What makes premium loyalty programs work?

What makes premium loyalty programs work

Paying a fee to join a membership or loyalty program sounds not the path most people would take. This is changing, customers today look for convenience and special treatment when choosing a brand, & they are willing to pay a premium price for it. This trend of privilege-driven customer engagement has led to the acceptance of paid and subscription loyalty programs. 81% of traditional loyalty program members have considered upgrading to a premium loyalty program. Research shows that 35% of customers have tried a new brand since the pandemic, while 77% have changed their shopping behaviors.

Changing customer expectations have played a significant role in the popularity of premium loyalty programs. While Gen-Z is most favorable to joining paid loyalty programs, other customer segments are also ready to pay for a better experience, exclusivity, and improved customer service. Premium loyalty programs are a valuable and sophisticated form of customer retention.

Why do customers prefer joining premium loyalty programs?

1. Sense of exclusivity

Premium loyalty programs offer rewards that are not accessible to basic loyalty program members. These exclusive rewards make premium loyalty programs compelling and desirable. 94% of Americans say they would readily take advantage of exclusive offers. The FOMO effect plays its role in attracting more members to this community.

The sense of exclusivity of the premium loyalty program satisfies the innate need of every human to feel special.

2. Better customer experience

Brands focus more on providing an enhanced experience with paid loyalty programs. With free loyalty programs, members must wait till they earn a specific number of points or reach a certain number of transactions to get rewards. But premium loyalty programs give customers access to many services as soon as they subscribe to the program.

For example, when customers sign up for Amazon’s Prime membership, they get instant access to Amazon Prime Movies, Prime Music, free shipping, and exclusive Prime deals.

3. Free shipping

Many customers are discouraged from buying a product due to the extra shipping charges. Without free shipping, every product has an extra slice of cost added to it. Premium loyalty programs get rid of this cost for members. It not only reduces resistance to buy but delivers a smooth shopping experience.

Out of all features that the premium loyalty program offers, free shipping is the biggest motivator for people to join these programs.

4. Customer support

Customer support is a time-saver for many customers. As premium loyalty programs have a limited number of members, brands can efficiently offer 24/7 support.

Customers who fall into some issue or problem don’t want to wait. It could be a transactional or product issue, they look forward to getting it sorted as quickly as possible. Premium loyalty programs help their customers with any problem round the clock. This support overpowers the premium loyalty program fee for many members who willingly join it.

5. A sense of attachment to the brand

While discount works best in attracting customers, it’s not enough to retain them. Brands must resonate emotionally with members. Premium programs typically provide members access to exclusive brand events. This allows customers to form an emotional attachment with the brand.

Nike club members or Sephora community members feel proud of being part of its community.

6. Experiential rewards

Experiential rewards play a major role in retaining customers. Premium loyalty programs with experiential rewards help brands create long-lasting customer relationships.

Giving rewards like vacation tickets and free food coupons from their favorite brand are examples of experiential rewards.

Premium loyalty programs are a win-win for brands and customers. Not only do customers enjoy the perks of being a premium member, but brands also leverage several benefits. Here are some of the most common benefits.

Benefits of premium loyalty program to brands

Benefits of premium loyalty program

1. Easy to engage customers

Customers who pay a fee to join any program stay more active. They spend more time on the brand’s program to get back the value worth the paid fee. This makes customer engagement easier for brands. Brands can try gamification to increase engagement time.

2. Increased order frequency

Paid loyalty programs drive higher purchase frequency, basket size, and brand affinity than free programs. The benefits offered by the brand for premium members outweigh the cost of the product in terms of value perceived by customers. It results in frequent shopping and higher revenue growth for brands. Premium loyalty program members are 60% more likely to spend extra on the brand post subscribing.

3. Ability to provide better rewards for customers

Often providing valuable rewards to retain customers can prove expensive for the brand. Many brands are finding a solution for this by launching paid loyalty programs.

The membership fee acts as an additional revenue stream for brands. It makes them financially strong to invest more in bigger and better rewards.

4. Easier customer segmentation

With premium loyalty programs, brands can effectively segment customers based on engagement. This eases the process of personalization.
Crafting personalized messages for basic members and premium members gets easy if the marketing team has precise segmentation of customers.

Examples of premium loyalty programs

1. REI Co-op membership

REI Co-op membership program is one of the most popular premium loyalty programs. The brand charges a one-time $30 fee for a lifetime membership. However, members can easily earn back the amount within a year with the amazing perks offered by REI. The brand also donates $5 for every new member to the REI Cooperative Action Fund.

Some of these perks include:

  • Free shipping
  • Early access to limited-edition products
  • Members-only deals & events
  • Expanded shop service discount

2. Barnes & Noble

Barnes & Noble offers many exclusive benefits to loyal customers. The brand charges a $25 annual subscription fee.

Barnes & Noble membership benefits include:

  • Free shipping
  • Exclusive in-store and online offers
  • 40% off on hardcover bestsellers
  • 10% off for every purchase in-store
  • Special birthday offers

3. CSV Care Pass

By launching its premium loyalty program ‘Carepass’ in 2019, CSV became the first pharmacy to offer free nationwide delivery. Members can join the program at a $48 annual fee or a $5 monthly fee. The variable fee structure allows a vast audience to join the program even if they don’t want to invest a big amount initially.

CSV Care Pass benefits include:

  • Free delivery and shipping
  • 20% on every CSV branded product
  • $10 promo reward every month
  • 24/7 pharmacist helpline to members

4. Restoration Hardware

Restoration hardware’s RH Grey Card is another popular premium loyalty program. Charging an annual fee of $175, the brand offers loyal customers many monetary and experiential benefits.

Some of the RH Grey Card benefits include:

  • 25% off on every item
  • 20% savings on all sale items
  • Complimentary interior design services
  • Financing with the RH credit card

5. Walmart+

For many, Walmart is the go-to place for buying groceries or everyday items. Walmart+ brings together in-store and online benefits to save customers money and time. The membership fee is $98 per year or $12.95 per month. Members can avail of membership perks at any other Walmart-owned company.

The benefits of Walmart+ include:

  • Free shipping
  • Member-only discounts on fuel stations
  • Discounts on products
  • Scan and go for a quick, easy, touch-free payment experience.
  • Free delivery on products above $38

Premium loyalty isn’t a replacement for a traditional program

While premium loyalty programs deliver a higher engagement level, free loyalty programs are great for attracting customers. People who are new to a brand do not develop trust soon. But no fee to join the basic version of the program is an excellent motivator for many customers. Brands can also get a better chance to convert the free members into paid members by first understanding their purchase behavior and interaction with a loyalty program.

The decision to include premium loyalty programs should be taken wisely depending on the business objective. To ensure the program is profitable and sustainable it is critical for the model to be designed strategically. A brand can end up incurring losses if the program is too generous. An important point to note is that member expectations are also high considering the payment aspect. For newly launched businesses premium loyalty programs may not be the best option as they may struggle to get customers to join in.

Zinrelo is a loyalty platform empowering brands to increase retention and repeat purchases. Zinrelo stands out from other loyalty platforms with its unique offerings: a robust & secure technology platform, data sciences & analytics, and strategic consultations.