Beyond utility and transactional benefits like discounts, there are other areas of the experience brands can improve upon—making shopping easier, offering enhanced shipping, member-only checkout, etc.

If your goal is to acquire and retain customers, there must be apparent value in your program.

That’s where a premium loyalty program can substantially increase engagement and loyalty levels for brands.

Instead of requiring members to spend money over time to receive benefits somewhere down the road, a premium loyalty program allows members to pay a recurring fee for benefits they can use right away.

As a result, a premium loyalty model creates an “instant culture” whereby members can engage with the program 24 hours a day, 365 days a year.

With a premium loyalty program, you enjoy elevated customer engagement, higher order frequency, and higher AOV.

On top of that, you collect valuable data about your best customers that can be leveraged for future messaging.

Premium loyalty allows a retailer to transition from being “just another store” to become an invaluable part of your best customers’ everyday lives.

According to the Clarus Commerce 2021 Loyalty Industry Data Study, 95% of respondents with traditional loyalty programs said they have discussed launching a premium loyalty program in 2021.

It’s a striking statistic that indicates premium loyalty is on the minds of many retailers this year.

 

Some Examples of Premium Loyalty Programs

Amazon paved the way for premium loyalty when it launched its highly successful Prime program in 2005.

Given its laser focus on its customers, an abundance of engaging benefits, Amazon continues to show retailers through its Prime program what loyalty success looks like.

Fast forward to 2021 and Prime boasts more than 150 million global members. This attractive and enviable business model has prompted many retailers to rethink their respective approaches toward customer loyalty.

Amazon officials have kept the program fresh and attractive by adding benefits over the years. Included are unlimited video streaming, limited music streaming, unlimited photo storage, one free e-book per month, free audio books, and free games.

What’s more, Amazon has been able to unlock true loyalty with a balance of rational, emotional, and utility-driving connections that, combined, deliver greater value and stronger brand advocacy.

Amazon’s success with Prime may have prompted other retailers to emulate the premium loyalty model.

Read more about how Amazon Paved the Way for Premium Loyalty Programs.

We saw Walmart launch its Walmart+ premium loyalty program last year.

The annual membership fee for Walmart+ is $98 ($21 less than Prime). Amazon has an advantage in the number of products available for fast, free shipping, but Walmart+ has advantages of its own.

Walmart+ includes same-day delivery of groceries, fuel discounts at 2000 locations, and access to Scan & Go (which allows customers contactless checkouts with their phones so they can skip lines).

Premium loyalty’s No. 1 focus is on the customer.

As a result, your best customers become even more loyal and valuable.

One of the main things that Restoration Hardware officials did before launching its RH Grey Card premium loyalty program five years ago was eliminated promotions.

Restoration Hardware CEO Gary Friedman eliminated the company’s traditional discounting and promotions entirely and introduced its own premium loyalty program.

This simplified the value proposition for RH Grey Card members who, for a $100 annual fee, receive 25% off all full-price purchases.

At Overstock, its Club O premium loyalty program helped address its customers’ biggest pain points, such as paying for shipping or returns.

When GameStop launched its PowerUp Rewards program in 2010, the company’s main marketing goal was to start collecting customer data that officials could use to create personal and relevant communications.

Brands like Lululemon, Wayfair, CVS, Barnes & Noble, Bed Bath & Beyond, Costco, Bob’s Stores, and ShopHQ also offer premium loyalty programs.

 

The Rise of Premium Loyalty

According to the McKinsey Paid Loyalty 2020 Survey, premium, or paid, loyalty programs are definitely on the rise.

Premium loyalty members can be worth several times more than non-paying members. In fact, the survey says premium members are 60% more likely to spend more on your brand, while free loyalty programs only increase that likelihood by 30%.

Our 2020 Premium Loyalty Data Study shows nearly 90% of consumers would choose a retailer whose premium loyalty program they belong to over a competitor that is offering a lower price.

Also, 70% of consumers not in a premium program would join one if their favorite retailer offered one and the benefits were valuable.

 

Can Premium Loyalty Help Elevate Your Customer Engagement?

Premium loyalty programs are important in today’s marketplace because consumers have so many different shopping options. They provide immediate value to customers, which helps retain them as members.

Premium loyalty programs are more profitable for brands and more engaging and valuable for customers.

You need to strengthen consumer relationships through trust and reciprocity.

Because of limitless consumer options, you must create a value exchange with your customers that occurs at every touchpoint. If that exists, you will gain brand loyalty and brand advocates.

Are you thinking about launching a premium loyalty program in 2021?

Are You Ready to Go Premium?

If you want to become a 24/7 presence in your best customers' lives, it's time to get started.