Subscription And Loyalty Strategy: The Ultimate Revenue Growth Combo

Gone are the days when eCommerce brands advertized products and customers simply made purchases.

Today, there are many factors that customers consider. Hence, transactional relationships are no longer sustainable for brands. Customers prefer long-term engaging associations.

This brings the spotlight on marketing and retention strategies. Subscriptions and loyalty programs are two key long-term customer retention methods. And when eCommerce brands combine these two strategies, it can result in maximum growth.

In this blog, we explore how subscription and loyalty strategy combined can help your business, and how to go about it.

Why combine subscription and loyalty strategy?

According to a report by Forbes, the cost of customer acquisition has gone up in the last decade. It is now $29 for every customer acquired. This puts the emphasis on retention strategies to reduce customer acquisition costs.

Now, subscription and loyalty strategies individually help with customer retention. But when combined, the two strategies can increase the value of the other. For instance, it can increase engagement, reduce churn, and lead to higher customer lifetime value (CLV).

Here are some examples of how brands combine these two Shopify retention strategies:

Example 1: Amazon Prime

Amazon Prime membership is both a subscription and loyalty program in one. Members pay an annual fee and enjoy benefits such as free shipping, Prime Video, etc., while also earning points.

Example 2: HelloFresh

HelloFresh food subscription offers Fresh Points program through which long-term subscribers can earn points, discounts, and free mean upgrades, among other benefits.

Source

How do loyalty-driven subscriptions improve customer retention?

Now let’s look into the details of how exactly loyalty programs enhance engagement and growth opportunities when combined with subscriptions, and some takeaways for your Shopify subscription and loyalty strategy.

By rewarding long-term subscribers

Offering loyalty points to subscribers can improve the value proposition of your subscription plans. Also, when subscribers see tangible benefits, they are less likely to cancel their subscription; and more likely to continue with your brand.

For instance, in addition to free shipping, gifts, discounts, early access, and in-person events, subscribers also get points. These points have monetary value and can be used to make more purchases. This gives subscribers one more reason to shop more from your Shopify store with their points.

Example: Chewy pet supply subscription offers “Paw Points” for scheduled deliveries, redeemable for future purchases or donations to animal shelters.

By encouraging renewals through tiered programs

Tiered loyalty program structures offer benefits based on levels or tiers. For instance, gold level members get more benefits than silver and bronze members. Thus, silver and bronze members strive to become gold members. With loyalty-driven subscription programs, you can incentivize higher spending and long-term loyalty, and customers tend to stay with your brand longer.

By increasing engagement

Loyalty programs can help you increase customer engagement opportunities for subscribers. For instance, offering points on every subscription order gives you the opportunity to interact and communicate with subscribers. When you use these communication opportunities smartly, you can increase the quality of your engagement with subscribers.

How to structure a successful subscription + loyalty model?

There are various ways you can structure your subscription and loyalty program. The subscription app you choose should provide options and customization features to create a unique subscription and loyalty program. Here are some structures you could consider:

1. Tier-based subscription and loyalty strategy

This subscription model is based on different levels or tiers. For example, bronze, silver, and gold are common tiers used by eCommerce businesses. Moreover, most brands create three or four tiers, as it is easy to manage.

So what can you do with a tier-based subscription and loyalty program?

• Offer loyalty points towards subscription orders based on the tier or level
• Encourage subscribers to increase their spend in order to progress to higher levels
• Clearly mention the loyalty benefits for each tier and ensure the benefits are exclusive to each tier
• Make it easy for subscribers to advance to the higher tiers

2. Gamification for subscription and loyalty strategy

There are numerous ways to engage customers beyond purchases, points, and transactions. If you want to create a unique and engaging subscription program, you will have to bring in exciting rewards and gamification.

What are some unique and engaging rewards you could consider?

• Think of rewards that would be relevant to your products, services, and subscribers
• For example, allow customers to use their points to support causes such as animal welfare, environmental initiatives, etc. This would attract conscious consumers
• Offer points to subscribers that refer their friends or reshare your content on social media

3. Monetize subscription and loyalty strategy

Most brands offer free subscriptions. However, there are many brands that don’t shy away from charging a fee for their subscription programs. This has many benefits, such as an extra revenue generation stream, a KPI to measure year after year, and a pool of interested subscribers.

