It is significantly costlier to acquire a new customer than to retain one you already have.
Competition is increasing, while loyalty is decreasing. Consider the impact of loyalty fatigue: The average consumer belongs to more than 14 loyalty programs. So how loyal can someone be to so many different loyalty programs?
Customers are changing how they shop and engage with retailers. There are infinite choices, offers, and discounts available to every consumer right in the palm of their hands. Why should they shop with you?
The Realities of Loyalty Today
The realities of the traditional loyalty space clearly don’t match the expectations of today’s consumer. Consumers need and desire immediate value. In exchange, the retailer needs to get not only increased engagement, but useable data that can be leveraged to tweak and optimize business strategies.
Billions of dollars are wasted annually on traditional programs that don’t hit those critical elements.
Traditional programs require members to spend over time for rewards that come later. These traditional programs simply train customers to wait for discounts and coupons. They don’t develop loyalty.
Premium loyalty programs work the opposite way.
In the loyalty space, a premium loyalty program is simply a program where members pay an annual fee for enhanced benefits they can use right away. A premium loyalty program gives the consumer the benefits upfront, rather than transactions first and rewards later.
In a premium loyalty program, members pay a recurring fee to stay in the program in exchange for valuable brand and product specific benefits that they can use anytime. This means that members can engage with the program 24 hours a day, 365 days a year.
Retailers enjoy enhanced engagement, more order frequency, and higher AOV in addition to collecting valuable data about their best customers.
The membership fee also becomes a recurring revenue stream, which retailers can use to fund benefits. With this model, the loyalty program goes from potential margin killer to ancillary revenue source.
Premium loyalty programs target a brand’s best customers. In return, those customers shop more, spend more on each occasion, and become brand advocates. As a result, these programs can become ingrained in their customers’ routines.
Premium Loyalty and the Modern Consumer
Modern consumers are looking for instant gratification and they are willing to pay for it.
They yearn for convenience and do not want the hassle of tracking promotional offers or cutting coupons.
Consumers have grown up using subscription services such as Netflix, gym memberships, and AAA. Sixty-two percent of customers would sign up for a premium loyalty program if their favorite retailer offered one.
A premium loyalty program can strategically impact frequency of purchases and average order value. From a margin perspective, it can make a significant impact through the potential incremental revenue subscription stream.
It can also positively influence margins by not offering a one-size-fits-all promotional strategy that doesn’t drive the engagement or loyalty a retailer seeks.
They demand instant gratification and traditional loyalty programs simply can’t deliver on that. The loyalty programs of the past require customers to spend over time to receive rewards later. It’s purely transactional.
That’s why premium loyalty programs do such a good job of keeping people engaged at all times. They offer 24/7 benefits and services that a traditional loyalty program can’t touch.
Consider Amazon Prime, which is the most successful premium loyalty program in the world with the most compelling value proposition. Members pay $119 annually and they immediately gain access to a myriad of great benefits that they can access 24/7.
Once consumers become Prime members, they usually remain heavily invested in the program. The effect that a premium loyalty program has on its members is profound.
Consider this: Prime members spend nearly five times the amount of non-Prime members. That’s because Prime offers members the benefits they want, whenever they want to use them.
A Part of Daily Life
When someone raises their hand to become a member of your premium loyalty program, that says a lot about the person’s commitment to your brand.
It says that the new member has an emotional attachment to your brand and your offer is compelling.
That leads to heightened customer engagement levels and the program becoming embedded in members’ daily lives.
When a company truly listens to its customers, it can identify their pain points. Following through by providing the exact benefits they desire leads to elevated engagement and purchase levels will follow.
If the benefits are good enough, members will even pay an annual fee to access them. Naturally, they want to take advantage of their investment. That’s why premium loyalty programs become a part of the fabric of their daily lives.
Since these programs target a brand’s best customers, they make a brand’s best customers exponentially more valuable. With a premium loyalty program, your previous most valuable customers now become so engaged to the point where they become true advocates.
When your top customers not only engage and spend at very high levels with your brand, but also share your message, the value they represent is almost immeasurable.
Premium Loyalty in 2019
In today’s Age of the Customer, meeting and exceeding consumer expectations is the goal of any brand’s loyalty program.
When a brand offers a premium loyalty program, which customers are willing to pay for because it offers them great benefits and services on a 24/7 basis, you will see elevated engagement levels that can lead to more advocates.
A premium loyalty program cuts to the heart of consumer desires, offers a unique and desirable brand experience, and becomes a staple of your customers’ daily lives.
Consider premium loyalty as part of your overall brand strategy in 2019. In a time when competition is fiercer than ever before, isn’t it time to keep your best customers more engaged than ever?