THANKS FOR DOWNLOADING THE PREMIUM LOYALTY STARTER BUNDLE.
In a premium loyalty program, your best customers pay a membership fee to access enhanced benefits like instant discounts, free shipping, and exclusive experiences.
In this comprehensive content bundle, you’ll learn everything you need to know to get started with a program for your best customers.
From premium loyalty basics, to the most common questions retailers are asking, to data collected straight from 2500 consumers, you’re covered.
Ready to get to started?
Here’s a quick summary of each piece of content, along with the best order to read them in.
1. The Definitive Guide to Premium Loyalty This all-inclusive overview provides the most essential elements of a successful premium loyalty program. It’s a great place to begin if you’re just getting started, but it’s also a great refresher if you’re already familiar with premium loyalty programs.
2. Premium Loyalty: Answers to the Questions You Should be Asking This eBook digs into the most important questions retailers ask about premium loyalty (and you may have already been asking yourself). You’ll find all the answers and more.
3. 2020 Premium Loyalty Data Study: What Do Your Customers Expect in 2020? This data study provides information surveyed from 2500 U.S. consumers. It dives into how they feel about paying for a loyalty program, the types of benefits they expect to receive, and what they’re expecting from retailers to earn their ongoing loyalty.
4. 5 Loyalty Lessons from Amazon Prime This webinar provides an in-depth review of 5 loyalty lessons you can learn from Amazon Prime, and the impact Prime has made on other retailers’ loyalty programs. You’ll also learn how you can use some of these same strategies in your unique loyalty program. Click Here to Watch the Recording
If you’d like to talk more about a premium loyalty program for your brand, email us at [email protected] or call us at (860) 358-9198 The Definitive Guide to Premium Loyalty
CLARUS commerce Table of Contents
3 Introduction: Premium Loyalty – Why Now?
6 What is a Premium Loyalty Program?
10 At the Intersection Of Loyalty & Subscriptions
14 Who Does Premium Loyalty Make Sense For?
22 A Premium Loyalty Program Build, Quarter-by-Quarter
27 What about the Financial Model?
32 What KPIs Should You be Measuring?
41 Five Questions to Ask Yourself Before Going All In
48 2020 and Beyond
2 TABLE OF CONTENTS Premium Loyalty - Why Now?
Have you noticed the number of loyalty program relaunches lately?
Target, Macy’s, Starbucks, and others have revamped or enhanced their programs over the past couple of years, just to name a few. And it’s no surprise.
Shopping habits have changed, and loyalty has gotten harder.
Nearly 70% of consumers agree their loyalty is more difficult for a retailer to maintain than ever before.
But what is causing the change? And why do so many programs feel so similar?
Customers are driving everything and not the retailers. They are forcing the change with more expectations than ever and making it difficult for retailers that aren’t making the journey with them.
Three global trends are driving these expectations that aren’t limited to retail, but are having a massive impact on retail:
Unlimited choice, instant gratification, and the membership economy.
INTRODUCTION 3 Click here to read more about the three megatrends impacting the rise of premium loyalty.
UNLIMITED CHOICE
Consumers have more power than ever.
It’s easier than ever for your customers to pull out their smartphones and find products at the lowest prices and with the fastest shipping.
Add to that the fact that there is more competition than ever before, and differentiation and personalization become non-negotiables, especially in a loyalty program.
4 INTRODUCTION INSTANT GRATIFICATION
Your customers expect everything instantly now.
Food, movies, music, rides, discounts – People don’t want to wait. They expect everything to be instantaneous.
The same goes for loyalty programs. Your customers don’t want to earn rewards over time. They want valuable benefits every time they engage with your brand. Loyalty programs need to offer instant benefits whenever someone engages.
THE MEMBERSHIP ECONOMY
Your customers’ daily lives now include memberships and subscriptions – and lots of them.
Netflix, Spotify, clothing, home essentials and even vehicles are now subscription-based. Your customers are comfortable with this model and happily pay for things that add value.
The same goes can go for loyalty programs.
Here’s how premium loyalty can help you take advantage of these trends and provide more value to your best customers.
INTRODUCTION 5 CHAPTER 1 What is a Premium Loyalty Program?
6 You’ve heard of Amazon Prime.
And with over a million members in the U.S., you might even belong to it.
But aside from that obvious example, many brands have rolled out premium loyalty programs.
Restoration Hardware, CVS, GameStop, and Lululemon are a few well-known examples.
While these programs all feature unique benefits, there are core things they have in common: Instant benefits and unique experiences, which is what customers today are looking for.
Premium loyalty is a reaction to what your customers already want.
LET’S BEGIN WITH THE DEFINITION OF PREMIUM LOYALTY
Simply put, a premium loyalty program is a type of loyalty program that is so valuable, consumers are happy to pay for membership.
Members pay an annual fee to receive enhanced, instant benefits.
These can be transactional benefits like discounts and free shipping that can be applied to every order. Or they can be unique experiential benefits like access to exclusive events or VIP customer service.
CHAPTER 1 - WHAT IS A PREMIUM LOYALTY PROGRAM? 7 It’s different than a traditional points-based loyalty program where members must earn rewards over time.
At its core, premium loyalty places your customers at the center of everything you do. Your best customers want exclusivity, so it’s about giving them the best of your brand.
That’s why so many retailers are thinking about premium loyalty programs as a part of their overall marketing strategies.
PREMIUM LOYALTY GIVES YOUR CUSTOMERS THE BEST OF YOUR BRAND
The word premium sparks thoughts and emotions centered around the best of the best.
8 CHAPTER 1 - WHAT IS A PREMIUM LOYALTY PROGRAM? These programs create deeper emotional relationships between customers and retailers. As a result, members engage a lot more.
Therefore, a premium loyalty program should provide premium benefits and experiences, which is to say, the very best and most attractive ones your brand can offer.