Here are some ways you can monetize your subscription and loyalty program:

• Introduce paid memberships alongside traditional subscription plans
• Increase the paid subscription fees every year or every few years, leading to recurring revenue growth
• Allow customers to progress tiers by joining paid memberships

How does combining subscription and loyalty strategy impact business finances?

While you would need to incur some expenses to manage a subscription plan that has loyalty benefits combined in it, the monetary advantages this strategy will bring are way more than the expenses.

Let’s explore some ways in which your Shopify business can benefit with this combined strategy:

1. Increase in customer lifetime value (CLV)

Both subscription and loyalty programs have one common advantage. They improve CLV. Both these strategies involve long-term engagement from customers and hence lead to increased CLV.

A study by BusinessDasher found that loyal customers are 5x more likely to repurchase, 5x more likely to forgive, 4x more likely to refer, and 7x more likely to try a new offering.

Here’s how it helps increase customer lifetime value:

• Long-term subscription sign-ups (6 months, 1 year) ensure more revenue for your business and more spends from customers
• With tiered structures, customers tend to spend more to progress to higher levels, thus, increase CLV
• When you focus on creating more engaging experiences for subscribers and loyalty members, they tend to stay more loyal to you. They also refer their friends, which adds to your revenue

2. Reduced churn rates

According to the Harvard Business Review, engaged customers are more likely to be loyal to brands. That’s because higher engagement with a brand leads to deeper emotional connections and satisfaction. These factors lead to repeat purchases and reduced churn.

Here’s why engaged customers are less likely to cancel subscriptions:

• With more engagement, you can make customers feel more invested in their relationship with your brand
• Loyal customers tend to make repeat purchases, increasing recurring revenue growth and profitability
• Loyal customers are more likely to increase word-of-mouth referrals
• Increasing customer retention by 5% can increase profits by 25% to 95%. With subscription and loyalty program together, you can increase retention

Example: DollarShave men’s grooming subscription model’s referrals program offers 500 points to subscribers who share referrals.

3. Higher average order value (AOV)

With subscriptions and loyalty programs, brands have more opportunities to upsell and cross-sell. This directly leads to an increase in the average order value. Consistent increase in order value can have a positive impact on profits.

Here are some ways to create upselling and cross-selling opportunities for subscription and loyalty strategy:

• Upsell and cross-sell new products added to the subscription inventory and offer exclusive extra points
• Offer exclusive loyalty rewards on specific recommended products
• Promote subscribers to a higher loyalty and subscription membership tier when they spend more

Best practices for implementing subscription and loyalty strategy on Shopify stores

• Choose the right platform for your Shopify store. It is critical to choose the best Shopify subscription and loyalty apps that provide comprehensive features. Your app should allow seamless experience for both subscriptions and rewards programs.
• Appstle Subscriptions App and Appstle Rewards & Loyalty App is the best Shopify app preferred by merchants across industries.
• Collect, analyze, and use customer data to personalize rewards. Create customer segments and offer subscription perks and loyalty points.
• Utilize multiple communication platforms, such as email, SMS, push notifications to engage customers and drive retention. Automate subscription and loyalty strategy communication.

Example: The North Face, an outdoor gear brand, has a loyalty program called XPLR Pass. The program offers discounts, field testing options for gear, and dedicated customer support, along with points when customers return their old gear.

Ready to start your Shopify subscription and loyalty strategy?

Combining subscription and loyalty programs can be a game-changer for your business growth. From driving engagement to increasing loyalty and multiplying profits, a combination of the two strategies can set your business for success.

And the best part, you can set up and manage these strategies using Appstle apps. Appstle provides a suite of intuitive and comprehensive apps for Shopify marketing requirements.

Appstle Subscriptions and Appstle Loyalty & Rewards apps enable seamless integration with each other and other third-party apps. Their in-built automation and marketing features make it easy for you to implement the above strategies.

Explore Appstle for your subscription and loyalty strategy today!