THE CLARUS Blog

How Brands Are Rethinking Retail With Premium Loyalty Programs

Customer loyalty is changing.

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

Customers have needs ranging from transactional utility to emotional connection. There are many ways to deliver utility and transactional benefits beyond discounts, which include focusing on the experience—making shopping easier, offering enhanced shipping, member-only checkout, etc.

Brands understand that they need to strengthen consumer relationships through trust and reciprocity. Creating a value exchange that occurs at every touch point between you and your customers is vitally important to gain brand loyalty.

To achieve this goal of true differentiation, many brands have implemented premium loyalty programs.

The Premium Loyalty Option

A key challenge retailers face is acquiring and retaining customers. 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.

As opposed to a traditional loyalty model where a consumer can lose interest quickly due to the transaction-based/rewards later paradigm, a premium loyalty program embodies instant gratification, which is more important now than ever before.

What’s more, the retailer enjoys deeper customer engagement, higher order frequency, and higher AOV, in addition to collecting valuable data about their best customers that allows it to tailor 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.

Some Common Traits Among Premium Loyalty Programs

Above all, the most common trait among brands that offer premium loyalty programs is truly listening to their customers.

By doing this, brands better understand their customers’ pain points, along with their needs. Often, some loyalty programs don’t offer the benefits/perks that customers really desire.

Premium loyalty programs, however, offer the benefits that customers want. As a result, a brand’s 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 two years ago was eliminate promotions.

To simplify the loyalty value exchange, Restoration Hardware CEO Gary Friedman unburdened the company of its traditional discounting and promotions entirely and introduced its own paid premium loyalty program.

Friedman believes that people’s lives are filled with complexity “and we long to break through the clutter to find simplicity. We want to shop for what we want, when we want, and receive the greatest value. So rather than navigating countless promotions, we’re changing things … because time is the ultimate luxury. They want what they want, when they want it, without being inundated by promotional emails and discount offers.”

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

With 95% of its core RH business driven by members, Friedman declared the company’s move from a promotional to membership model a success.

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.

Amazon Prime

Viewed as the gold standard among all premium loyalty programs, Amazon Prime recently eclipsed 100 million global members.

Given its laser focus on its customers, an abundance of engaging benefits, and its new foray into the grocery industry via Whole Foods, Amazon continues to show the retail world through its Prime program what loyalty success looks like.

This enduring and attractive business model has forced 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.

Perhaps, the success attached to Amazon Prime will prompt other retailers to emulate the premium loyalty model.

We recently saw Boxed launch its Boxed Up premium loyalty program. Officials at Boxed said they considered Amazon Prime when designing their premium loyalty program.

 

Brands that have opted for premium loyalty programs

Retailers that think differently and challenge the traditional loyalty model are earning increased levels of brand advocacy from their best customers.

Here are brief snapshots of some retailers that have rethought their respective loyalty strategies and implemented a premium loyalty program:

Amazon:

Name of program: Amazon Prime

Launched: 2005

Value Proposition: Prime members are attracted to the program for its convenience (free two-day shipping), simplicity, and slew of benefits. Annual membership will increase from $99 to $119 on June 16, 2018.

The lengthy list of Amazon Prime benefits can be found here.

Interesting note: In March 2014, Amazon Prime had about 28 million members. That figure has soared to 100 million global members in the past four years.

 

Boxed:

Name of program: Boxed Up

Launched: April 2018

Value Proposition: For an annual $49 fee, customers receive:

Free priority shipping on orders over $20

2 percent cash rewards

Exclusive deals & gifts

VIP customer service

Special deals at  Boxed Hotels

Other special deals on products from Pepsi, Keurig, and more

Interesting note: Helen Pan, Director of Loyalty and Customer Experience at Boxed, told Clarus Commerce: “In our view, premium loyalty programs allow for continual testing, optimization, and personalization. With the way that we set up Boxed Up, we have given ourselves tremendous flexibility to offer the perks our customers truly value and to evolve over time as our customers evolve.”

 

Lids:

Name of program: Access Pass Premium

Launched: March 2017

Value Proposition: Lids Access Pass Premium is a $5 fee for a one-year membership. Customers can sign up, in-store, and online.

Benefits Include:

20% off headwear and embroidery

10% off apparel and novelties

Exclusive access to high profile sporting and entertainment experiences

Rewards points earned for every dollar spent. For every 1,000 points earned, a $10 reward is provided that can be used online or in stores.

Interesting note: Jeff Pearson, Senior Vice President, E-commerce & Marketing at Lids Sports Group, told Clarus Commerce: “Premium loyalty programs make it easy for customers. I also believe once a customer selects the premium option, they are more engaged, but also have higher expectations. It’s then our responsibility to meet and exceed these expectations on a regular basis.”

 

GNC:

Name of program: myGNC Pro Access

Launched: March 2016

Value Proposition: For an annual $39.99 fee, myGNC Pro Access members receive additional perks such as free shipping, customized PRO boxes (with new products, samples and coupons based on the member’s lifestyle and goals), quarterly sale days, and much more.