As you think about a premium loyalty program for your brand, ask yourself these questions:
• What can I do for my customers that would add value to their everyday lives?
• What is a benefit that my customers would want that can’t be offered by any company?
• What would make a part of my customer base love our brand?
The answers are different for every brand and that’s the point.
It’s about Lululemon providing not only free shipping, but also yoga classes to its members. It’s about RH not only discounting furniture 25% but also giving free interior design services. It’s about CVS not only giving instant discounts but providing its members with 24/7 access to a pharmacist.
It’s about your brand going above and beyond the usual and offering your best customers a premium experience that makes sense for them.
CHAPTER 1 - WHAT IS A PREMIUM LOYALTY PROGRAM? 9 CHAPTER 2 At the Intersection Of Loyalty & Subscriptions
10 Adding a price tag to your loyalty program doesn’t make it a premium loyalty program. It must be valuable. It’s about putting your customer at the center of everything and creating an amazing experience for them.
YOUR CUSTOMERS DON’T WANT TO WAIT FOR REWARDS
Traditional free programs still have a place, and they can even work well together which we’ll explore later, but premium loyalty requires a different mindset.
Traditional loyalty programs require members to transact first and eventually get a reward.
But consumers don’t want to wait for rewards. CHAPTER 2 That’s why premium loyalty members will pay to access exclusive discounts, perks, content, and experiences that are not available to anyone.
CHAPTER 2 - AT THE INTERSECTION OF LOYALTY & SUBSCRIPTIONS 11 Members gain access to exclusive benefits without needing to accrue points or spend a specific dollar amount (other than the membership fee).
A member might pay $50 a year to be in your program. In exchange, that member immediately gains access to the full benefits and can use them right away and as many times as he or she wants.
These can be transactional benefits like a discount on every order, free shipping, or free return shipping.
Or, these can be experiential benefits like fitness classes, interior design consultations or discounts on excursions.
HOW IS PREMIUM LOYALTY DIFFERENT THAN A SUBSCRIPTION PROGRAM?
Loyalty, like many areas, is moving toward subscription.
12 CHAPTER 2 - AT THE INTERSECTION OF LOYALTY & SUBSCRIPTIONS But while premium loyalty programs and subscription programs can perhaps be considered relatives, they’re not the same.
EXAMPLES OF EXAMPLES OF EXAMPLES OF TRADITIONAL SUBSCRIPTION PREMIUM LOYALTY LOYALTY PROGRAMS PROGRAMS PROGRAMS
DSW REWARDS DOLLAR SHAVE CLUB AMAZON PRIME
PETCO PALS REWARDS BLUE APRON LIDS ACCESS PASS PREMIUM
NORDSTROM THE NORDY CLUB CHEWY RH MEMBERS PROGRAM
OFFICE DEPOT OFFICEMAX REWARDS BIRCHBOX CVS CAREPASS
KOHL’S YES2REWARDS BARKBOX REI CO-OP
Subscription programs do require a recurring fee for members, but in exchange, members automatically receive a set number of products or services on an ongoing basis.
Subscription programs simply offer an element of convenience around products that are purchased regularly like pet food or razors.
Premium loyalty programs offer discounts and rewards every time a member engages with a brand.
Think of premium loyalty as the intersection of traditional loyalty programs and subscription programs.
CHAPTER 2 - AT THE INTERSECTION OF LOYALTY & SUBSCRIPTIONS 13 CHAPTER 3 Who Does Premium Loyalty Make the Most Sense For?
14 Since premium loyalty takes a different mindset, there are some questions that retail marketers often ask. You might be wondering the same things.
• Who does it make sense for, both from your perspective and your customers’ perspective?
• What are the retail categories in which consumers are most happy to join premium loyalty programs?
• Which of your customers would want to sign up?
• What if you already have a free program?
CHAPTER 3 Well, let’s dive in.
WHICH CATEGORIES MAKE THE MOST SENSE FOR PREMIUM LOYALTY?
The truth is, consumers are ready and willing to sign up for these programs in all categories, but with a few conditions.
The program must be easy to understand with a clear value proposition. It needs to provide immediate and ongoing value. And it needs to make members feel special and exclusive.
In the apparel space, Lululemon has been rolling out a premium loyalty program in select markets.
CHAPTER 3 - WHO DOES PREMIUM LOYALTY MAKE THE MOST SENSE FOR? 15 In a recent article, CEO Calvin McDonald said, “In each market, the results have been well above our expectations going in very favorable from the guest and we continue to tweak and learn and do plan to roll into more markets and we’ll have more to announce at a later point in time.”
For $128 per year, members get transactional benefits like pants or shorts, free shipping, and a birthday discount. The value proposition is clear, immediate and makes sense.
But in addition to those transactional benefits, members also get access to experiential benefits like fitness and yoga classes.
There’s no need to accrue points over time. The program offers instant and ongoing value in a way that makes sense for Lululemon’s customers. The program is a clear differentiator.
High-end furniture retailer RH has also been successful with the RH Members program which costs $100 annually.
Members received 25% full price purchases among other transactional benefits, but also receive complimentary interior design services.
Its member count is over 400,000 and RH members account for 95% of the retailer’s core business.
16 CHAPTER 3 - WHO DOES PREMIUM LOYALTY MAKE THE MOST SENSE FOR? CHAPTER 3 - WHO DOES PREMIUM LOYALTY MAKE THE MOST SENSE FOR? Even pharmacy retail chains like CVS have followed the premium loyalty prescription with CVS CarePass.
Members pay either $5 monthly or $48 annually, instant transactional benefits include a 20% discount on all CVS Health brand items and a $10 monthly credit that can be applied to a variety of items.
On the experiential side, the program provides members with a 24/7 pharmacist helpline for questions about prescriptions or other health needs.
