Subscription-based loyalty programs have been gaining in popularity and customers enjoy them because they receive next-level benefits and rewards that free points programs can’t offer.
Typically, subscription loyalty program members pay monthly or annual fees while brands receive a recurring revenue stream, elevated engagement and enhanced customer data they can use to tailor member communications.
If you’re considering a subscription element for your loyalty program, read on to learn more about this rising trend.
Table of Contents
- What is a Subscription Loyalty Program?
- Types of Subscription Loyalty Programs
- How Does Subscription Loyalty Benefit Your Brand?
- Types of Subscription Loyalty Rewards
- Examples of the Best Subscription Loyalty Programs
- Things to Consider Before You Price Your Subscription Loyalty Program
- Make Your Subscription Loyalty Program One of the Best
- Is a Subscription Loyalty Program Right For Your Business?
What is a Subscription Loyalty Program?
Unlike points-based programs, subscription-based loyalty solutions like premium loyalty and paid enrollments typically offer benefits like VIP services, exclusive experiences, instant discounts, first access to products and events and free shipping.
This helps brands build 1-to-1 relationships with members and serve as a retention tool as well. Providing members with valuable benefits plays a big role in keeping them loyal and engaged with your brand.
Some examples of subscription loyalty programs include Amazon Prime, CVS CarePass, Barnes & Noble Premium Membership, My Best Buy Plus and My Best Buy Total.
Specific types of subscription services have also caused the rise of subscription loyalty programs, including streaming services, SaaS (software as a service) products and meal delivery services.
Robbie Kellman Baxter, founder of Peninsula Strategies and author of the book, “The Membership Economy,” believes in the power of subscription loyalty programs.
“They’re a way for the most engaged customers to raise their hands and indicate an intention of loyalty,” she told ebbo. “They immediately gain the benefits, which drive happier customers and higher spend and retention levels.”
Personalization, value and an improved customer experience are the main contributing factors to the rise in subscription loyalty programs.
- Personalization: Subscription loyalty programs can be tailored to members’ needs and preferences. These programs are geared toward the top 10% of your customers, which allows better personalization for your best customers. It separates your points program members from your top-tier members and allows you to communicate differently with each group.
- Value: Subscription loyalty programs offer members exclusive rewards such as discounts, early access to new products and free shipping. These rewards make members feel valued, appreciated and recognized.
- Improved customer experience: As you receive enhanced data, you can tweak the overall customer experience. For example, a food delivery service could use customer data to see how long it takes for orders to be delivered and identify areas where they can improve the delivery process.
Members of subscription loyalty programs have the highest expectations so you have to make sure you’re offering them valuable benefits along with excellent customer service so you can retain them for the long run. And they’re more valuable to your brand.
Types of Subscription Loyalty Programs
There are two types of subscription-based loyalty models: premium loyalty programs and paid enrollment offers.
A premium loyalty program requires members to sign up and pay a subscription fee (generally billed annually or monthly) for valuable benefits they can use at any time — without having to accumulate points over time.
For example, CVS CarePass offers a $10 monthly promo reward, 20% off CVS Health brand products, free 1-2 day shipping on every qualifying order, free same-day or 1-2 day delivery on eligible Rx orders and a 24/7 pharmacist helpline, all for $5 per month or $48 per year.
A paid enrollment is a one-time paid incentive that creates a sense of urgency among your customers and increases their incremental spend and brand advocacy. In exchange for a fee, consumers enroll to receive limited-time benefits — like a chance to purchase or win exclusive items or members-only offers.
For example, Taco Bell launched a Taco Lovers’ Pass where rewards members could get a free taco per day for 30 days after purchasing a $10 pass, but the passes were only available for a limited time.
The promise of value is important for you and your customers. Consider that 78% of consumers who aren’t participating in any paid enrollments said they’re likely to opt in if the paid enrollment offer was exciting or valuable.
How Does Subscription Loyalty Benefit Your Brand?
A subscription tier allows your brand to engage your best customers with appealing benefits. This makes it easier for you to identify and segment your customer base. Consider that a McKinsey report found that the average customer lifetime value (CLV) for members of a subscription loyalty program is 30% higher than for non-members.
And, since consumers pay to join your subscription loyalty program, you create a steady and predictable revenue stream.
As the cost of loyalty programs continues to rise, adding a subscription tier can help you mitigate those costs.
While a platform-only approach like Software as a Service (SaaS) is less expensive for brands, many don’t have the number of dedicated resources available to manage it.
A subscription-based loyalty program provides your members with valuable benefits and allows you to cover your costs, pay for those benefits and receive elevated customer data that you can use to tailor better experiences in the future.
It also helps you segment data on your best customers and increase overall engagement.
After funding your subscription-based loyalty program with member fees, use any excess money to cover the costs of a free program or for internal initiatives.
Sixty percent of consumers indicated that they were more likely to join a brand’s free loyalty program if it gave them the chance to take advantage of paid enrollments that gave them valuable rewards or benefits. And sixty-eight percent of consumers are likely to join a paid enrollment if recommended by friends or family and 71% are likely to recommend subscription products they’re excited about to friends and family.
