It’s that time of the year again.
Customers are mostly done with their year-end and festive season shopping.
For retailers, this indicates a period of lull in the coming weeks.
That means, it’s time to focus on building and implementing strategies to increase customer lifetime value (CLTV) for continued business.
This guide focuses on one such strategy — paid loyalty programs.
Whether you already have a loyalty program or want to set up one for your Shopify store, this guide shares the ins and outs of paid loyalty programs.
What is a paid loyalty program?
Loyalty programs can be free or paid. Paid loyalty programs are fee-based. Customers get benefits, perks, and advantages in return of joining a loyalty program by paying a fee. The fee can be either recurring, annual, or one-time.
One of the best examples of an eCommerce paid loyalty program is Amazon Prime. Customers join Amazon’s loyalty program by paying a fee. In return, they receive benefits such as free shipping, among other perks.
Here are some of the benefits offered by Amazon Prime loyalty program:
Paid vs. free loyalty programs: what’s the difference?
One of the most obvious differences between paid and free programs is that paid programs involve a fee, while free programs do not. But the main differences between these two types of programs is the value-add to customers and retailers. Let’s look at the differences between paid and free loyalty programs from the value perspective.
Here’s what a study by McKinsey found on the benefits of paid loyalty programs:
1. Attract new customers
According to a study by Harvard Business Review, attracting new customers is the top reason for brands to set up loyalty programs — 65% of brand executives cite it as a top goal of their loyalty programs.
In general, both free and paid loyalty programs help attract customers. One of the most common ways this happens is through word of mouth. Satisfied customers often tend to spread word about good loyalty programs. This helps brands increase loyalty program members. Customers like to receive free perks, benefits, and incentives such as reward points, and often choose brands based on their loyalty programs.
2. Increase in sales
You might assume that consumers might favor free loyalty programs more, but a McKinsey survey found that members of paid loyalty programs are 60% more likely to spend more on brands after subscribing, while free loyalty programs only increase that likelihood by 30%.
That’s 2x more sales for eCommerce stores. Here are the reasons why paid loyalty programs help increase sales:
- Customers that already like your products/brand tend to join paid programs
- These paid members are serious, high purchase intent members
- Offering value in terms of incentives, benefits, and perks helps increase sales
3. Build emotional brand connection
Paid membership plans create an atmosphere of exclusivity for members. Hence, there’s a better emotional connection with the brand. Moreover, brands often create more personalized experiences for paid loyalty program members.
Personalization helps boost the emotional connection between brands and customers. This ultimately leads to higher customer retention. When customers find value in your loyalty program, they are more likely to stick around longer.
4. Improve customer data collection
Paid loyalty programs work as excellent tools for collecting valuable customer data. Each interaction, including purchase history and reward redemption patterns, provides insights into customer behavior.
Additionally, brands can incentivize customers to share specific data, such as offering birthday rewards in exchange for the customer’s birthday date. The gathered data empowers brands to make informed marketing and strategic decisions.
For example, one of the best known loyalty programs is cosmetics brand, Sephora. The brand collects insightful customer data by strategic incentives offered against the collection of customer data. Look at the image:
Paid loyalty program examples to learn from
Many brands have paid loyalty programs. But only some succeed. Why’s that so? That’s because these brands have made their loyalty programs unique by offering valuable benefits, creating communities for members, and consistently offering value to customers via innovative strategies. Let’s look at a few paid loyalty program examples for inspiration.
1. Barnes And Noble
Barnes And Noble is an online bookstore that has the largest number of outlets in the USA. It has a free and paid loyalty program. While the free membership plan offers reward points, the paid plan offers a wide variety of benefits — discounts on purchase, free shipping, free books, etc.
Takeaway: Barnes and Noble’s premium loyalty program offers a wide range of benefits as opposed to the free program. The attractive benefits and incentives would bring more paid membership sign ups even though the program is paid.
2. M & S Sparks Plus
Clothing brand Marks and Spencers introduced Sparks Plus paid loyalty program. Members pay a yearly fee to enjoy benefits such as unlimited next-day delivery, free monthly hot drink, exclusive invitations to events, among other benefits.