No matter the category, if the value is there, customers will gladly sign up and pay to be members of premium loyalty programs. They perceive these programs as “paying for themselves”.
CHAPTER 3 - WHO DOES PREMIUM LOYALTY MAKE THE MOST SENSE FOR? CHAPTER 3 - WHO DOES PREMIUM LOYALTY MAKE THE MOST SENSE FOR? 17 WHAT TYPES OF CUSTOMERS SIGN UP FOR PREMIUM LOYALTY PROGRAMS?
If traditional loyalty programs are great at getting signups from casual customers, premium loyalty programs are the best at attracting and retaining your top customers – Those with some level of affinity for your brand.
And since you’re asking members to pay, premium loyalty programs do require a degree of selling.
The value proposition has to make sense and your in-store associates must be knowledgeable and excited about the benefits.
After all, why would your customers get excited about it if your people aren’t? But if the program is valuable to your best customers, they will want to sign up.
80%
For example, 80% of millennials would be willing to join a premium loyalty program if their favorite retailers offered them and the benefits were valuable.
84%
And 84% of consumers are likely to recommend a retailer to friends or family when the retailer offers a premium loyalty program with valuable benefits.
In addition to increasing engagement and putting an end to the “loyalty to the coupon” phenomenon, premium loyalty programs also open the door for a boost in brand advocacy from your best customers.
18 CHAPTER 3 - WHO DOES PREMIUM LOYALTY MAKE THE MOST SENSE FOR? CHAPTER 3 - WHO DOES PREMIUM LOYALTY MAKE THE MOST SENSE FOR? 86%
86% of consumers would choose retailers with premium loyalty programs they belong to over other retailers. This is even higher at 90% for millennials.
These are the customers you want to deepen your relationships with, so think of ways to make the benefits and rewards valuable to them specifically.
CAN FREE AND PREMIUM LOYALTY PROGRAMS LIVE TOGETHER?
Retailers in any category can put a premium loyalty program in place to give your best customers a better experience, but can it play nicely with your existing program?
The good news? Premium loyalty doesn’t mean leaving your existing program behind.
If you already have a free loyalty program, that’s great. Use them together.
There’s no reason why you can’t add a premium tier on top of it. Free loyalty and premium loyalty can coexist to ultimately serve your entire customer base.
A free loyalty program can transform a sporadic shopper into an occasional shopper.
CHAPTER 3 - WHO DOES PREMIUM LOYALTY MAKE THE MOST SENSE FOR? CHAPTER 3 - WHO DOES PREMIUM LOYALTY MAKE THE MOST SENSE FOR? 19 But a premium loyalty program can transform those occasional shoppers into your best and most loyal customers.
It makes sense to think of just your top customers that raise their hands to join premium loyalty programs, but it’s possible to move your casual customers into that upper tier as well.
Nearly three in four customers (73%) are likely to invest in a retailer’s premium loyalty program if they already belong to that retailer’s free loyalty program.
A great example of this is AMC Theatres.
Just two months after launching Stubs Premier, 1.2 million more households had signed up. Adding the free program encouraged more signups and provided AMC with a much larger member database and insight on their preferences.
It’s also easier to demonstrate the value of the premium tier to existing free tier members than it is to try to get program acquisitions from non-members. Even if a premium member downgrades to the free program, they are still in the Stubs ecosystem, making an upgrade to premium easier in the future.
So, it’s doesn’t have to be a question of which type of program to offer, but rather how they can best work together.
20 CHAPTER 3 - WHO DOES PREMIUM LOYALTY MAKE THE MOST SENSE FOR? CHAPTER 3 - WHO DOES PREMIUM LOYALTY MAKE THE MOST SENSE FOR? The same goes for private label credit cards (PLCC). PLCCs largely offer the same benefits for cardholders that traditional loyalty programs do, but a loyalty program provides that differentiation through targeted offers/rewards and personalized communications.
Think of ways to leverage your existing program. Can you use it to communicate the enhanced benefits of your premium loyalty program to members?
What about using it as a steppingstone to give your customers a taste of what the premium tier has to offer?
When strategically thought out, multiple tiers can bring the right value to different segments of your customer base.
Here are answers to more of the questions you should be asking about Premium Loyalty.
CHAPTER 3 - WHO DOES PREMIUM LOYALTY MAKE THE MOST SENSE FOR? CHAPTER 3 - WHO DOES PREMIUM LOYALTY MAKE THE MOST SENSE FOR? 21 CHAPTER 4 A Premium Loyalty Program Build, Quarter- by-Quarter
22 CHAPTER 4 - A PREMIUM LOYALTY PROGRAM BUILD, QUARTER-BY-QUARTER While a premium loyalty program can be built and launched in as little as 90 days when working with the right partner, there is a lot of planning and strategy that must go into it before and after it’s out in the wild.
Here’s a sample roadmap that is broken down by quarter.
Q1: Plan and Analyze
DETERMINE YOUR LOYALTY PROGRAM GOALS
→ Why are we creating this program?
→ What do we want from it?
→ What does success mean?
FIGURE OUT WHAT YOUR CUSTOMERS WANT A Premium → What are their habits and interests? → What pain points can we alleviate with the program? Loyalty Program → What would make their experience better? EVALUATE YOUR INTERNAL RESOURCES Build, Quarter- → What are our current technology, marketing, and in-store resources? → How will we form a small internal loyalty team dedicated to the program? by-Quarter → How can we leverage a loyalty partner?
CHAPTER 4 - A PREMIUM LOYALTY PROGRAM BUILD, QUARTER-BY-QUARTER 23 Q2: Build Your Loyalty Program
DEVELOP YOUR MARKETING PLAN
→ How and when will we reach our customers?
→ How can we leverage social media, email campaigns, and influencers?
→ What in-store signage, ads at checkout and associate training do we need?