In keeping with the same theme, 68% of consumers are likely to join a paid enrollment program for a brand they like if a trusted friend or family member recommended it to them
Here are some other benefits a subscription tier can give your brand:
- Increased purchase frequency
- Increased AOV
- Increased data collection
- Increased customer loyalty: Because subscription tier members receive exclusive benefits, it makes them more excited to engage with your brand and increases their loyalty.
- Higher customer lifetime value: Since subscription members typically spend more money with your brand compared to non-members, they’re more likely to buy new products and services from you and are more likely to refer your brand to their family and friends.
- Improved customer insights: Subscription tiers help you gain more insights to better understand your customers’ needs and preferences. These insights can be used to tailor experiences and create more targeted marketing campaigns.
Overall, a subscription tier can help your loyalty program build deeper relationships with members.
The statistics below from the 2022 Premium Loyalty Data Study illustrate the popularity of subscription-based loyalty.
- 91% of premium loyalty members said they’re 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 premium loyalty program.
- 83% of consumers said they were likely to invest in a brand’s premium loyalty program if they already belong to that brand’s traditional loyalty program
- 78% of consumers would pay for a premium loyalty program
- 77% of consumers that don’t belong to any premium loyalty programs would join one if their favorite brand offered one and the benefits were valuable to them
- 72% of consumers belong to a premium loyalty program
- 71% of premium loyalty members shop with brands whose programs they participate in at least once a week
Consider that 54% of consumers expressed their willingness to participate in a subscription-based paid enrollment program if the benefits were deemed valuable. This statistic illustrates how critical the role of perceived value is when it comes to driving member acquisition.
Types of Subscription Loyalty Rewards
While you’re planning your subscription loyalty program, the most attractive pieces for consumers revolves around the rewards you offer. Rewards are what will draw your best customers to your program and keep them coming back for more.
Typically, the best subscription loyalty program rewards align with what your customers want and your brand identity.
Some popular subscription loyalty program rewards are:
- Free or discounted products or services: Consumers always will be enticed by free or discounted products.
- Early access to new products or services: This exclusive reward makes your loyalty program members feel special and creates brand advocates.
- Free shipping/delivery and returns: This reward is always at the top of most consumers’ list of wants and expectations from a loyalty program.
- Personalized rewards: When any loyalty program member receives anything personalized, it is a memorable moment and strengthens the two-way relationship.
- Experiences: Any experiential event that is a program reward builds emotional bonds between customers and brands that last and play a major role in long-term retention.
When your subscription loyalty program is brand-driven and offers members valuable rewards and experiences, they will engage with it often. Once you have them as members, you want them to engage and incentivize them to retain their loyalty for the long term.
Make your subscription loyalty program simple to join and offer value. Here are some key elements of a great subscription loyalty program:
- Valuable rewards: The rewards that subscribers can earn should be something they want and value. This could include free products, discounts, exclusive access to new products or features, or early access to sales. Offer a variety of rewards that appeal to your membership.
- Easy to understand and participate in: The program should be easy to understand and participate in, with clear rules and guidelines. Subscribers should be able to easily see how they can earn and redeem rewards.
- Aligned with your brand’s values and goals: The loyalty program should be aligned with your brand’s overall values and goals. For example, if a brand is focused on sustainability, its loyalty program could reward subscribers for recycling products or using reusable packaging.
- Make it fun: Your subscription loyalty program should be fun and engaging for members and could involve gamification or elements of surprise and delight.
Based on data from the 2022 Premium Loyalty Data Study, consumers value the following benefits the most when it comes to subscription-based loyalty programs:
- 69% Free shipping
- 63% Instant discounts
- 59% Free giveaways
- 43% Surprise rewards
- 40% Faster shipping
- 37% Exclusive deals
- 33% Holiday discounts
- 28% Personalized offers
- 18% Exclusive in-store experiences
It’s important to consider your target audience and what they would find most valuable. Make sure your rewards are sustainable for your business.
Examples of the Best Subscription Loyalty Programs
Coldwater Creek MyColdwater Rewards
Coldwater Creek launched a premium loyalty program called MyColdwater Rewards to help retain more members and acquire long-term customers. The return shipping benefits are great for members since they don’t have to worry about having to pay return shipping if a clothing item doesn’t fit.
Cost: $14.95 per month
- 10% cashback
- Shipping rebates and return shipping rebates on Coldwater Creek purchases. This not only saves them money, but it allows them to easily return items if they don’t fit or suit their style.
- Access to a Marketplace of more than 1,500 retail and travel brands where they enjoy 5% back and the same shipping savings, all through their member dashboards.
REI’s Co-op is a great example of a subscription-based premium loyalty program because it is all about everything the brand and its devoted customers value. It is an outdoor lifestyle brand and the program embodies that because the Co-op speaks to all of the company’s fiercely devoted customers.
