THE CLARUS Blog

Why the New Lululemon Loyalty Program Test has Been a Success

The new Lululemon loyalty program test is about to expand as more and more retailers are starting to rethink loyalty by offering better, more experiential benefits to customers.

Consider Canadian athletic apparel retail Lululemon Athletica, which just announced that it’s been testing a premium loyalty program that charges members $128 annually.

Because the results have been so successful, officials for the athleisure brand plan to expand the test into additional markets, possibly at a higher membership price point.

Here’s why we think Lululemon’s premium loyalty test has been so successful.

 

Mix of Transactional and Experiential Benefits

Successful loyalty programs combine transactional and experiential benefits to create differentiation.

Transactional benefits like free shipping and discounts are still important to consumers and they elicit an emotional response. People feel smart when they get a deal.

Most retailers, however, offer very similar programs that offer similar benefits. As a result, there’s not much differentiation and it makes it easy for casual customers to switch brands based on price.

Competition is heating up in the athleisure market and Lululemon’s program satisfies that emotional need to shop smartly by offering benefits like free shipping and a pair of pants or shorts.

But, there’s more to it.

The program also awards members curated events and workout classes. Those are the experiences that are more memorable and unique to Lululemon, satisfying an emotional desire for exclusivity. These kinds of experiences become so valuable to customers and often become a part of their daily lives.

When a loyalty program becomes a part of a person’s daily life, that is the ultimate goal for any retailer.

Just ask Amazon, which launched its wildly successful Prime program with free shipping, but have added a slew of benefits over time, including Prime Video, which many Prime members can’t live without.

 

Clear Value Proposition

Another reason that Lululemon’s premium loyalty program test has been so successful is because there is a clear value proposition.

For $128 annually, members are getting a pair of pants or shorts.

If you click over to the Lululemon website, you can see that many of the pants are around the $100 price point, with some of the more hip looking women’s leggings coming in right at $128. Coincidence? Probably not.

If someone plans to buy one pair of those leggings a year, that membership just paid for itself.

This is like the RH premium loyalty program. The annual fee for the program is $100 and members receive 25 percent off all purchases. If someone buys one piece of furniture, which is going to cost more than $400, that membership paid for itself.

Unlike traditional points programs where the benefits tend to be confusing, and often not even used, premium loyalty programs are very clear.

If you have even just a little affinity toward Lululemon, it makes sense to join the program.

 

Lululemon is Rethinking Loyalty

Lululemon’s premium loyalty test is a solid indicator of what its program can do when it’s fully rolled out.

Transactional benefits are still important, but it’s the unique experiential benefits that create differentiation and keep customers emotionally engaged.

Since Calvin McDonald became Lululemon’s new CEO earlier this year (after serving in the same post at Sephora), outside praise has been the norm.

Jim Duffy of Stifel wrote the following in a note to analysts:

“Lululemon is defining the prototype omnichannel model to which consumer brands should aspire. Innovation is moving the product forward, the retail footprint remains tight, community remains central to the brand, and a growing digital competency is being leveraged for consumer engagement and to drive traffic to stores.”

We’re happy to see that Lululemon is among the growing number of retailers rethinking loyalty and adapting to accommodate the modern consumer.

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