Premium loyalty programs aren’t just for retail giants like Amazon and Walmart. Many brands of all shapes and sizes have launched their own programs – and continue to do so. That being said, there’s a lesson or two to learn from the biggest names in retail.
- How has Walmart helped cement the rising popularity of premium loyalty programs?
- What are some examples of these types of programs?
- How does adding a premium tier to an existing loyalty program give your customers the best of both worlds?
The answers to these questions and more can be found in a recent Total Retail Tech Insights podcast featuring Brian Carl, VP of Marketing at ebbo; and Joe Keenan, editor-in-chief of Total Retail.
Listen to the third episode in this four-part series here: Lessons You Can Learn from the Best Premium Loyalty Programs in Retail
If you don’t get a chance to listen, here are the five biggest takeaways from the episode.
Amazon Prime has Been the Standard Bearer for Premium Loyalty
Prime has become part of daily life for millions of people around the world.
Amazon Prime is a premium loyalty program that is, arguably, the loyalty program of all time. The program has been around for 18 years and half the U.S. population are members. That is staggering.
Members each pay $139 per year because of the abundance of value found in Prime.
A program like Prime is a massive revenue generator and quite profitable because it changes consumer behavior.
Prime focuses on instant benefits and members will receive fast, free shipping every time they shop with Amazon.
When Amazon launched, online shopping wasn’t easy and convenient like it is today.
What Amazon achieved through Prime is it solved customer pain points. And now that fast, free shipping has become ubiquitous, especially with premium loyalty programs. It also significantly enhanced the overall customer experience.
Consumers need a mix of transactional and experiential benefits because combined, they create brand advocates.
Amazon has done this through Prime. Retailers want to be that “reflex” choice like Prime is for so many.
Prime is part of the fabric that popularized premium loyalty and continues to do so.
Walmart Cemented the Trend Toward Premium Loyalty
When Walmart launched its Walmart+ program in September 2020, it cemented the trend toward premium loyalty programs because you have the two largest retailers in the space, Walmart and Amazon, competing against each other with them.
According to our Loyalty Industry Data Study, after Walmart launched Walmart+, 95% of loyalty marketers who have a loyalty program and responded to our survey are already discussing launching a premium loyalty in 2021.
There are three reasons why we think premium loyalty is growing substantially.
First, customers have more choices than they’ve ever had before which has forced retailers to find new ways to differentiate themselves to try to engage customers more and retain their loyalty.
The second is a demand for instant benefits.
We live in an instant society where consumers want everything now, which includes the benefits they receive in a loyalty program. With infinite choices available to them, consumers don’t have time to wait and will find what they’re looking for elsewhere.
The third is the normalization of subscription programs, which have become a staple of everyday life for millions of people.
These three things are part of the reason we’re seeing a rising trend toward premium loyalty.
Premium Loyalty Isn’t Just for the Mega Retailers
While 2020 was a reactive year, 2021 is more of a proactive year.
More retailers outside of Walmart and Amazon are investing in loyalty programs that capture existing customers, further engage them, and create deeper connections.
Brands are diving deeper as they get more proactive to try and keep customers back in their loyalty ecosystems.
Best Buy is interesting because it has a free loyalty program and launched a premium program called Best Buy Beta.
This program focuses more on the experiential side that includes extended warranties, unlimited tech support from the Geek Squad, round-the-clock concierge service, free installation of many appliances and products, and fast, free shipping.
Consumers can join the Best Buy Beta program for $199.99 per year or $179.99 per year for customers who have the retailer’s credit card.
Another successful premium program with a high price point is lululemon.
With a $168 (up from $128) annual membership fee, Lululemon’s program is incredibly engaging.
Members receive a free pair of yoga pants or shorts when they join and have access to curated events and workout classes. Not every premium program can be priced like Lululemon’s, but in this case, it works.
Through the program, Lululemon builds strong connections with members and creates a unified brand community.
On the flip side, CVS CarePass is $5 a month and is built around prescriptions.
Besides free shipping on prescriptions, CVS awards members $10 a month in credits to shop there and 24/7 access to a live pharmacist.
Lids is a fascinating one just because it’s $5 annually.
It’s a very simple, transactional value proposition for consumers to understand. Members receive 20% off all headwear and embroidery, and 10% off apparel and novelties.
Not bad for $5 a year.
The program changes behavior and becomes that reflex retailers desperately seek from consumers.
A Premium Tier Complements Your Free Program and Give Customers Best of Both Worlds
Free and premium work best when done together.
In fact, 81% of respondents who belong to a traditional loyalty program said they would join that retailer’s premium program if the benefits were good.
You’re priming the funnel for your premium loyalty program with a free loyalty program. Free programs are great for acquisition, and collecting first-party data. They also can serve as a springboard to your premium tier offering.
A premium loyalty tier allows a brand to offer benefits that extend beyond typical transactional incentives many times including experiential rewards. These benefits can take many forms, including convenience perks such as free shipping and returns.
If a member downgrades from the premium loyalty program to the free tier, they’re still moving within the overall program and not dropping out completely. If a free member is interested in joining your premium program because of the clear value, the consumer has upgraded and become more valuable.
It’s that loyalty ecosystem we talk about. Giving consumers options is a great thing, so having loyalty options only makes your program more attractive.
Either way, your brand stays top of mind. This makes it easier to move customers toward the premium tier.
Premium Loyalty Goes Beyond Retail
Everyone has heard of Amazon Prime, right? This premium loyalty program launched in 2005 and has more than 200 million global members.
While Amazon has been busy since then building and refining its program, there have been many other premium loyalty programs that have emerged (Restoration Hardware, Bed Bath & Beyond, and Lululemon) that we’ll focus on later.
But the trend toward premium loyalty extends beyond retail.
In March Tripadvisor launched a $99 membership program, which is free for hotels to join, called TripAdvisor Plus.
Tripadvisor Plus allows travelers to unlock insider savings, personal service, benefits, and various perks (such as a free bottle of wine upon check-in, room upgrades when available, or spa credits).
In January Spirit Airlines reintroduced its $9 Fare Club as the Spirit Saver$ Club. The new membership program has different options.
Discounted fares and bags were existing program benefits, and now members can receive discounted seats, discounted Flight Flex, discounted shortcut security, and discounted shortcut boarding.
Panera Bread has its coffee membership as part of its loyalty program.
Premium loyalty programs, where members pay a fee to join and receive instant benefits, are popping up across all kinds of industries now with future growth projected.
Key aspects of premium loyalty, like subscription and instant gratification, are becoming quite popular for many more retailers now because of the proven results.
Specifically, retail is taking cues from the three megatrends revolving around premium loyalty: Consumers are more empowered and have more choices; consumers expect things to be instant, and consumers are comfortable with subscriptions.
Keep Your Loyalty Program Members Engaged
Having a successful loyalty program is about putting your customers at the center of everything you do, offering ease of use and clear value.
Amazon has been the standard-bearer for premium loyalty.
Walmart cemented this popularity when it launched Walmart+ in 2020.
Amazon will always have Prime as the standard-bearer of premium loyalty, but the 18-year-old program continues to show retailers everywhere the best practices for running a successful program.
Premium loyalty isn’t just for mega retailers and adding a premium tier to a free program gives your customers the best of both worlds.
Make your loyalty ecosystem the best it can be and differentiate yourself from competitors by adding a premium tier to your free program. This will attract more customers and your best ones will rise to the top very quickly.
Check out the previous podcast recap in the series: How to Acquire and Retain Premium Loyalty Members
Check out the next podcast recap in the series: How to Build a Premium Loyalty Program