THE CLARUS Blog

Membership Loyalty Programs: 3 Reasons Why They’re the Future

Membership loyalty programs, also known as premium loyalty programs, have been around for quite some time.

But they’re growing in popularity. Why is that?

In these programs, your customers pay a fee in exchange for enhanced benefits that traditional free loyalty programs can’t offer.

Consumers love them for their convenience, exclusivity, and instant benefits.

If your goal is to retain your best customers moving forward, here’s why you should consider a membership loyalty program.

 

Customers Want Membership Loyalty Programs

Think about it: Memberships are all around us.

Everywhere you look, from the way your customers stream videos and music through Netflix and Spotify to the way they communicate through social media, they want everything to be instant.

This also applies to loyalty programs. But traditional loyalty programs reward slowly.

That’s why consumers are signing up for more membership loyalty programs.

Consider that 70% of consumers not in a membership loyalty program would join one if their favorite retailer offered one and the benefits were valuable.

And members love to talk about you: Nearly 90% would recommend a retailer to family or friends if the retailer’s program offers valuable benefits.

The appeal of membership loyalty programs is clear: 67% are likely to join one of these programs if they already belong to that retailer’s free program.

According to McKinsey, consumers clearly want membership loyalty programs.

In 2019, consumers spent an estimated $25 billion to $30 billion on these programs, which represents between a 25%-50% growth rate from the previous year.

McKinsey’s study summarized the point by saying: “With 63 percent of consumers already members of at least one paid loyalty program, it’s clear that paid loyalty is not a niche trend.”

 

These Members Are More Engaged and More Loyal

Simply put, your members are your most engaged customer group.

They raise their hands to say they want to join your program.

They engage with your instant benefits right away and are more proactive than reactive.

Consider that  these members are 4x more valuable than non-members.

According to our 2020 Premium Loyalty Data Study, 94% percent of members shop at that retailer at least once a month.

Enhanced benefits in these programs are so attractive that 88% of consumers are likely to choose a retailer whose program they belong to over a competitor offering a lower price.

Members want to get the most out of their investments in the program. When that happens, you enjoy increased average order value, order frequency, and engagement.

For example, members of CVS CarePass spend four times as much as non-CarePass customers.

According to McKinsey, members of these programs are 60% more likely to spend more on your brand, while free loyalty programs only increase that likelihood by 30%.

These members are your very best customers who evangelize about your brand and become ambassadors.

 

Your Competitors Are Thinking About Membership Loyalty Programs

As a retailer, you almost have to consider launching a membership loyalty program.

Your customers want them and have shown they will engage with them at very high rates.

They will spread the word about your brand to friends and family.

Other retailers have gotten onboard with this trend, starting with Amazon’s highly successful Prime program that launched in 2005.

Prime’s success led to other retailers finding the merits of membership loyalty. Most recently, Walmart joined the bandwagon with Walmart+.

Consider that 11% of Americans joined Walmart+ after two weeks of its launch.

Premium loyalty programs like Prime and Walmart+ offer enhanced value, instant benefits, and create emotional bonds between brands and their members.

In fact, 95% of retailers said Walmart+ has them thinking about launching a a program of their own in 2021.

Our 2021 Loyalty Industry Data Study reveals some eye-opening statistics:

  • Ninety-five percent of retailers with traditional loyalty programs have discussed launching a premium loyalty program in 2021
  • Ninety percent of retailers say enhancing or expanding their loyalty programs is a priority for 2021
  • Seventy-eight percent of retailers anticipate an increase in the number of premium loyalty programs due to COVID-19

It’s Not Just Amazon Anymore

Membership loyalty, or premium loyalty, isn’t just about Amazon anymore.

Look around and see these types of programs at Walmart, Lululemon, CVS, Wayfair, Restoration Hardware, Overstock, and Barnes & Noble, just to name a few.

Consumer behavioral changes are apparent: McKinsey found that 35% of U.S. consumers have tried a new brand since COVID-19 began while 77% demonstrated new shopping behaviors, including new channels, stores, and brands.

It’s more important than ever to retain your best customers.

These are your most valuable customers and they’re telling you they want membership loyalty programs, they’ll engage with them frequently, spend more with your brand, and tell everyone they know about you.

If you’re thinking launching a membership loyalty program, we’re here to help!

Feel free to reach out to us anytime.

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