According to the 2021 Premium Loyalty Data Study, 71% of consumers belong to a traditional points-based loyalty program.
But traditional loyalty members are increasingly willing to shift to premium loyalty programs for better benefits. The study shows that 81% of respondents who belong to traditional programs would join a retailer’s premium program if the benefits were evaluable.
Perhaps more than anything, these statistics underscore the need to give your customers loyalty options.
Here’s why you should offer your customers loyalty options and how traditional and premium loyalty can work together harmoniously.
Breaking Down Traditional and Premium Loyalty Programs
Traditional loyalty programs are great at getting consumers in the door and collecting zero- and first-party data. These programs appeal to most consumers and are free to join. Members make purchases over time to earn rewards that come later.
A traditional tiered program, which is an enhanced version of a points-based program, improves members benefits and includes things like double points, exclusive offers, early access to sales, and free shipping with no threshold. Most importantly, this type of program introduces status to the loyalty ecosystem.
Your existing points program plays a critical role in your overall loyalty strategy. This point can’t be emphasized enough. Acquiring members to your traditional loyalty program is crucial to collecting data.
Zero-party data, which is data consumers intentionally share with you, will become even more important as cookies eventually go away.
A premium loyalty program targets your top 20% of customers, introduces them to elevated benefits, and creates a different type of member relationship.
Premium loyalty members pay an annual fee and are rewarded every time they engage and receive benefits like instant discounts, free shipping with no minimums, and VIP experiences.
A premium loyalty tier allows a brand to offer benefits that extend beyond typical transactional incentives. The goal of a premium loyalty program is to get your best customers engaging more, spending more, and advocating more for your brand.
How Your Current Loyalty Program Can Work Seamlessly with a Premium Tier
Offering your customers a traditional loyalty program and a premium loyalty tier covers all your bases.
This gives your customers the options they need to join your loyalty ecosystem. This can also make your best customers significantly better and move some of your traditional members to your premium tier.
Traditional loyalty programs are great for your acquisition efforts, and they should always be an option. By offering a premium tier, you also create an aspirational goal full of attractive benefits available 24/7.
Customers can move seamlessly between both programs and giving your consumers options broadens your brand loyalty reach.
Undoubtedly, traditional programs attract a much wider audience than premium loyalty programs because there is no barrier to entry. Premium loyalty programs charge an annual fee and attract your best customers with the best benefits your brand has to offer.
A premium loyalty tier allows a brand to offer benefits that extend beyond typical transactional incentives. These benefits can take many forms, including convenience perks such as free shipping and returns.
If a member downgrades from the premium loyalty program to the traditional tier, they’re still moving within your loyalty ecosystem.
If a traditional member is interested in joining your premium program, it’s easier to convert them than a cold customer. Either way, your brand stays top of mind.
CVS is a Great Example of Combining a Traditional Loyalty Program with a Premium Tier
CVS ExtraCare is a great traditional loyalty program that offers cash back and extra savings for members. The ExtraCare program has 74 million members, and they can also join two other traditional loyalty programs: ExtraCare Pharmacy & Health Rewards, and ExtraCare Beauty Club.
CVS revamped its ExtraCare loyalty program this year. Members can now access their 2% rewards after each purchase, instead of waiting until the end of each quarter.
Nearly one in four people in the U.S. are members of the ExtraCare loyalty program.
For CVS’s top customers, CarePass was introduced for $5 per month.
This premium loyalty tier offers free delivery on eligible prescriptions, as well as fast, free shipping and instant discounts on certain CVS Health brand items and monthly rewards that can be used in-store and online.
In addition, members have access to a live pharmacist chat line 24/7. It’s a great program for those who value those benefits.
On average, CarePass members spend three to four times more than non-CarePass CVS customers.
Make Your Loyalty Program Something Consumers Crave
Whether you have a traditional program, a premium loyalty program, or both, remember that four things are crucial to your success:
- Offer enticing rewards. If there is no value in your benefits, consumers won’t join your program.
- Create emotional connections. Consumers want to feel they’re special and that you know them. This strengthens two-way relationships.
- Make it easy to enroll and use. If it’s not, consumers will find a program that is.
- Encourage engagement beyond transactions. Reward members for non-transactional things like reading a piece of content or engaging on social media.
It’s simple: By offering a traditional program with a premium tier, your customers have choices and, once they’re in your traditional program, they might want to at least try your premium offering.
Traditional and premium complement each other because, combined, you cover all your loyalty bases. Consumers want choices and you give them that with a traditional program and a premium tier.