BUILD YOUR TIMELINE
→ Develop a project plan outlining each step
→ Define roles and responsibilities
→ Commit resources to different parts of the project
COMMUNICATE INTERNALLY
→ Be clear about the vision, progress and launch plan across the company
→ Utilize tech talks, share marketing plans, and show KPI outlooks
→ Everyone needs to buy into the loyalty culture
24 CHAPTER 4 - A PREMIUM LOYALTY PROGRAM BUILD, QUARTER-BY-QUARTER CHAPTER 4 - A PREMIUM LOYALTY PROGRAM BUILD, QUARTER-BY-QUARTER Q3: Pilot Your Program
TRAIN YOUR PEOPLE
→ Internal and frontline employees are trained on program details and servicing
→ Store associates must understand the benefits and how to sell them
→ You can have the best program in the world, but if your people can’t get customers excited, they’ll never get the chance to experience it
LAUNCH YOUR PILOT
→ Put the program into a test market and monitor the results
→ If KPIs aren’t being met, is there enough signage? Training? Marketing?
→ This is your chance to correct any bugs before a full rollout
CHAPTER 4 - A PREMIUM LOYALTY PROGRAM BUILD, QUARTER-BY-QUARTER CHAPTER 4 - A PREMIUM LOYALTY PROGRAM BUILD, QUARTER-BY-QUARTER 25 Q4: Roll Out Your Program
CELEBRATE
→ This is a big milestone
→ Stop, take a breath, and enjoy it!
→ Now get back to it
REASSESS YOUR ROADMAP
→ How your brand manages the program from now on will determine its future
→ Take the time to see what’s working and not working
→ Get feedback from members and use it to make enhancements
OPTIMIZE FOREVER
→ A “set it and forget it” mentality will undermine all your hard work
→ Start testing new messaging and benefits to not only attract new members but to retain existing ones
→ Adding to the program over time keeps your program fresh and helps you avoid a costly relaunch in the future
26 CHAPTER 4 - A PREMIUM LOYALTY PROGRAM BUILD, QUARTER-BY-QUARTER CHAPTER 5 What About the Financial Model?
CHAPTER 4 - A PREMIUM LOYALTY PROGRAM BUILD, QUARTER-BY-QUARTER 27 27 As with all factors of premium loyalty, the financial model is different as well.
There is a need to continue optimizing and adding to the program over time. And as such, your loyalty partner needs to be aligned with you on that.
OPTIMIZATION IS THE LIFEBLOOD OF PREMIUM LOYALTY
You’re asking your most loyal customers to pay for your program benefits not only upfront but also when it’s time to renew.
But how are you showing amazing value and an elevated experience regularly? Continual optimization shows your paying members that you’re keeping the program fresh, relevant, and increasingly valuable.
A great example of this is Amazon Prime.
28 CHAPTER 5 - WHAT ABOUT THE FINANCIAL MODEL? CHAPTER 5 - WHAT ABOUT THE FINANCIAL MODEL? While the program started by solving the pain point of shipping costs, it evolved to offer members-only discounts, content and even grocery delivery. At the center was always the question, “What will make our members’ lives better?”
While not every retailer is Amazon, there are things you can do to enhance your program over time.
Test new benefits. Find new ways to engage your members.
It goes a long way in giving your customers the best of your brand.
HOW TO FIGURE OUT WHAT YOUR MEMBERS WANT
Adding to your program over time is the right move, but where do you start? You must look at your customers.
Run a survey to ask questions. Hear them out on what they like and don’t like. Find out what new rewards and experiences would delight them.
Is there currently a pain point in their lives that you can solve for them?
Can you offer free services like interior design, a personal stylist or consultations as part of the benefits?
Could membership include discounts at other non-competing brands that you partner with?
CHAPTER 5 - WHAT ABOUT THE FINANCIAL MODEL? CHAPTER 5 - WHAT ABOUT THE FINANCIAL MODEL? 29 How about a members-only shopping day with special deals online and exclusive hours in-store?
The most important thing to remember once you’ve launched your premium loyalty program is that “set it and forget it” doesn’t work. Keep in contact with your members to see how you can keep adding value over time.
LOYALTY PARTNER ALIGNMENT
To encourage optimization and upgrades to your program, you must be aligned with your loyalty partner from Day 1.
Is your partner a true partner or can you expect to be upsold or billed any time you want to add a feature or enhance the program?
30 CHAPTER 5 - WHAT ABOUT THE FINANCIAL MODEL? CHAPTER 5 - WHAT ABOUT THE FINANCIAL MODEL? The right partner will not only build and manage your program but should also work with you on keeping it fresh.
You want your customers to use your premium loyalty program as much as possible. At the end of the day, if they’re not getting constant value out of the program, they’re not going to renew.
A term often used in the loyalty space is the “breakage model”, but think of your premium loyalty program as a usage model.
The more you get your customers to use the program, the more they are going to engage over time.
That’s why a true partner is better than just a vendor. A true partnership that encourages both parties to constantly work together on optimizing a program will ensure that members love it and renew.
CHAPTER 5 - WHAT ABOUT THE FINANCIAL MODEL? CHAPTER 5 - WHAT ABOUT THE FINANCIAL MODEL? 31 CHAPTER 6 What KPIs Should You be Measuring?
32 CHAPTER 6 - WHAT KPIS SHOULD YOU BE MEASURING? As Peter Drucker once said, “You can’t manage what you don’t measure.” How can do you know if your program is successful if you don’t define and track what success is to you?
Are your customers receptive to your program? Are individual customers more valuable than they were a year ago? Are key financial metrics like AOV and order frequency increasing?
These are the metrics to look at regularly to answer the overarching question, “Is my premium loyalty program successful?”
CHAPTER 6 - WHAT KPIS SHOULD YOU BE MEASURING? 33 KPI Group 1: Acquisition
Before you can start measuring how a program affects your core business, you need customers to join the program.
