According to our 2022 Premium Loyalty Data Study, 83% of consumers would join a premium loyalty program if they already belong to that brand’s free program.
Membership businesses are growing to the tune of 65% just last year with subscription commerce expected to reach $905B annually – how’s that for a major trend?
Many brands have a free points-based loyalty model that allows consumers to enjoy benefits most often for making a purchase. Some of the free programs are more advanced because they go beyond just awarding points for purchases, but also reward members for engaging with the brand.
What many of these advanced programs have in common is that they offer an additional service or experience for their top customers.
But subscription-based loyalty solutions like premium loyalty programs and paid enrollment offers go a step further.
They offer customers the ability to receive exceptional service and preferential treatment (for a fee) and the brand and customers reap the benefits of that ongoing relationship.
This article will show you how to add a subscription tier to your existing loyalty program.
What Are the Benefits of a Subscription-based Loyalty Program?
From streaming entertainment to groceries to even how we drive our cars, everything is a subscription.
A subscription-based loyalty program requires your customers to pay a fee to join. In exchange, members receive exclusive benefits like cash back in brand currency, free shipping, early access to new products and other experiential perks.
Subscription loyalty programs are becoming increasingly popular because they are exciting for consumers and brands, who receive a steady and predictable revenue stream. They also increase retention and loyalty, create a brand community and help you collect valuable data from your best customers.
By providing exclusive benefits such as discounts, early access, personalized recommendations and premium customer service, your brand can deepen its customer relationships, fostering increased satisfaction and loyalty by offering a subscription program.
You can identify customer preferences, purchase patterns and behavior with the data and member insights you collect. You can leverage this data to inform your personalized marketing efforts, product improvements and enhanced customer experiences.
With a tiered loyalty program (including a free points program and a subscription tier), another advantage is that if a member opts out of the subscription, they remain within your loyalty ecosystem.
According to our 2023 Loyalty Programs Data Study, 77% of consumers would still want to remain a member of a brand’s free loyalty program if they’re thinking of canceling their subscription loyalty membership because they’re not getting enough value out of it.
With a subscription model, a brand strives to keep its members engaged and feeling rewarded for their extra level of commitment. Therefore, it’s important to understand customer insights while creating your program so that the value proposition is appealing on multiple levels.
The Two Main Types of Subscription Loyalty Solutions
Before we get into the nuts and bolts of how to add a subscription tier to your existing loyalty program, there are two main types of subscription loyalty solutions: Premium loyalty and paid enrollment.
Premium Loyalty Programs
As pioneers in the subscription space, we coined the term “premium loyalty” to convey this method of offering a mix of benefits like free shipping, brand currency and shipping rebates along with interchangeable options like a curated marketplace, exclusive content/access and VIP treatment.
A premium tier lends itself well to a strategy that includes ongoing benefits and program optimization and can be billed monthly or annually.
Members of a premium tier pay a recurring fee for benefits they can use right away. They receive the benefits upfront instead of making transactions first and receiving rewards later. Members can engage with the program 24 hours a day, 365 days a year.
Brands receive increased customer engagement, more order frequency and higher AOV in addition to collecting valuable data about their best customers.
Here are some typical premium loyalty benefits for members:
- Cash back (immediate)
- VIP services
- Exclusive experiences
- Instant discounts
- Early/exclusive access
- Free shipping
- Shipping rebates
- Discounts at an online marketplace
With a premium loyalty program, your brand receives the following benefits:
- Increased frequency among member shoppers. According to our 2022 Premium Loyalty Data Study, 71% of premium loyalty members shop with brands whose programs they participate in at least once a week.
- Premium loyalty members are fiercely committed. Consider that 91% of premium loyalty members are likely to choose a brand over a competitor offering a lower price if they’re satisfied with the special benefits offered by the brand’s program.
- And 91% of premium loyalty members are likely to recommend a brand to friends or family when the brand offers a program with benefits they find valuable.
- Premium loyalty members are your best customers. Consider that premium loyalty members are 4x more valuable than non-premium loyalty members.
Paid Enrollment Offers
Meanwhile, a paid enrollment is a “one-time” fee for service that satisfies a specific objective.
A paid enrollment is a subscription loyalty amplifier that allows your customers to receive exciting, limited-time benefits or offers in exchange for a fee.
Due to the urgency surrounding paid enrollment campaigns, they create a sense of FOMO because they give your customers or existing loyalty program members the chance to receive amazing benefits or experiences that are not available to everyone, for a fee.
Paid enrollments are generally more time-sensitive because they’re open for either a limited time or there are only a limited number of spots. The goal with paid enrollments is to create a sense of urgency and exclusivity by offering these opportunities through your loyalty program.
Here are some example paid enrollment benefits:
- The opportunity to purchase or win a limited or exclusive new product.
- Receive discounts on products for a specific amount of time.
- VIP experiences you want to offer your best customers.
With paid enrollment, your brand receives the following benefits:
- Achieve specific goals by creating a sense of excitement and ugency
- Steady revenue, loyalty and collecting zero-party data.
- Generate revenue through the membership fees that can be used to fund the benefits, or even enhance your existing loyalty program.
Paid enrollments are typically used to gauge public interest, generate demand and create scarcity.