Interesting note: In the first four months of the program, PRO members had purchased twice as often and spent significantly more than a regular non-PRO customer; and

Total enrollment had reached 325,000 members since its launch four months prior; and

PRO member had visited the physical store locations two times more than non-members

 

AMC Theatres:

Name of program: AMC Stubs Premiere

Launched: The program received a refresh in 2016, which included added benefits.

Value Proposition: For a $15 annual membership fee, Premiere members enjoy express service with specially marked shorter lines at the box office and concession stand, free size upgrades on popcorn and soda, a free refill on large popcorn, up to $5 off movie tickets on Tuesdays, a birthday gift (free large popcorn and soda), no online ticket fees, and 100 reward points for every $1 spent.

Interesting note: In July of 2016, AMC announced a relaunch of AMC Stubs to increase the appeal of its paid, premier tier and to add a free tier. At that time, the AMC Stubs membership hovered around 2.5 million households, a membership level that had not changed in approximately three years.

The AMC Stubs loyalty program eclipsed 10 million members in September 2017−a goal AMC originally did not expect to reach before 2025.

 

Barnes & Noble:

Name of program: Barnes & Noble Membership Program

Launched: 2000

Value Proposition: The Barnes & Noble Member Program entitles members to the following benefits:

40% off the list price of the current hardcover Barnes & Noble Store Bestsellers. Applies to the 10 fiction hardcover bestsellers and 10 non-fiction hardcover bestsellers based on sales at Barnes & Noble Stores and designated by Barnes & Noble from time to time.

10% off the marked Barnes & Noble sale price of other eligible items. Does not apply to hardcover Barnes & Noble Store Bestsellers.

Free Express Shipping. Applies to orders made at BN.com and on Ship-to-Home orders placed at Barnes & Noble Stores, shipped within the continental U.S. only.

Receive over $60 in Bonus Coupons by email when you join.

Interesting note: In the past eight months, Barnes & Noble has tested new offers tied to the program and customers have responded well, as more than 500,000 new members joined, raising the total membership north of 6.5 million.

 

Overstock:

Name of program: Club O

Launched: 2004

Value Proposition: For $19.95 per year, customers enrolled in the program receive free shipping on every order, at least 5% in reward dollars for all purchases, and access to extra rewards on select products in the Extra Rewards Store. Members also receive 5% rewards from all participating restaurants, free returns on select products, discounted stock trading at $1.99 through Overstock’s FinanceHub™, and they can use their rewards for their membership fee as well as stack them with other promotional offers on Overstock.com.

Interesting note: Overstock.com offers Club O Memberships free of charge to teachers and students; active, retried, or reserve members of the United States military; members of first responder groups such as police, firefighters, and emergency medical technicians; and Club O Rewards Mastercard Cardholders.

See why the Club O Premium Loyalty Program Continues to Grow.

 

GameStop:

Name of program: PowerUp Rewards

Launched: 2010

Value Proposition: The program offers two premium options: Elite Pro for $29.99 per year and Pro for $14.99 per year.

Elite Pro member benefits include: 30 points for every dollar spent; exclusive monthly offers; 20% off pre-owned games and accessories; 20% extra trade credit on games, accessories, and technology; 12 issues of Game Informer magazine; collectibles welcome offer; and free two-day shipping (with minimum purchase of $35).

Pro member benefits include: 20 points for every dollar spent; exclusive monthly offers; 10% off pre-owned games and accessories; 10% extra trade credit on games, accessories, and technology; 12 issues of Game Informer magazine; collectibles welcome offer; and free two-day shipping (with minimum purchase of $35).

Interesting note: The PowerUp Rewards program has more than 50 million global members.

 

Restoration Hardware:

Name of program: RH Grey Card

Launched: April 2016

Value Proposition: For $100 annually, members receive 25% off all full-price purchases immediately after signing up.  They also receive:

5% savings on RH, RH Modern, RH Baby & Child, RH TEEN, and RH Contemporary Art

10% savings on all sale items

Complimentary interior design services

Concierge service to manage your orders

Early access to clearance events

Interesting note: Roughly 95% of the core RH business is driven by members, a statistic that led CEO Gary Friedman to declare the company’s move from a promotional to membership model a success.

The Allure of Premium Loyalty

As you can see, there are many brands investing in premium loyalty and reaping the rewards.

Premium loyalty programs are important in today’s marketplace because consumers have so many different shopping options.

Premium loyalty programs help increase customer loyalty and retention by providing immediate value to customers.

Premium loyalty programs help brands find that crucial alignment with their customers’ needs and desires, which paves the way for sustainable engagement and brand loyalty.

Premium loyalty programs allow brands to meet and exceed customer expectations, gain keen behavioral insights, and forge lasting two-way relationships.

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

As Pearson from Lids states: “Premium loyalty programs make it easy for customers.”

 

 

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.