Monitoring each touchpoint from the initial presentation of the offer through a customer joining is paramount to successful optimization.
Two acquisition metrics within the funnel are most telling to set up a successful premium loyalty program from the start.
KPI 1: Eligible Orders
How many people are seeing the offer?
The key to premium loyalty is to fill the top of the funnel, so you must make sure that as many eligible people as you have are seeing the offer.
The more customers that see your value proposition, the more potential for maximizing joins. If the customers don’t know about the program or don’t have access to the offer, they can’t join.
34 CHAPTER 6 - WHAT KPIS SHOULD YOU BE MEASURING? CHAPTER 6 - WHAT KPIS SHOULD YOU BE MEASURING? KPI 2: Conversion
This is the most important one and it’s plain and simple. It’s the number of people who say yes.
Throughout the purchase path, many conversions can be measured, but overall, the most important metric is the number of people who said yes divided by the total people who saw the offer.
It provides a key benchmark around how people understand the offer and are they interested.
Let’s face it.
You can’t demonstrate the value of your premium loyalty program to your members if you haven’t convinced them to sign up in the first place.
That’s why it’s so important to optimize for the maximum amount of conversions. Once you do that, you’ll have members, but how do you keep them?
CHAPTER 6 - WHAT KPIS SHOULD YOU BE MEASURING? CHAPTER 6 - WHAT KPIS SHOULD YOU BE MEASURING? 35 Premium Loyalty KPI Group 2: Persistency
Persistency, like acquisition, has many touchpoints to measure throughout a member’s lifecycle.
Understanding how persistent, or ‘sticky’ your member base is, allows for greater insight into success. It tells you how long people are staying in the program.
Among the many metrics that can be analyzed throughout the persistency funnel, the two most important ones combined represent an early indicator of program health and overall member value.
KPI 3: Trial Stick Rate
This is what we refer to internally as our “early warning indicator.”
Many programs allow customers to try the program before they are ever charged, so this is an important indicator as to how long they’ll stay in the program once the trial ends.
There will be customers who change their minds and cancel before they are charged, but the number of members who ‘stick’ past the trial period is the first step to understanding overall bill rates, the health of the program, and the value of an individual member will generate.
36 CHAPTER 6 - WHAT KPIS SHOULD YOU BE MEASURING? CHAPTER 6 - WHAT KPIS SHOULD YOU BE MEASURING? KPI 4: Lifetime Value
In addition to the improvement in core metrics that a premium loyalty program can provide, there is also the revenue generated which can help fund the enhanced benefit costs.
But, it’s important to understand how much each member is worth over the lifetime of his or her membership. Combining the average number of months a customer stays in the program with the cost per month provides your total lifetime value of each member.
Customers are staying in the program, but is the program improving core metrics?
CHAPTER 6 - WHAT KPIS SHOULD YOU BE MEASURING? CHAPTER 6 - WHAT KPIS SHOULD YOU BE MEASURING? 37 Premium Loyalty KPI Group 3: Engagement
Engagement and persistence go hand in hand.
The more members that use the program, the more value they see, and the longer they stay with the program.
This cycle continues over and over creating the premium loyalty sweet spot: Value for customers AND retailers at the same time.
KPI 5: Average Order Value
One of the biggest benefits of premium loyalty programs for retailers is an increase in average order value.
When members earn rewards back to your brand for engaging with the program, it is proven that they will spend above and beyond the reward dollar amount and above a retailer’s current AOV.
38 CHAPTER 6 - WHAT KPIS SHOULD YOU BE MEASURING? CHAPTER 6 - WHAT KPIS SHOULD YOU BE MEASURING? KPI 6: Frequency of Purchase
Likewise, as members use the program more and generate rewards back to your brand, they are more likely to shop more frequently.
That’s why Amazon Prime members spend $600 more per year on average than non-Prime members. When a member has invested in a premium loyalty program, he or she wants to make sure they’re getting the most out of it.
By monitoring AOV and frequency of purchase of a strong active member base, the premium loyalty program’s success is confirmed.
KPI 7: Gross Merchandise Value
In addition to the revenue generated from the program, with increased AOV and frequency of purchase there is a direct correlation to an increase in gross merchandise value driven from a premium loyalty program.
Data analytics and strong, clear KPIs are at the heart of any successful premium loyalty program.
Most importantly, no one metric or category can be viewed in isolation. Each piece is tied together and results in an endless cycle of testing, analyzing, tweaking, analyzing, and testing… well, you get the picture!
CHAPTER 6 - WHAT KPIS SHOULD YOU BE MEASURING? CHAPTER 6 - WHAT KPIS SHOULD YOU BE MEASURING? 39 Answering the question, “Is my premium loyalty program successful” might seem difficult, but it all comes down to looking at these seven KPIs.
• ELIGIBILITY • CONVERSION • TRIAL STICK RATE • LIFETIME VALUE • AVERAGE ORDER VALUE • FREQUENCY OF PURCHASE • GROSS MERCHANDISE VALUE
If your premium loyalty is missing the mark in any of these areas, then it’s time to re-evaluate. At the end of the day, that sweet spot is when both you and your customers are getting a lot of value out of the program.
40 CHAPTER 6 - WHAT KPIS SHOULD YOU BE MEASURING? CHAPTER 7 Five Questions to Ask Yourself Before Going All In
CHAPTER 6 - WHAT KPIS SHOULD YOU BE MEASURING? 41 You understand the mindset and the value of premium loyalty to your brand and your customers.
Before you decide on launching a premium loyalty program for your brand, here are five questions you need to answer.
1. WHO WILL BE YOUR INTERNAL EVANGELIST?
Without internal alignment, it will be difficult to build a program that successfully meets your KPIs because you’ll end up with an ever-evolving project roadmap.
