As marketers, we talk and hear a lot about social media, email marketing, SEM, and so on. These are all important pieces of our overall marketing strategies, but why aren’t we talking more about premium loyalty programs?
These programs take the traditional model of transaction first, benefits later, and flip it around. They focus on the customer and give them immediate value instantly.
Members pay for their benefits upfront and use them right away as they shop and engage with the brand. This signifies a commitment from the consumer from the start and allows brands to offer the very best customer experience because of the self-funded nature of the program. Think Amazon Prime.
Let’s explore why premium loyalty is a better way to build engagement and increase revenue and why it should be on your mind.
Traditional Marketing Strategy
Marketing habits haven’t always kept pace with consumer demand. For ages, marketing has been focused on acquisition strategy over retention strategy.
Companies made products and tried to get sales by bombarding their audiences with advertising. They held the power and it was all about the brand and not about the customer.
Now, in the age of the consumer, it’s no longer all about the seller. Information is readily available to consumers. They have been gifted with the power of choice.
Customers now rule the land and your focus should be on them. Single sales are easy, e.g., 75% off today only, but building loyalty with customers is another story. That’s where loyalty programs come in.
Traditional Loyalty Programs
To focus on the customer, we as marketers must shift our mindset. We need to solve their problems at the right times, ease their decision process, and demonstrate the best of our brands everywhere all while providing value.
According to Forrester Research, 81% of marketing decision-makers say that improving customer loyalty is a top priority. Many companies think they’ve handled loyalty by implementing a loyalty program.
That may sound promising, but a report by Bond Brand Loyalty shows that consumers belong to an average of 13.4 loyalty programs, but are active in only 6.7 programs. What is the disconnect?
Let’s be honest.
Many retailers have just been paying lip service by implementing the first run of the mill loyalty programs and considering the job done.
According to Accenture, “…research has found that roughly one-third of each retailer’s loyalty members cross-shop at another key competitor within the same channel, and nearly half (44 percent) of consumers believe that it would be easy to replace a retailer’s loyalty program with a competitor’s program”. The problem is that everyone has a loyalty program, but aside from the brand, they’re all basically the same.
Traditional loyalty programs such as punch cards and points systems focus too much on the company and not the customer. Forcing people to spend a lot of money over time for minimal monetary rewards makes these programs ineffective and doesn’t discourage your customers from shopping elsewhere.
Customers aren’t showing loyalty. They’re milking these poorly designed products just to get free stuff or discounts on stuff they would have purchased anyway.
It’s important to understand that loyalty is not a tactic. It’s a strategy to build your entire brand around. Enter the premium loyalty movement.
Premium Loyalty Programs
Prime is the most famous example of a modern premium loyalty program.
Members can take advantage of their rewards instantly, and as you can see from our Amazon Effect infographic, Prime members are extremely valuable to Amazon.
Business Insider says Amazon Prime members spent $1300 per year compared to only $700 for non-members in 2016.
Amazon isn’t the only one who has seen tremendous success with a premium loyalty program. A key finding by Accenture shows that members of retail loyalty programs across the board generate 12-18% more revenue than non-members.
According to Forbes, GameStop has experienced tremendous success with its PowerUp Rewards premium loyalty program as well. With more than 40 million members, PowerUp Rewards members drive three times the sales of non-members and five times the profitability.
GameStop also uses the data that they collect from their program to personalize offers for members and give them value that is specific to their needs, which increases revenue and engagement even more.
It’s not just traditional retailers that are benefiting from premium loyalty programs either.
AMC Theatres, which enhanced the benefits of their premium paid tier of AMC Stubs loyalty program in Q2 2016, added more than 1.2 million households to their program just two months later. This contributed to an all-time high of four million active member households, according to Business Wire. The growth of the program also provided AMC with a much larger database of customers and more insights into their movie-going preferences which can be used for future marketing endeavors.
More so than just generating additional revenue and engagement, premium loyalty programs are about consumer data collection, analysis, and execution to provide the best customer experience.
While traditional points and discount programs of the past have been thought of as margin killers, premium loyalty programs are by nature self-funded by the recurring, high-margin subscription fees that members pay. Both brand and consumer benefit.
Keep This in Mind
A premium loyalty program is a great marketing tool for generating additional revenue and gathering valuable customer data for your brand, but the most important thing to keep in mind is that consumers have a choice. They want immediate value and will go elsewhere if you can’t provide it
Give customers the best brand experiences every step of the way. They’ll become even more valuable and they will give you strategic data that can be used to make them better customers and continue finding and retaining new customers.
Premium loyalty programs are effective. Amazon Prime has proven it and other brands from different industries are getting on board.
So, keep doing all that you do to reach customers at the right times and get them in the door, but don’t stop there.
Start thinking about how to build a premium loyalty program that is valuable to your customers. If you don’t keep them coming back, a competitor will gladly welcome them in.
Tyler Haskins
Tyler is our EVP, Marketing & Operations. He is a seasoned marketing professional with close to 20 years of experience in digital marketing and product development and has extensive knowledge of the loyalty and customer engagement space.
