THE CLARUS Blog

Podcast Recap: What is Premium Loyalty and Why You Should Consider Launching Your Own Program

Why are premium loyalty programs more valuable to consumers and retailers?

How is premium loyalty different from traditional loyalty?

Why are younger, more tech-savvy consumers drawn to premium loyalty programs?

The answers to these questions and more can be found in a recent Total Retail Tech Insights podcast featuring Clarus Commerce CEO Tom Caporaso and Joe Keenan, editor-in-chief of Total Retail.

If you haven’t already tuned in, here’s the full episode:

But in case you don’t get a chance to listen, here are the five biggest takeaways from the episode.

 

Premium Loyalty is Different from Traditional Loyalty Programs 

Traditional free loyalty programs are typically based on earning points through spending several times and receiving rewards at an indefinite time in the future. 

They are a solid tool for member acquisition and are great at getting people to sign up. This means lots of first-party data for your brand, which will become even more important as the end of cookies will make it harder to collect third-party data. 

But your existing free loyalty program is only part of the equation. 

A premium loyalty program targets your best customers who pay an annual fee in exchange for instant or enhanced benefits that are accessible immediately. 

With premium loyalty, there aren’t any points or waiting for rewards. Members have immediate 24/7/365 access to benefits after they sign up. 

Typical premium loyalty benefits include discounts on free shipping on every order, free return shipping, cash back, along with VIP experiences. When you combine transactional and experiential benefits, you offer your members the best of both worlds. 

 Some of the best premium loyalty programs are Amazon Prime, lululemonCVS CarePass, and Walmart+. 

 

Premium Loyalty Programs Are More Valuable to Consumers and Retailers 

The attractive and enticing component of a premium loyalty program is consumers receive great value from Day 1. 

And that’s why consumers are demanding these programs from retailers. Consumers see the apparent value in premium loyalty programs and are willing to pay a membership fee to join. 

Consider nearly two-thirds of consumers say their loyalty is more difficult for retailers to maintain than ever before. This point alone should prompt retailers to design a premium loyalty program for their customers due to the abundance of value. 

With so many choices today only a click away, and the pandemic shifted consumer behavior toward convenience, the value in premium loyalty programs becomes more attractive to both consumers and retailers.  

According to our 2021 Premium Loyalty Data Study, nearly 50% of consumers have tried shopping with a new brand since March 2020. And 73% of premium loyalty members shopped with retailers whose premium loyalty programs they were part of during the pandemic. 

We live in an instant society where consumers want everything now. And that includes the benefits they receive in a loyalty program. 

Since premium loyalty programs provide instant benefits, they spark interest among consumers. Premium loyalty members engage more with you and talk about you more. 

The inherent value proposition in any premium loyalty program equally benefits retailers and consumers. 

Eighty-eight percent of premium loyalty members say they’re likely to recommend a retailer with valuable premium loyalty benefits to a family member or friend. 

 

Premium Loyalty Programs Especially Speak to Your Younger Customers 

Younger consumers are drawn more to premium loyalty programs, according to our 2021 Premium Loyalty Data Study. 

Besides being more comfortable with technology, younger consumers (Millennials and Gen Zers, in particular) are less brand loyal, seeking to find value. 

Millennials (77%) comprise the largest generational group of premium loyalty members. 

Subscriptions services such as Netflix and Spotify became popular during the Millennial generation and maybe that’s why premium loyalty is a hit with this group. 

Millennial expectations are high and instant gratification is a big reason for that. 

Technology has significantly impacted the expectations of Millennials, which plays right into premium loyalty programs. 

Millennials don’t want to collect points. They want to receive instant benefits and are willing to pay for them if the value is there. 

Another key study stat shows that Gen Zers are more likely to have premium loyalty accounts (70%) than traditional loyalty accounts (63%). 

Premium loyalty offers the exact types of benefits younger consumers are searching for in a program. 

 

Premium Loyalty is a Marriage of Transactional Benefits and Experiential Rewards 

While the core benefits of premium loyalty programs include free shipping, free returns, cash back, and discount offers, marrying those with experiential rewards offers your members the best of both worlds. 

Experiential rewards are the VIP experiences that elevate a member’s experience with your brand. 

Transactional benefits are important, but experiential benefits take members to a totally different brand experience. And those experiences create emotional loyalty. 

lululemon’s annual premium loyalty membership costs $170. Members receive those foundational benefits like free shipping on every order. But they also receive a free pair of pants when they sign up and access to yoga and fitness classes. 

So, when you join lululemon’s program, you receive transactional and experiential benefits that ultimately create brand advocates. 

As much as consumers are drawn to discounts and material benefits, receiving special treatment from a brand experience solidifies the two-way loyalty relationship. 

 

Existing Loyalty Members Would Join a Premium Program If Their Favorite Retailer Offered One 

According to our 2021 Premium Loyalty Data Study, 81% of respondents (up from 70% last year) said they would join a premium loyalty program if their favorite retailer offered one and the benefits were valuable. 

Another interesting stat from the study is 81% of respondents said they are likely to join a premium loyalty program if they already belong to that retailer’s free loyalty program.  

But you shouldn’t drop your free program.  

In the larger loyalty ecosystem, a free program and a premium one give your customers options they desire and offer inclusivity.  

Traditional programs serve as entry points for consumers while premium loyalty programs highlight the aspirational goals. Customers can move seamlessly between both programs. Giving your customers options broadens your brand loyalty reach. 

 

Premium Loyalty Is All About Offering Great Value   

In the past 18 months, we’ve seen a shift away from brick-and-mortar and toward a digital consumer experience.  

The pandemic changed consumer behavior significantly and some of those habits might be here to stay. Either way, they’re demanding more from brands to earn their loyalty. 

So, while traditional loyalty programs are here to stay, consider offering your best customers a premium tier. 

Remember, value is the key to any loyalty program and, with a premium loyalty program, great value is what your members will receive. 

 

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