For businesses that are considering starting a loyalty program, or even for businesses that already have a free loyalty program, the question, “Is premium loyalty the right choice for me?” always comes up.
It all comes down to who it’s for.
If you’re trying to attract as many members as possible, a free program could be the right choice. After all, there is little barrier to entry for consumers to sign up.
However, if you’re trying to get your best customers to engage more with your brand, a one-size-fits-all free loyalty program may not do the job very well.
That’s where paid premium loyalty programs come in.
By charging a membership fee, you’ll get the most loyal customers and be able to offer them the best, most personalized experiences of your brand.
Successful brands create engaging loyalty programs that are seamlessly aligned with the brand’s character and message. Catering to your most valuable and loyal customers is the best way to earn sustainable brand advocacy.
The Big Differences Between Free and Premium Loyalty
This seems obvious.
In a premium loyalty program, members pay a fee. In free loyalty programs, there is no cost to join. It goes much deeper than that though. It’s about the end goal.
Traditional free loyalty programs focus on acquisition. They’re good at getting a lot of signups. It’s quantity over quality.
People sign up because they’re free, but then not much else happens with most programs.
On the other hand, premium loyalty programs focus on retention. They’re very good at getting members to stay once they sign up because of the great benefits. That’s why Prime retains so many members year after year.
It’s because members know that they are getting the best possible experience every time they use the program, so engagement increases.
Free Loyalty Versus Paid Loyalty: The Full Breakdown
Here’s how free and premium loyalty programs compare.
Traditional Free Loyalty
- Transactions First, Benefits Later
- Members Must Accumulate Points to Earn Benefits
- Good at Attracting a Large, Random Group of Consumers
- Customers Become Trained to Wait for Discounts to Shop
- Example – Spend $50 to Get $5 Off Merchandise
- Benefits up Front that Drive Transactions Later
- Members Pay a Fee for Exclusive Benefits
- Attracts a Brand’s Most Valuable and Engaged Customers
- Fully Customizable Based on Brand’s Goals and Customers
- Customers Know They’re Getting the Best Experience 24/7/365, No Need to Wait for Discounts
- Example – Restoration Hardware RH Grey Card
Premium Loyalty and the 80/20 Rule
If the old 80/20 adage holds true—80% of a brand’s sales come from 20% of its customers—then a premium loyalty program could be right for you.
A brand’s best customers behave that way because they have an emotional attachment to the company. Sprinkle in rewards and perks that customers desire, and a premium loyalty program raises that emotional connection to another level.
Whereas traditional, transaction-based loyalty programs focus on getting lots of people to sign up (that 80%), premium loyalty programs really focus on that all-important 20%.
With paid loyalty, a brand’s top customers become even more important because of a stronger bond that prompts two-way conversations. Rewarding your best customers breeds magnified engagement and allows for loyalty inroads with newer ones.
As your best customers drive your premium loyalty program, a new company culture develops that perpetuates higher engagement levels and personalized interactions.
Out of this premium loyalty program is born a tight-knit community that guides the brand through ongoing engagement and experiences.
Getting Your Best Customers to Engage
All brands seek heightened engagement from their customers.
With a premium loyalty program, brands see right away enhanced levels of engagement from their best customers because these programs provide instant benefits that members can use right away.
Making your brand top of mind is an overarching goal for any retailer.
A paid premium loyalty program achieves this goal through a convenient shopping experience, exclusive offers, cash back savings, and more. It gives members valuable benefits that make their lives easier 24/7.
By removing the inconveniences out of the shopping experience, your premium loyalty program will remain top of mind for your members.
Premium Loyalty Benefits
Removing pain points for customers is an integral piece of the premium loyalty program.
These programs are important in today’s marketplace because consumers have so many different shopping options. They help increase customer loyalty and retention by providing immediate value to the customer.
Since not all customers are created equal, a successful premium loyalty program design allows a brand to focus on its best customers in a unique way.
These are your best customers and they should be rewarded in special ways.
A premium loyalty program:
- Drives increased customer engagement
- Tailors a personalized experience
- Targets each customer segment distinctly
- Provides a seamless omnichannel experience
- Makes your brand top of mind
- Offers another channel through which a brand can communicate with customers
- Provides invaluable data on your best customers
Sizing Up a Premium Loyalty Program
Consider the attributes of your brand, marketing strategy, and financial goals when deciding on a premium loyalty program. These programs are associated with higher member spend, higher advocacy, and longer-term brand loyalty.
Customer expectations are higher than ever today, and that is where a premium loyalty programs comes into play.
Brands implement a premium loyalty program after truly listening to their customers, their expectations, and addressing those pain points in an effective, engaging way.
Considering a Premium Loyalty Program?
Free loyalty programs are great for getting a lot of people to sign up, but it ends there for many consumers.
In premium loyalty programs, your best customers pay a fee in exchange for 24/7 benefits that traditional loyalty programs can’t touch. You go from being “just another store” to being an irreplaceable part of your best customers’ everyday lives.
Your best customers buy more often, spend more when they do, and evangelize for your brand.
A premium loyalty program can incentivize frequent guest visits and increase spending. As a result, a paid loyalty program targets a brand’s best customers and elevates their respective experiences through a variety of attractive perks and benefits.
Since customers pay to become members, brand officials know that the ones who raise their hands to sign up are deeply committed to the company.
Premium loyalty programs will attract your best customers who, over time, will become more highly engaged and more valuable customers.
When a consumer decides to sign up, that person is investing in your company and brand.
It’s a two-way street where you, as a retailer, are investing in those consumers stepping forward and investing in your business.
Perhaps the real question should be, “How can I build a loyalty program that is so valuable, my best customers are willing to pay for it?”