Although membership loyalty seems like a new trend, the fact is it has been around for many years.
In retail, warehouse clubs have been using membership models for years.
Costco and BJ’s have built their respective businesses around charging their customers a fee for access to discounts and bulk purchases.
In the past year, BJ’s membership rose 10%, to more than 6 million paid members.
BJ’s CEO Lee Delaney said during a recent earnings call that the company acquired and retained 18 months’ worth of members during a six-month period this year.
Meanwhile, from 2014 through the end of 2019 Costco membership jumped from 76 million to more than 98 million.
These numbers are testament to the fact that memberships work in retail and in loyalty programs.
Why Does Membership Loyalty Work?
Traditional loyalty programs are largely similar and require your customers to transact over time to earn rewards later.
In today’s day and age of instant gratification, people do not want to wait for rewards.
That’s why memberships are everywhere.
Whether it’s streaming movies on Netflix or getting meal kits delivered every week, consumers are comfortable paying a membership fee if they receive value.
And that applies to loyalty as well.
A membership-based loyalty program, or premium loyalty program, creates a sense of exclusivity and rewards your customers immediately.
The paradigm is simple: The consumer invests in the brand and the brand rewards the customer in ways that a traditional loyalty program can’t touch.
Loyalty is a two-way street and a membership loyalty program accelerates and enhances customer relationships.
These programs focus on the retailer and its best customers by enticing them with value every step of the way.
Membership loyalty focuses on the long-term relationship with a customer. Unlike traditional loyalty programs that focus on acquisition.
Amazon Prime Changed Membership Loyalty Forever
The loyalty game changed in 2005 when Amazon introduced Prime, which has gained staggering success and now has more than 150 million global members.
At the time, Prime had a single benefit: Free shipping.
Amazon identified that shipping was the biggest pain point for its customers and every other ecommerce retailer.
Consumers have a visceral reaction to paying shipping fees and it’s the No. 1 reason why people abandon shopping carts when shopping online.
Amazon changed the loyalty game when it introduced Prime because (for an annual fee) it alleviated the friction around buying online.
This is clear by the fact that Prime members spend twice as much as non-members.
In the past 15 years, Amazon has continued to add attractive benefits to Prime.
Benefits include music, movies, photo storage, and grocery delivery. These benefits make Prime a holistic program that touches every aspect of our lives.
Some traditional brick-and-mortar specialty retailers have seen Prime’s global success and developed membership loyalty programs specifically designed for their brands.
Brands like Target, Restoration Hardware, Lululemon, REI, 1-800-Flowers, CVS, and Cinemark offer their own premium loyalty programs that include exclusive benefits for a membership fee.
For example, Restoration Hardware’s RH Members Program charges members a $100 annual fee in return for 25% savings on all full-priced items, an additional 20% savings on all sale items, interior design, concierge service to manage your orders, and early access to clearance events.
Every retailer is not Amazon so it’s important to know what you are good at and, more importantly, what your customers want.
Can Walmart+ Rival Prime or Does It Have To?
Walmart’s recent launch of its Walmart+ premium loyalty program made headlines in the retail industry.
While some view it as competition for Prime, it seems as if both programs can coexist quite nicely given their respective benefits and target audiences.
Prime has been the answer for millions of members when it comes to convenience, product suggestions, and entertainment streaming services.
Walmart+ will appeal to a different audience that prioritizes gas discounts, groceries, and in-store convenience.
Only time will tell, but it’s possible both these membership-based premium loyalty programs are valuable to many consumers who may very well participate in both.
Why Exclusivity Is Vital in Membership Loyalty
Ninety-four percent of Americans would take advantage of an exclusive offer, which is a compelling statistic for retailers to consider.
It revolves around that special feeling of exclusivity.
That feeling of exclusivity (like belonging to a country club, or another VIP-type club) makes a loyalty program more attractive, compelling, and desirable.
Sprinkle in exclusive and instant benefits and you create elevated engagement and brand advocacy.
When consumers feel a sense of exclusivity in a membership loyalty program, they engage more, spend more, and talk about your brand to their family and friends.
Consumers can easily be drawn to loyalty programs by discounts, but what they truly want is to be understood and treated special.
Membership, or premium, loyalty programs are so valuable to members that they become part of their daily lives.
Put a Premium Loyalty Program to Work for You in 2021
One thing the pandemic has shown is that consumers are changing their shopping habits and trying new things.
Now is the time to be bold.
Our 2020 Premium Loyalty Data Study shows that 70% of consumers not in a premium loyalty program would join if their retailer offered one with valuable benefits.
Nearly 70% of premium loyalty members plan to join additional premium loyalty programs in 2020; and 88% of consumers are likely to choose a retailer whose premium loyalty program they belong to over a competitor with a lower price.
And our own retail partners have experienced a big uptick in membership joins this year.
Membership-based premium loyalty programs are important in today’s marketplace because consumers have so many different shopping options.
They increase customer loyalty and retention by providing immediate value to customers.
In 2020, loyalty is critical: Nearly two-thirds of customers say their loyalty is more difficult for retailers to maintain than ever before.
Translation: With limitless options available to consumers, earning loyalty today takes more than just a plastic punch card or weekly coupon.
To get loyalty, you must give loyalty.
Membership loyalty programs exemplify this paradigm.
Michael Iannucci
Michael Iannucci is our Executive Vice President, Business Development. He has over 15 years of experience at top loyalty marketing and subscription commerce companies, where he held leadership positions in sales, business development, and account management.