Takeaway: While the yearly membership fee is £120, the brand promotes it as £10 per month that makes it more affordable and enticing for customers. What is more, the program has a dedicated app that makes it easy for customers to enjoy the experience.
3.Swarovski Crystal Society
The crystal brand, Swarovski offers two paid loyalty programs charged based on the period — three years or one year. Customers can enjoy discounts and vouchers on their birthday, exclusive access to sales, free shipping on all orders, free jewelry repair service, among other benefits.
Takeaway: The brand keeps it simple and easy for customers to choose their preferred loyalty program plan by offering only two options. Too many options can lead to decision fatigue.
4. ASOS Premier
Another good paid loyalty program example is ASOS — the popular online clothing retailer, provides cost-saving delivery discounts through its Asos Premier service paid loyalty program. For an annual fee of £9.95, customers can enjoy reduced delivery costs and gain exclusive access to discounts and sales. While the current benefits are appealing, there is potential for ASOS to enhance the Asos Premier membership by introducing additional perks for its valued members.
Takeaway: The brand clearly shows customers the delivery cost difference between the premier and the standard delivery — delivery being one of the biggest reasons for customers to abandon carts and choose not to buy from certain brands.
Step-by-step: Set up a paid loyalty program for your Shopify store
If you’re all set to start your paid loyalty program, all you need is to follow the steps in this section. This quick X-step guide will get you started easily and fast.
Step 1: Define your paid loyalty program goals
To ensure success, it’s important to set clear goals. Is your goal to increase spending among customers, or to encourage repeat purchases, or to grow your member count. Understanding the factors that drive these goals within your target audience is key. Designing the program to align with related actions will enhance the success of your program.
Step 2: Identify your target audience
Understand what attracts potential loyal customers to increase their engagement with your brand. Segment customers based on their purchase behaviors, preferences, and needs. This will help you tailor your loyalty program accordingly.
Pro tip: Focus on acquiring members for your paid loyalty program from segments with the highest potential value instead of pursuing the entire audience simultaneously.
Step 3: Define the rewards/benefits structure
Specify how customers can earn and redeem rewards or incentives. Choose a rewards structure that aligns with your products/services, target audience, and your loyalty program goals.
Pro tip: Involve customers to work out the kind of rewards that will be beneficial to them as well as you.
Step 4: Specify loyalty program fees
Clearly outline your paid loyalty program and the fee. If there are multiple tiers or plans, mention the fee for each tier along with associated benefits. Make the program valuable to customers by offering incentives, for example, renewal discounts for annual fees.
Pro tip: Justify the annual fee by breaking it down into a monthly equivalent. Tell potential members how the fee compares to the value of the loyalty program.
Step 5: Communicate how the program works
You may set up an excellent loyalty program but the key is in your potential customers knowing about it. Hence, clearly explain how the program works. You could have a separate dedicated page, FAQs, explainer videos, etc. Create communication plans for existing customers, new/potential customers, and ongoing marketing plans.
Step 6: Make it engaging
Ensure that the rewards and perks in your premium loyalty program are engaging enough for members to continue their membership year-after-year. The trick is to be consistent and keep introducing new benefits and perks.
Step 7: Monitor, analyze, and optimize
Continuously monitor and analyze the performance and results of your paid loyalty program. Treat it as an ongoing initiative, requiring regular maintenance, improvement, and management. Keep track of program members, customer lifetime value (CLV), average spend, and purchase frequency for both loyalty and non-loyalty customers. This analysis provides insights into the program’s effectiveness and guides adjustments for sustained value for both customers and the business.
Get started with a premium loyalty program
You can easily initiate a paid loyalty program for your Shopify business using the Appstle Loyalty and Rewards App. The app is designed for Shopify and Shopify Plus sites to set up loyalty and rewards programs with ease.
Appstle Loyalty and Rewards app offers features such as gamified reward programs, customization, seamless migration from other apps, easy integration with third-party tools, etc. Its comprehensive features make it a preferred choice for Shopify retailers.
Explore Appstle Loyalty and Rewards App for your Shopify store.