THE CLARUS Blog

What Makes Customers Willing to Pay for a Loyalty Program?

Have you ever wondered what makes customers willing to pay for a loyalty program?

Our 2020 Premium Loyalty Data Study found that 70% of consumers would be willing to join a premium loyalty program if their favorite retailers offered them and the benefits were valuable to them.

Amazon started the premium loyalty trend in 2015 with Prime, and many other major brands have jumped on board, most recently Walmart.

And our 2021 Loyalty Industry Data Study shows that 95% of retailers have discussed launching a premium loyalty program in 2021.

Free programs attract millions of customers to sign up, but consumer expectations have changed dramatically since COVID-19. 77% of consumers have changed their shopping behaviors according to McKinsey.

As a result, loyalty programs must change to adapt to these new consumer behaviors.

Translation?

While free programs still have their place, retailers can’t get by simply offering their most valuable customers traditional loyalty programs.

But to create a loyalty program so valuable that consumers will pay for it, brands need to go above and beyond what’s been offered in the past.

 

Loyalty Program Members Yearn for Exclusivity

Ninety-four percent of Americans would take advantage of an exclusive offer, which is an amazing statistic for retailers to ponder.

Exclusivity makes a loyalty program more attractive, compelling, and desirable. There is also the FOMO effect in play here that complements the exclusivity mindset.

When your loyalty program members feel they’re getting access and benefits that not everyone else has, that usually leads to emotional connections that become cornerstones of brand loyalty.

It follows that a loyalty program filled with exclusive benefits would be quite attractive to consumers.

Although many consumers look to loyalty programs to provide savings, they also want to feel special and have memorable experiences.

This is where customer data plays a major role because brands need it to create personalized and relevant experiences. How brands leverage their customer data differentiates their loyalty programs.

A brand’s loyalty program forms emotional connections with its most valuable customers.

That sense of community and exclusivity connects consumers to brands and helps form deep emotional bonds.

Consider the massive impact emotional connections have on sustainable customer loyalty:

Consumers with an emotional connection to a brand have a 306% higher lifetime value, stay with a brand for an average of 5.1 years vs. 3.4 years, and will recommend brands at a much higher rate (71% vs. 45%).

A brand’s loyalty program deeply connects with its best customers.

 

When Customers Pay for Loyalty, They Want Convenience and Immediate Value

When people pay to join a loyalty program, they expect a great experience by design.

The program needs to:

  • Be easy to understand
  • Be painless to enroll in
  • Be simple to use and earn rewards in
  • Provide immediate and ongoing value
  • Offer exclusive benefits
  • Show personalization/customization
  • Have the right price to value ratio

A major difference between a free loyalty program and a premium loyalty program is the latter provides immediate benefits 24/7, 365 days a year. This contrasts with a free loyalty program whereby a consumer enrolls and receives a reward somewhere down the road after X number of transactions.

Sixty percent of consumers say that instant discounts are a perk that motivates them to join premium loyalty programs.

Value is a keyword here because customers want and desire value from a loyalty program. And that is exactly what they receive from a premium loyalty program, which is why they pay for membership.

When a brand truly listens to its most loyal customers, those customers appreciate that and become even more engaged with your loyalty program.

 

Premium Loyalty Isn’t a Replacement for a Traditional Program

A free loyalty program can transform a sporadic shopper into an occasional shopper.

But a premium loyalty program can transform those occasional shoppers into your best and most loyal customers.

Finding the correct mix of loyalty program benefits and reward is crucial in adding value. These attractive benefits become an immediate and ongoing attraction to members and prospective members.

And complementing your free program with a premium loyalty tier is a great way to satisfy your entire member base.

Here’s everything you need to know about premium loyalty at a high level.

 

A Loyalty Program so Good That Your Customers Will Pay to Join It

A successful premium loyalty program begins with listening to your customers, first and foremost, and understanding what they want out of your program.

Ease of use is imperative for any successful loyalty program today. Even after a loyalty program achieves success, that’s not the time for a brand to rest on its laurels.

That’s when you closely monitor the program, its awards, and continually leverage its customer insights to always deliver relevant and personalized benefits.

It all comes back to knowing your customers and what drives them to choose your brand.

If you offer immediate benefits that your best customers want every time they engage, you will have a loyalty program that your best customers will be willing to pay for.

Are you thinking of starting a premium loyalty program in 2021?

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