So, whether it’s you or someone else in your company, a passionate team member needs to be anointed the in-house premium loyalty evangelist.
Think of this role as a project manager.
This person sets the vision and direction of the program, maintains a proper timeline, and serves as the liaison between the brand and your loyalty partner.
This person communicates the clear message of how the program will increase member engagement, impact gross sales, profits, and incremental spending.
Once you have your premium loyalty evangelist in-house, it’s time to think about the next step.
42 CHAPTER 7 - FIVE QUESTIONS TO ASK YOURSELF BEFORE GOING ALL IN CHAPTER 7 - FIVE QUESTIONS TO ASK YOURSELF BEFORE GOING ALL IN 2. WHAT DO YOU KNOW ABOUT YOUR BEST CUSTOMERS?
Eighty percent of executives feel their brand understands the needs and desires of their consumers; only 15% of consumers agree.
All retailers say they know who their customers are. But do they truly?
You have to truly understand your customers to offer attractive benefits that make sense to them.
So, put yourself into your customers’ shoes and ask questions about preferences, habits, and desires.
These types of qualitative insights from customers give retailers a more complete picture.
With the 80/20 rule in mind, your best customers can make or break your year. You need to identify that top segment, understand what motivates them, and then acknowledge them with a premium loyalty program that says, “I know who you are”.
Learn more about understanding the needs and values of your customers.
CHAPTER 7 - FIVE QUESTIONS TO ASK YOURSELF BEFORE GOING ALL IN CHAPTER 7 - FIVE QUESTIONS TO ASK YOURSELF BEFORE GOING ALL IN 43 3. WHAT ARE YOUR COMPETITORS DOING?
What loyalty and engagement strategies are your competitors employing? It’s not enough to simply match on price. And providing great customer service is a given.
A premium loyalty program sets you apart from providing a competitive advantage, where adoption and first-mover status allows you to grab market share.
Premium loyalty is new and different.
It moves beyond pay-to-play where enrollment provides access to the same experience.
For example, Lululemon offers unique experiences designed specifically for its loyalty program members.
44 CHAPTER 7 - FIVE QUESTIONS TO ASK YOURSELF BEFORE GOING ALL IN CHAPTER 7 - FIVE QUESTIONS TO ASK YOURSELF BEFORE GOING ALL IN Premium programs proactively engage your best customers, recognizing them and rewarding them with benefits that are informed by your understanding of your customer and their expectations.
You need to know who your competitors are and assess their offerings.
Armed with this knowledge, you can create appropriate benefits that meet and exceed customer needs. This reinforces your brand value and differentiates you from your competition.
Understand what competitors are doing. And does that appeal to your audience? Or is it lacking?
This is where you can find opportunities to differentiate your program from the competition and build real emotional connections with your customers.
4. WHAT ARE YOUR PROGRAM GOALS?
A very important and often overlooked piece of the loyalty puzzle is that brands need to set clear program goals from the start to accurately measure results and success.
While every loyalty program needs to be centered on your customers, data is one example.
Data continues to become more important.
CHAPTER 7 - FIVE QUESTIONS TO ASK YOURSELF BEFORE GOING ALL IN CHAPTER 7 - FIVE QUESTIONS TO ASK YOURSELF BEFORE GOING ALL IN 45 Customers are now concerned with where their data is going. You need data for personalization and to find more customers like your best customers.
Increased engagement could be another critical goal associated with your loyalty program.
For example, a new loyalty program that includes instant benefits boosts customer engagement immediately.
Some other loyalty program goals include the impact on customer lifetime value, frequency, recency, and spend per transaction.
The more clarity you can give your loyalty program goals, the easier it will be to construct the right program and KPIs.
46 CHAPTER 7 - FIVE QUESTIONS TO ASK YOURSELF BEFORE GOING ALL IN CHAPTER 7 - FIVE QUESTIONS TO ASK YOURSELF BEFORE GOING ALL IN 5. HOW WILL YOU GET LEADERSHIP BUY-IN?
Loyal customers are 5x more likely to make a repeat purchase and 4x more likely to refer the brand to others.
You are all in on premium loyalty. You know your customer; you’ve received focus group and survey feedback informing your premium tier value proposition.
Internal and external resources are aligned and all that remains is initial testing. What could go wrong?
Well, if you don’t have C-suite buy-in from the start, the likelihood of reaching a test phase is limited and the likelihood of positive program results is diminished.
If management doesn’t understand, that will get passed down all the way to store level. And at the end of the day, your in-store associates can determine success or failure. If they don’t understand the program, they won’t be excited to tell your customers about it.
Customer loyalty must be cultural because if leadership is not convinced, then it becomes a trickle-down effect.
Learn about the premium loyalty answers to the questions you should be asking here.
CHAPTER 7 - FIVE QUESTIONS TO ASK YOURSELF BEFORE GOING ALL IN CHAPTER 7 - FIVE QUESTIONS TO ASK YOURSELF BEFORE GOING ALL IN 47 CHAPTER 8 2020 & Beyond
48 CHAPTER 8 - 2020 AND BEYOND Premium loyalty is on the rise.
Customers today have more choices than ever before, expect everything instantly, and are increasingly subscribing to products and services.
The loyalty space is not outside of these expectations and that’s why we’re seeing more large brands offering premium loyalty programs.
So, as you move forward into 2020 and beyond, ask yourself these questions: • \
• “What can I do for my customers that would add value to their everyday lives?”
• “What is a benefit that my customers would want that can’t be offered by any company?”
• “What would make a part of my customer base love our brand?”
With these things in mind, you can create a premium loyalty program that will deepen relationships with your best customers and keep them coming back.