Think about what is unique about your brand and what it can deliver.
Like the data from our 2022 Premium Loyalty Data Study, our 2023 Paid Enrollment Data Study shows that consumers love cash back as 70% of consumers say cash back on purchases is the most important paid enrollment benefit, along with discounts and coupons. And 28% of consumers say VIP customer service is the most important paid enrollment benefit.
How to Add a Subscription Tier to Your Existing Loyalty Program
It’s important to recognize that subscription-based loyalty programs are fundamentally different from free points-based programs. They require:
- A distinct acquisition strategy (as customers are asked to pay)
- Different reward structures (funded by the subscription revenue stream)
- Enhanced security measures
- Dedicated customer service
- A robust subscription billing system
- Ability to forecast ROI and benefits
While these will vary from brand to brand and program to program, here are some best practices and principles to consider when adding a subscription tier to your existing loyalty program.
Define the benefits of your subscription tier.
What exclusive benefits will subscription members receive? This could include better discounts, free shipping, early access to new products and personalized rewards.
Set a price for your subscription tier.
The price should be high enough to cover the cost of providing the additional benefits, but low enough to be attractive to customers. Finding a price that is beneficial to your brand and enticing to your customers is the key. Your rewards and benefits should be attractive and valuable to your customers to create interest and engagement.
Update your loyalty program platform to support your subscription tier.
This could involve adding new features or functionality to support a subscription tier. Update your platform’s user interface to make it easy for members to manage their subscriptions, which could involve adding new pages or features to your website or mobile app.
Communicate your new subscription tier to your existing loyalty program members.
Explain the benefits of the subscription tier and how they can upgrade their membership. You can also offer a limited-time discount on the subscription fee to encourage members to upgrade. The more information you send to customers about your subscription tier, the more informed and aware of it they’ll be. Then they’ll be more likely to consider becoming a member.
Offer a free trial.
This is a wise move because you’re letting existing members test the subscription tier to see if they like it enough to want to join. Offering a free trial for a subscription tier also helps build trust with your customers, whether they
Segment your loyalty members and target your most valuable customers for the subscription tier.
Customer segmentation can be based on purchase history, spend level and brand engagement. This helps you understand your customers better and get a better handle on their expectations and preferences. Then you can more easily target different customer segments.
This also helps you reduce churn and enhance customer lifetime value.
Track the results of your subscription tier.
This helps you ensure that your program is meeting your members’ expectations. If not, you can always make adjustments to offer members more value.
By following these tips, you can successfully add a subscription tier to your existing loyalty program and reap the benefits of increased customer retention, loyalty and revenue.
Examples of Subscription Loyalty Programs/Paid Enrollment Campaigns
The best way to envision a subscription tier for your loyalty program is to look at examples from some of the biggest brands out there.
Here are a few examples of a few recent programs and campaigns:
B&N Premium Membership
Barnes & Noble, which has a points program, also has a subscription-based premium loyalty program called B&N Premium Membership.
The annual membership is $39 and includes:
- A 10% discount in Barnes & Noble stores
- A 10% discount for purchases made on bn.com
- A new spend-and-save reward on all shopping
For every $10 spent, B&N Premium members receive one stamp and after receiving 10 stamps, he or she earns a $5 reward, free drink upgrades in B&N Cafes, a yearly free canvas tote and free standard shipping.
The spend-and-save reward and the incentive to earn stamps elevate the subscription tier’s appeal. Barnes & Noble also has a points-based tier for its customers called Barnes & Noble Rewards.
Taco Bell’s Taco Lover’s Pass
To celebrate National Taco Day in 2022 Taco Bell’s Taco Lover’s Pass allowed participants to receive one taco each day for 30 days. The price for the Taco Lover’s Pass varied from $5 to $10, depending on the customer’s location.
Since the pass was exclusive to Taco Bell Rewards members, this limited-time, paid enrollment not only gave current members an exciting, limited-time offer but it also encouraged member signups.
This showed how a paid enrollment campaign can be on-brand, fun, engaging and exclusively available to loyalty program members.
QSR Monthly Pass
We worked with a popular Quick Service Restaurant (QSR) that launched the first-ever month-long sandwich subscription. To participate in this pass, customers had to be members of or join their existing rewards program.
Created exclusively for the QSR’s rewards program members, subscription holders could buy a specific sandwich for 50% off on the QSR’s app or on their website, once per day, all month long for a one-time fee of $15.
The results were fantastic with subscribers transacting 9X on average during the redemption period (vs. 2x 90-day prior period). Almost a third of those customers were new or lapsed guests.
Make Your Best Customers Even Better
If you don’t have a subscription tier in your loyalty program, you’re not maximizing your customer engagement potential. The previous examples targeted the top 20% of customers who have already decided they like your brand a lot.
So, now is the opportunity for true brand love!
According to McKinsey, members of subscription loyalty programs are 60% more likely to make purchases, while those who join free programs are only 30% more likely to do so.
Many brands may not have the in-house capabilities to strategize and implement such programs effectively, necessitating collaboration with a partner equipped to deliver a top-tier program. If you’d like to talk to one of our loyalty experts about subscription loyalty programs, contact us here.
Or check out The Ultimate Guide to Subscription Loyalty.