Bond
From discounts and free shipping to makeovers and workout classes, paid perks are taking off in the loyalty space.
In recent years, retailers such as Restoration Hardware, Bed Bath & Beyond, and Wayfair have launched paid loyalty memberships, and many others are following suit. In just the past month, home furnishings retailer Ethan Allen launched The Ethan Allen Member Program, which offers discounts, free shipping, and in-home delivery for $100 a year. In the U.K., grocery retailer Tesco introduced The Tesco Clubcard Plus, which offers perks such as 10% off two shopping trips a month for a £7.99/month fee. The program will launch later this year. And in Canada, book and lifestyle retailer Indigo launched a new paid tier called Plum Plus, which offers customers benefits like free shipping, 10% off most purchases, and access to events, for $39 a year.
What’s behind the push to paid? While the average person now belongs to 15 loyalty programs, they’re only active in seven, according to The Loyalty Report 2019. To get members actively engaged, brands need to evolve traditional programs and take loyalty to the next level. Paid loyalty has emerged as a prominent strategy to address this, and consumers are increasingly willing to pay to play. Our Loyalty Report found that 43% of loyalty members would pay a fee for enhanced benefits in a loyalty program, up from 37% in 2018. Unsurprisingly, Gen Zs and millennials are leading the way, with both being above 50% in their willingness to pay.
Any brand considering a paid program should take a page from Plum Plus, which aims to address three key areas of consumer need:
- Value: With a discount on every purchase, a consumer can clearly see a line of sight to the $39 fee being worth it.
- Convenience: Free shipping with no minimums will encourage smaller, more frequent purchases.
- Unique experiences and access: The value and convenience factors alone will make Plum Plus a successful program, but what can truly result in its taking off could be unique experiences that create a deeper, emotional connection with members.
To date, Indigo hasn’t said what sort of experiences and access it will offer Plum Plus members, but there are many examples of one-of-a-kind experiences that demonstrate paid loyalty done right. Lululemon is a testing a $128-a-year loyalty program that includes curated events and workout classes. For $5 a month, CVS Health’s CarePass includes a 24/7 pharmacist helpline, giving members the ability to speak live with a pharmacist when they have questions about prescriptions. Restoration Hardware’s RH Members Program offers members complimentary interior design services, on top of rich discounts, for $100 a year. Rather than rely on discounts, which do little to differentiate programs, paid loyalty gives brands the opportunity to create brand-aligned experiences that build bonds with consumers, which in turn build business.
Is paid loyalty right for your business?
To decide if paid loyalty makes sense for your business, you will likely first ascertain whether the value offered to members will result in enough sign-ups and incremental spend to drive business results. However, many other factors should be considered as more and more paid programs hit the market:
- Determine what features and benefits would appeal to your members—by asking them. An element Indigo definitely got right with Plum Plus was designing the program with feedback from customers about what they most wanted out of a membership program, and testing the program in select markets before launching it nationally. Pretotype and/or pilot to ensure you’re on the right path.
- If you have an existing loyalty program, understand what is and isn’t working, and determine if additional benefits offer enough value to drive consumers to a paid program. What Plum Plus does not do (and rightly so) is alter the earn rate (five points for every dollar spent) when compared to the free version of Plum. Many programs are relying less on earn rate as a key lever, as consumers are looking for benefits beyond points to justify the fee.
- Develop a proper methodology and framework that will allow you to test and learn and evolve the program without any major missteps. The key here is not going in blind.
As paid loyalty quickly becomes “the new loyalty,” there may be an urgent need for your brand to enter this space, giving your program the first-mover advantage. Consumers aren’t willing to pay for two or three paid programs per category—they only have room for one paid program in each category. Those who are willing to pay are declaring a clear commitment to the brand. Will it be yours?