CHAPTER 8 - 2020 AND BEYOND 49 About Clarus Commerce
Clarus Commerce is the only company solely focused on building, managing and optimizing customizable premium loyalty programs for retailers. The company provides the full suite of services needed for a successful program, which includes the technology platform, client services, strategy, creative, marketing, analytics, IT and operations. Clarus Commerce was founded in 2001 and is headquartered in Rocky Hill, Connecticut.
For more information, visit www.claruscommerce.com
WANT TO LEARN MORE ABOUT PREMIUM LOYALTY?
claruscommerce.com [email protected] How to Build a Loyalty Questions You Should 2019 Premium Program for the Modern be Asking About Loyalty Data Study 500 ENTERPRISE DRIVE Consumer Premium Loyalty SECOND FLOOR ROCKY HILL, CT 06067 50 claruscommerce.com [email protected]
500 ENTERPRISE DRIVE SECOND FLOOR ROCKY HILL, CT 06067 51 Premium Loyalty: Answers to the Questions You Should be Asking
CLARUS commerce Table of Contents
3-4 The Loyalty Landscape
5-8 What Exactly is a Premium Loyalty Program?
9-11 Will My Customers Pay for a Loyalty Program?
12-14 What Types of Customers Sign up for Premium Loyalty Programs?
15-17 Should I Charge My Customers for Loyalty Program Membership?
18-20 How Does the Premium Loyalty Financial Model Work?
21-24 How Can I Get Customers to Sign Up?
25-28 What Types of Benefits do Members Value Most?
29-32 Can Premium Loyalty Work with My Existing Program?
33-34 Ready to Dive Deeper on Premium Loyalty?
2 TABLE OF CONTENTS INTRODUCTION The Loyalty Landscape
3 As a retailer, you’re thinking about customer engagement.
In a time when consumers have unlimited choice amid increased competition, building stronger relationships with customers is more important than it has ever been.
That’s why loyalty programs are on the minds of every retailer.
You most likely have a loyalty program (or are at least planning to implement one soon).
After all, whether they’re shopping in your stores or online, most consumers expect to be offered membership to some type of loyalty program to be rewarded for shopping with you.
Many retailers do offer free, traditional programs, but now many are talking about premium loyalty programs. And while more and more big brands like Restoration Hardware, Lululemon and CVS Health are seeing success with premium loyalty, marketers still have a lot of questions around it.
Will my customers pay to sign up for a loyalty program? What types of benefits are they looking for if they do? Can a premium loyalty program work seamlessly with my free program?
Within the pages of this eBook, you’ll learn how to engage your customers with a premium loyalty solution starting with answers to these most important questions.
So, grab a cup of coffee and let’s jump in.
4 INTRODUCTION - THE LOYALTY LANDSCAPE CHAPTER 1 What Exactly is a Premium Loyalty Program?
5 5 Amazon Prime. Overstock Club O. RH Members Program.
Chances are you’re familiar with these popular premium loyalty programs. And if you’re a retail marketer, you have probably wondered, “What makes a loyalty program premium?”
In short, a premium loyalty program is where your customers pay a recurring fee to become members in exchange for valuable benefits that they can use right away.
It’s the opposite of a traditional, free loyalty program where the customer makes purchases over time to get rewards later.
But premium loyalty is about more than that simple definition. And it’s about more than just paying a membership fee.
At its core, premium loyalty is about putting the customer at the center of everything you do.
That’s why successful retailers are thinking about premium loyalty programs as a part of their overall marketing strategies.
6 CHAPTER 1 - WHAT EXACTLY IS A PREMIUM LOYALTY PROGRAM? Premium Loyalty Recap
In the simplest terms, a premium loyalty program is a loyalty program that’s so valuable, your customers are willing to pay for it.
These programs must provide perks that traditional programs can’t touch. Typical benefits include things like:
• Fast, free shipping • Instant, 24/7 discounts and / or cash back that can be enjoyed every time someone shops • Benefits, access, content and experiences that are exclusive to premium members • VIP customer care and treatments in-store, online and via personalized communications
Examples:
• Amazon Prime • CVS CarePass • Overstock Club O • RH Members Program • Lids All Access Premium • Best of Bob’s Premium
CHAPTER 1 - WHAT EXACTLY IS A PREMIUM LOYALTY PROGRAM? 7 Premium Loyalty Versus Traditional Loyalty Programs
Premium Loyalty Programs Traditional Loyalty Programs
Benefits and rewards up Transactions first, rewards Benefits front that drive transactions and benefits later
Recurring membership fee Points are accumulated with Model in exchange for benefits that each transaction to slowly can be used anytime earn benefits over time
Increase engagement, Mass signups of casual Outcome purchase frequency, and shoppers AOV with top customers
So, now that you have a clear definition of what premium loyalty is, let’s explore some of the most common questions being asked about it. You’re probably wondering the same things.
8 CHAPTER 1 - WHAT EXACTLY IS A PREMIUM LOYALTY PROGRAM? CHAPTER 2 Will My Customers Pay for a Loyalty Program?
CHAPTER 1 - WHAT EXACTLY IS A PREMIUM LOYALTY PROGRAM? 9 This is the most commonly asked question about premium loyalty.
And spoiler alert - The answer is yes.
According to a study that we recently published, lots of people already belong to premium loyalty programs and they’re already considering signing up for additional ones.
In fact, 58% currently belong to a premium loyalty program while 65% of those who belong to one plan to join additional programs in the next 12 months.
The truth is, consumers are ready and willing to sign up for these programs, but with a few of conditions.
The program has to be easy to understand with a clear value proposition. It needs to provide immediate and ongoing value. And it needs to make members feel special and exclusive.
In a recent article about its new premium loyalty program, Lululemon CEO Calvin McDonald said, “In each market the results have been well above our expectations going in very favorable from the guest and we continue to tweak and learn and do plan to roll into more markets and we’ll have more to announce at a later point in time”.
