THE CLARUS Blog

An Upgrade to Your Loyalty Program or Something Completely New? The Two Models of Premium Loyalty

Consumers always want choices. 

When giving your loyalty program members options, adding a premium loyalty tier is a great complement to your existing traditional loyalty program. For a fee, these programs offer enhanced benefits and experiences to your best customers. 

Ninety percent of brands say either enhancing or expanding their loyalty programs are a priority this year. 

If you want to add a premium tier to your existing traditional loyalty program, there are two models to consider: The upgrade model or the addition model. 

Both require members to pay an annual fee to receive instant benefits available 24/7 but are structured differently. And there’s no right or wrong answer – It all depends on your customers. 

Here’s a breakdown of both models to help you decide which makes the most sense for your brand. 

 

An Enhanced Version of Your Existing Loyalty Program – The Premium Loyalty Upgrade Model 

The upgrade model of premium loyalty takes your existing loyalty program and enhances those benefits.  

The premium loyalty upgrade model is explained in this chart below:

Upgrade Model

For example, your existing program might offer 60-day returns and free shipping over $50, but your upgraded premium tier would offer 120-day returns and free shipping with no minimum.

 

GameStop PowerUp Rewards is an example of the upgrade model. The premium tier enhances the traditional program and provides better benefits for $19.99 annually.  

Members of the traditional program earn 10 points per dollar spent while the Pro (premium tier) members earn 20 points per dollar spent. 

GameStop

 

Pro members also receive: 

  • A $5 welcome reward 
  • A $5 monthly reward 
  • Pro-only event access 
  • Game Informer subscription 
  • 10% extra in credit 

The premium loyalty upgrade model is an attractive one because customers can place the traditional and premium programs side-by-side and easily see the differences in benefits. 

 

The Premium Loyalty Addition Model 

The premium loyalty addition model provides members with everything that your traditional program does but adds in completely new benefits. It’s a different experience for your best customers.   

Addition Model

For example, this chart explains that if your existing program offers 60-day returns and free shipping over $50, your addition premium tier would offer 120-day returns and free shipping with no threshold.

 

Best Buy has a traditional loyalty program called My Best Buy, where members earn points for every dollar they spend on eligible purchases. 

In April Best Buy launched a pilot premium loyalty program called Best Buy Totaltech, which exemplifies the premium loyalty addition model. 

Best Buy

 

Best Buy Totaltech offers attractive benefits. 

Consumers can join the Best Buy Totaltech program for $199.99 per year or $179.99 per year for customers who have the retailer’s credit card. 

Program members receive everything in the top tier of My Best Buy plus: 

  • Unlimited tech support from the Geek Squad. 
  • Round-the-clock concierge service. 
  • Exclusive member prices on merchandise. 
  • Free installation of many appliances and products. 
  • Fast, free shipping on all purchases and no minimum-order restrictions. 
  • Two-year warranties on most purchases, including Apple products like iPhones.

A premium loyalty program like Best Buy Totaltech can help your brand increase average customer spend and increase engagement levels. 

 

How to Select the Right Premium Loyalty Model 

Finding the right premium loyalty model for your members isn’t an exact science. 

There is no right answer. It comes down to whatever model you think fits your members best. A good, straightforward way to find out which model to use is to ask your members. 

It really comes down to what benefits your members want. GameStop and Best Buy have different models and they both work. 

A great loyalty program has elements of transactional and experiential benefits so figure out what is important to your customers. A combination of transactional and experiential benefits in your loyalty program creates strong emotional connections. 

Having a tight-knit loyalty community makes this process easier. Reach out to your members and ask which types of benefits they prefer. 

 

Add Options for Your Customers by Selecting Your Premium Loyalty Model 

Adding a premium loyalty tier to your traditional loyalty program is the best way to offer your customers the best of both worlds. 

In doing that, you also can choose what kind of premium tier best fits your customer base. Either premium loyalty model can work well. 

Figure out what types of benefits your customers want and then build the program that makes the most sense for them. 

Remember the inherent connection between traditional and premium loyalty: Consider that 81% of traditional loyalty program members would join a premium loyalty program at their favorite retailer, assuming that the benefits were valuable, according to the 2021 Premium Loyalty Data Study.  

If you want to learn more about adding a premium tier to your existing loyalty program, check out this new eBook. 

Are You Ready to Go Premium?

If you want to become a 24/7 presence in your best customers' lives, it's time to get started.