Cost: $30 for life
- Early access to limited-edition gear and curated products
- Special pricing and discounts on REI Co-op classes, day trips and nationwide adventures
- Free flat tire repair for bicycles and machine wax for skis or boards
- Free shipping
- Up to 33% off rentals
My Best Buy Memberships
The three memberships are My Best Buy (a free program), My Best Buy Plus (a premium tier) and My Best Buy Total (a higher-priced premium tier). Each membership tier has a different set of benefits, ranging from members-only pricing and deals, access to exclusive sales and events, 24/7 tech support, product protection and free shipping.
Historically, Best Buy has worked hard to provide its customers with attractive loyalty programs and it’s done it again with the three membership levels of My Best Buy. These three memberships nicely segment Best Buy’s customers and offer enhanced benefits in a tiered loyalty program.
My Best Buy:
- Free shipping with no minimum purchase
- Access to purchase history, online order tracking and up-to-date shipping information
- Quick checkout, save items to keep an ongoing wish list of your favorite tech
My Best Buy Plus:
Cost: $49.99 per year
- These members receive everything My Best Buy members do plus:
- Exclusive member-only prices on thousands of items
- Exclusive access to sales, events and highly anticipated products
- Free 2-day shipping with no minimum purchase
- Extended 60-day return and exchange window on most products
My Best Buy Total:
- All benefits contained in My Best Buy Plus, as well as:
- Geek Squad 24/7/365 tech support for all your tech—no matter where you bought it
- VIP priority support at any time and access to specially trained team members for advice, customer service and coordination via phone or chat
- Up to two years of product protection, including AppleCare+, on most new Best Buy purchases while you’re a member
- 20% off repairs
- Promotional service offers from time to time, like discounted in-home installation and haul-away
Things to Consider Before You Price Your Subscription Loyalty Program
After you’ve done all your necessary research from a customer perspective and you design your subscription loyalty program, another critical ingredient is the price. How do you set the price for your subscription loyalty program so it is fair and offers good customer value?
First, make sure whatever your membership fee is that it covers the cost of the rewards and benefits.
You need to consider the costs related to program software, marketing and customer support.
Software and technology costs will include member registration, reward tracking and redemption processing. Reward costs will depend on the types of rewards you offer in your program. You’ll also need to market and advertise your program to make potential members aware of it and educate them about it. This could include costs for email marketing, social media marketing and paid advertising.
You might need to hire additional staff to manage your program and train them so they’re well-equipped to educate customers about your program.
Employees need to know how the loyalty program works, including how customers sign up, earn rewards and redeem rewards. They should also be familiar with the different types of rewards that are available and how to answer customer questions about the program. You could also offer incentives for employee signups so they become better acquainted with the program.
Will your program add incremental revenue?
The incremental revenue represents the additional revenue members spend through your subscription program beyond what they would have spent without it.
There are two revenue streams connected to a subscription loyalty program: One is the membership fees charged to members that you receive and the second is the additional revenue you receive that’s driven by an increase in average order value, frequency, redemption rate and customer lifetime value.
Decide who you’re targeting with the program because pricing it depends on this point.
With your program, you want to give your members memorable experiences that will help you acquire and acquire them. When this happens, your members often tell other people they know about your program and become brand advocates.
Make sure it’s simple for your customers to sign up for the program and that they can easily access information about their loyalty program accounts, including their current points balances, available rewards and redemption history.
Your benefits can include discounts, exclusive content and early access to products or services. Consumers love experiential VIP events as well. The more valuable your benefits are, the higher you can price your program. You should mix transactional benefits and rewards with a high perceived value, but low cost (sweepstakes, content).
Make Your Subscription Loyalty Program One of the Best
Making your subscription loyalty program stand out among your competitors is a different formula for different brands. But here are some key elements to follow.
Figure out what you want to offer your best customers through a subscription loyalty program. For example, maybe you want to offer a different kind of shopping experience, or VIP treatment, free shipping for all members no matter the purchase size or cash back?
When you build a framework for your program, it begins with listening to and understanding your customers to build a value-filled program. This is your most critical point because you want to provide the most valuable benefits possible to make members want to engage and remain in your program for the long term.
The better you understand your customers, the better your subscription loyalty program will be.
Whatever you offer for benefits has to be compelling and be valuable to your customers.
Pay attention to members’ engagement levels and overall activity and send members relevant communications to let them know you value them.
After you launch the program, monitor and tweak it regularly based on member behavior and insights gained through your data collection.
Is a Subscription Loyalty Program Right for Your Business?
There are several factors to consider before you answer that question.
As you can see, a subscription loyalty program differentiates you from your competition and builds trust and excitement among your members. But these programs require a different strategy than free points programs.
Since your customers are paying for a membership, they have high expectations and that requires you to use a different acquisition strategy, different rewards structure (enhanced benefits funded by an incremental revenue stream), superior customer service and a subscription billing engine.
Many brands aren’t equipped to do this in-house so they might need to work with a partner that can help you.
If you’re thinking of adding a subscription tier to your loyalty program, or just want to learn more, you can talk to our loyalty experts about subscription loyalty or paid enrollment offers by contacting us here.