Much has been written about acquisition and retention in the loyalty industry. Which strategy should you focus on more as it relates to your loyalty program?
You can make solid cases for prioritizing acquisition or retention as a loyalty strategy. But we believe consumers should have loyalty options.
Here’s how combining a traditional loyalty program with a premium loyalty tier covers your bases and gives your customers the best of both worlds.
Breaking Down Traditional and Premium Loyalty Programs
Traditional loyalty programs typically are points-based and great at getting consumers in the door and collecting zero- and first-party data.
These loyalty programs, where members earn points over time to receive rewards down the road, appeal to most consumers.
A traditional tiered program enhances member benefits and includes double points, exclusive offers, early access to sales, and free shipping with no threshold. This type of program introduces status to the loyalty ecosystem.
Your existing traditional points program plays a crucial role in your overall loyalty strategy. Acquiring members to your traditional loyalty program starts the journey to developing long-term relationships.
A premium loyalty program targets your best customers, introduces them to elevated benefits, and creates a different type of member relationship.
Premium loyalty members pay an annual fee and are rewarded every time they engage and receive benefits like instant discounts, free shipping with no minimums, and VIP experiences.
A premium loyalty tier allows a brand to offer benefits that extend beyond typical transactional incentives. The goal of a premium loyalty program is to get your best customers engaging more, spending more, and advocating for your brand.
Your brand acquires most of its members through traditional loyalty programs and retains them through a premium loyalty tier.
A Strong Connection Between Traditional and Premium Loyalty Programs
According to our 2021 Premium Loyalty Data Study, 71% of consumers belong to a free, traditional loyalty program.
Traditional loyalty members are increasingly willing to shift to premium loyalty programs for better benefits. The study shows that 81% of respondents who belong to traditional programs would join a retailer’s premium program if the benefits were valuable.
These two statistics underscore the strong connection between traditional and premium loyalty programs, and between acquisition and retention.
Traditional loyalty programs attract wider audiences than premium loyalty programs because there is no barrier to entry. Premium loyalty programs charge an annual fee and attract your best customers with the best benefits your brand has to offer.
Seventy-five percent of consumers have tried a new shopping habit since COVID-19 started in the U.S. in March 2020. As a result, retailers are finding it harder to retain customer loyalty.
Many consumers don’t want to wait for loyalty program rewards and that’s where the value of premium loyalty comes into play. Premium loyalty members are fiercely loyal to their favorite retailers and serve as brand advocates.
Nearly 90% of premium loyalty members would recommend a retailer to family or friends if the retailer’s premium loyalty program offers valuable benefits. Consider that nearly three-quarters shopped more with retailers whose premium loyalty programs they were part of during the pandemic, and 41% shopped significantly more with those retailers.
Your premium loyalty members aren’t more valuable because of the annual fee they pay to join the program. They’re more valuable because they engage with your brand more, spend more, and advocate for you with family and friends.
Consider that 51% of retailers with premium loyalty programs say members are 4x as valuable as non-members.
If a traditional member wants to join your premium program, it’s easier to convert them than a cold customer. Either way, your brand stays top of mind.
Three Examples of Programs that Combine Traditional and Premium Loyalty
Here are three examples of brands that combine a traditional loyalty program and a premium tier.
GameStop: Offers a traditional (PowerUp Rewards) program and a premium (PowerUp Rewards Pro) tier.
Members of the traditional program earn 10 points per dollar spent while the Pro members earn 20 points per dollar spent.
Pro members also receive:
- A $5 welcome reward
- A $5 monthly reward
- Pro-only event access
- Game Informer subscription
- 10% extra in credit
Pro members pay an annual fee of either $14.99 or $19.99. The only difference is the lower fee gives members digital copies of Game Informer while the higher fee gives them print copies.
PowerUp Rewards Pro members can join GameStop Gives in supporting charitable organizations. GameStop does a great job of updating the program based on customer insights and creating a sense of exclusivity and community.
Best Buy: Has a free loyalty program called My Best Buy, where members earn points for every dollar they spend on eligible purchases and receive free shipping with no minimum amount.
Recently, Best Buy launched a premium loyalty program called Totaltech.
For $199.95 per year, it offers all the benefits of the elite tier of My Best Buy, plus:
- Up to 24 months of product protection with an active membership.
- VIP access to dedicated phone and chat teams.
- Unlimited Geek Squad tech support 24/7/365.
- Access to exclusive Totaltech member prices.
- Free in-home delivery and installation.
- Free two-day shipping.
- Extended 60-day return and exchange window.
- Everyday savings on repairs, advanced services, and more.
Best Buy doesn’t need to phase out its traditional program at all. Consider that 67% of consumers are likely to join a retailer’s premium loyalty program if they already belong to its traditional program.
CVS: Offers CVS ExtraCare (traditional) and CVS CarePass (premium).
CVS has done a phenomenal job acquiring new members, considering there are 74 million ExtraCare members. The program offers cash back and extra savings.
For CVS’s top customers, CarePass was introduced for $5 per month.
CarePass offers free delivery on eligible prescriptions, along with fast, free shipping, and instant discounts on certain CVS Health brand items. CarePass members also receive monthly rewards that can be used in-store and online.
There is also an experiential element to CarePass: Access to a live pharmacist chat line 24/7. CVS offers an abundance of value in its loyalty programs.
Prioritize Acquisition AND Retention
Instead of choosing which one to prioritize, your brand can make both equally important.
When you combine a traditional loyalty program with a premium tier, you’re giving customers options and the freedom to move within your loyalty ecosystem.
Your traditional program acquires members, and your premium tier retains them.
With different benefits offered in each loyalty program, your customers will start where they see fit and, eventually, try your premium tier.
Acquisition and retention can be done at the same time when you offer a traditional loyalty program and a premium tier.