Your brand has a paid loyalty program, and everything is going great: its added another revenue stream, incentivized repeat purchases and built a strong and loyal customer base. There’s no need to consider adding a free tier… or is there?
Considering 83% of consumers said they’d be likely to join a brand’s paid loyalty program if they already belonged to its free program, adding a free tier suddenly looks a lot more compelling. Likewise, 78% said they currently belong to a free loyalty program and another 78% said they’d be willing to subscribe to a paid loyalty program — supporting the notion that a free tier can be an obstacle-free entry point on the path to paid membership. Source: ebbo 2022 Data Study
And although impressive, it’s not the only advantage of a free tier. Let’s dive a little deeper with our seven key benefits to adding a free tier to an existing loyalty program — and six strategies to ensure its success.
6 Benefits of Adding a Free Tier
- Increase User Acquisition
A free tier can be a conversion magnet for new users — it can make your loyalty program a no-brainer versus a “no-way” to more frugal or hesitant customers. In fact, according to research by Brightback, companies offering free trials have an average conversion rate of 20% for trial users who become paying users.
- Boost Revenue Growth
Subscription loyalty programs with a free tier have a proven track record of boosting revenue. Harvard Business Review reports companies using this model experience a 30% higher growth rate compared to those without.
- Increase Customer Engagement & Re-Engagement
Free tiers encourage a deeper level of engagement with your customers across the board. HubSpot research shows a 25% increase in customer engagement for companies offering free trials compared to those that don’t. Likewise, activities like gamification, opting into emails, social interactions and personalized experiences can significantly boost program engagement as well — and are enticing elements for a free tier, while saving premium benefits and/or exclusive offers for paid members only. In fact, a Capgemini study found a whopping 89% of customers are more likely to engage with programs offering gamification elements. These activities can be a powerful tool for re-engaging dormant program members, too — research by Forrester Consulting indicates that companies with engaging loyalty programs experienced a 5 – 10% increase in member activity.
- Create New Upsell Opportunities
Free tiers are a natural springboard for an upsell. Kinsey research shows freemium users are 50% more likely to purchase a premium subscription compared to non-users. A free membership can nurture the path to paid with targeted campaigns, incentives and exclusives.
- Establish Market Differentiation
A free tier can help differentiate your brand from the competition — a Deloitte survey reveals 71% of consumers perceive companies offering free versions as more innovative.
- Build Relationships with Everyone
A free tier is a lower-hurdle way to bring in customers and recognize and reward them for their loyalty (as well as educate them on the perks of upgrading to the paid program down the road). A free tier can capture unconverted leads but equally important, attract existing members who intend to cancel their paid program, thereby keeping them within your brand ecosystem. In fact, ebbo’s Paid Loyalty Data study revealed that 76% of consumers would still want to want to remain a member of a brand’s free program if they’re thinking about canceling their paid membership.
Of course, adding a free tier isn’t just about throwing open the doors and crossing your fingers. The goal is to utilize your free tier as a direct pipeline to your paid tier, as well as to encourage and reward your existing members to participate in non-purchase-based activities. This can be especially effective as a means to re-engage lapsed users and keep them within your program longer, and to build an emotional connection with all members outside of key selling seasons.
Success, however, is all about strategic implementation. Here are our top risk mitigation strategies to ensure your free tier drives your desired outcomes (like the benefits mentioned above) without eroding from your paid member base:
6 Strategies for Success
- Define & Target Audience Segments
Tailor your free program to target a different segment of customers than your existing paid loyalty members. This can not only attract new customers who may not have been interested in the paid version but safeguards your paid members from converting to free tier.
- Differentiate Benefits
Clearly defined benefits for each tier are key. For example, the free tier should offer basic rewards and/or limited access, while the paid tier provides more valuable benefits, exclusive perks and premium features. This will help prevent existing paid members from downgrading to the free tier and help entice the free members to upgrade.
- Create a Compelling Value Proposition
With the above in mind, a compelling value proposition for your paid loyalty members goes a long way in justifying the fee. Focus on creating premium benefits or unique experiences that create a sense of exclusivity and value, thereby encouraging your members to either remain in or upgrade to your paid program.
- Communicate Clearly
Like any healthy relationship, clear communication is vital. From your landing pages to your emails to your FAQs, educate your customers on the differences between the tiers, with an emphasis on the added value and exclusive benefits of the paid program to encourage retention and discourage downgrades.
- Nurture the Upgrade
Once a customer is in your free tier, you can nurture them towards the paid program funnel. This could look like limited-time discounts, offering a trial period of premium features, or targeted marketing campaigns that showcase the added benefits they’re missing out on.
- Maintain Agility: Monitor, Analyze & Adjust
It’s important to track how your free tier is affecting your paid program so you can make the necessary adjustments in real time. Conversion rates, revenue, member behaviors, engagement levels and retention rates are dependable benchmarks to determine if any erosion is occurring and give insight on which mitigation strategies would be best.
All in all, a free tier can be a game-changer for your paid loyalty program, casting a wider net and bringing in members your brand might otherwise miss. Rife with engagement and upsell opportunities, a free tier can be one of the strongest acquisition and retention tools in your loyalty marketing toolbox — engaging and converting new members and engaging and re-activating existing ones. And with the right design and strategy, your brand could stand to see a healthy increase in metrics across the board.
Want to unlock the full potential of your loyalty program?
ebbo has been leading innovation in loyalty solutions for over 20 years. We can help you design and implement a winning free-tier strategy that propels your customer acquisition, engagement and revenue growth.
Contact ebbo today to explore how we can help you take your loyalty program to the next level.
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ebbo helps brands achieve their customer loyalty goals with full-service, end-to-end solutions and also creates original educational content straight from the experts to help loyalty marketers stay on the cutting edge of customer engagement.