That program costs well over $100 annually for membership. And, Lululemon was
10 CHAPTER 2 - WILL MY CUSTOMERS PAY FOR A LOYALTY PROGRAM? even able to raise its fee over the program testing period based on how much customers engaged with the program.
Lululemon customers now pay $128 and get a pair of pants or shorts valued at that amount. So, even before any other benefits are enjoyed, that deal makes sense and is perceived to pay for itself. Easy to understand with a clear value proposition? Check!
In addition to the exclusive products above and free shipping on online orders, members also enjoy classes and other special events. Immediate and ongoing value? Exclusivity? Check and check.
If the value is there, customers will gladly sign up and pay to be members of premium loyalty programs.
CHAPTER 2 - WILL MY CUSTOMERS PAY FOR A LOYALTY PROGRAM? 11 CHAPTER 3 What Types of Customers Sign up for Premium Loyalty Programs?
12 CHAPTER 3 - WHAT TYPES OF CUSTOMERS SIGN UP FOR PREMIUM LOYALTY PROGRAMS? Traditional loyalty programs are great at one thing – Getting signups.
After all, there’s not much of a barrier to entry for people to sign up. So, if we think of traditional, free loyalty programs as appealing more to the masses, is it safe to say that premium loyalty programs are really for your best customers CHAPTER 3 who have strong brand affinity and are already somewhat loyal?
It makes sense to think of just your top customers that raise their hands to join premium loyalty programs, but it’s possible to move your casual customers into that upper tier as well.
Cinemark does a great job of this with its tiered approach to loyalty. Movie Fan is the free tier that earns points towards tickets, concessions, and merchandise along with some exclusive screenings. Movie Club is the premium tier that costs around $10 per month. Benefits include a free ticket monthly, discounts on additional movies for the month and all concessions, as well as the ability to reserve seats with no fees.
CHAPTER 3 - WHAT TYPES OF CUSTOMERS SIGN UP FOR PREMIUM LOYALTY PROGRAMS? 13 With this tiered free/premium approach, it’s easy to enroll casual customers. And once they’re in the ecosystem, it’s much easier to upgrade them to the upper tier. Premium loyalty really is about demonstrating the best of your brand.
According to the study, 87% of consumers who are satisfied with the special benefits offered by a retailer’s premium loyalty program will likely choose that retailer over a competitor that is offering a lower price.
In addition to increasing engagement and putting an end to the “loyalty to the coupon” phenomenon, premium loyalty programs also open the door for a boost in brand advocacy from your best customers.
In fact, 84% of consumers are likely to recommend a retailer to friends or family when the retailer offers a premium loyalty program with benefits that are valuable.
And around 90% of consumers would choose retailers with premium loyalty programs they belong to over other retailers.
These are the folks you want to build deeper relationships with.
14 CHAPTER 3 - WHAT TYPES OF CUSTOMERS SIGN UP FOR PREMIUM LOYALTY PROGRAMS? CHAPTER 4 Should I Charge My Customers for Loyalty Program Membership?
CHAPTER 3 - WHAT TYPES OF CUSTOMERS SIGN UP FOR PREMIUM LOYALTY PROGRAMS? 15 While this question does pop up frequently, perhaps a better question to ask is, “Do my customers want to belong to my premium loyalty program?”
Well, it’s not that your customers just want it — they expect it.
In fact, 31% of consumers say they have yet to join a paid loyalty program because the retailers they shop with don’t offer them.
We’re living in an instant society. Whether it’s movies, music, razors, clothes, supplements – you name it. People are willing to invest in subscriptions for the things they value most. Loyalty is no different.
This trend has progressed over decades, but the ubiquity of smartphones has caused it to skyrocket.
You don’t have to look far to see this trend, but it’s been largely ignored by the loyalty industry. Traditional loyalty rewards more slowly than today’s “instant society” has the patience for, which no longer makes sense.
And think about it. Don’t traditional free loyalty programs charge customers anyway?
While they don’t charge customers anything upfront to sign up, they require members to spend money over time in exchange for rewards. Isn’t that the same thing?
16 CHAPTER 4 - SHOULD I CHARGE MY CUSTOMERS FOR LOYALTY PROGRAM MEMBERSHIP? CHAPTER 4 - SHOULD I CHARGE MY CUSTOMERS FOR LOYALTY PROGRAM MEMBERSHIP? Premium loyalty isn’t about charging customers, though. It’s about providing value and experiences so good that customers are willing to pay for it. Customers invest in the program to get the best of the brand, and in turn, brands can provide the very best to their customers.
Where premium loyalty helps here is providing instant, ongoing discounts and great experiences. Some of the best programs offer exclusive transactional benefits like discounts on every purchase, free shipping or expedited shipping. They also offer exclusive in-store experiences and VIP services that drive deeper engagement even when the member isn’t shopping.
It’s not simply about monetizing your customers with an additional subscription fee. It’s about providing value through instant benefits that your members are investing in. In turn, they engage more.
It’s a two-way street. Isn’t that how loyalty should be?
CHAPTER 4 - SHOULD I CHARGE MY CUSTOMERS FOR LOYALTY PROGRAM MEMBERSHIP? CHAPTER 4 - SHOULD I CHARGE MY CUSTOMERS FOR LOYALTY PROGRAM MEMBERSHIP? 17 CHAPTER 5 How Does the Premium Loyalty Financial Model Work?
18 CHAPTER 5 - HOW DOES THE PREMIUM LOYALTY FINANCIAL MODEL WORK? To better understand how premium loyalty programs work financially, we have to understand how things are done with free programs.
When working with a vendor on a traditional loyalty program, the pricing model typically follows this formula: You would pay a loyalty vendor up to seven figures for a loyalty program. That is usually for the platform itself. Additional consulting and customization can cost even more later. Then, you launch the program and hope to see a positive ROI after a 12-to-18-month period.
The traditional model doesn’t make sense for premium loyalty.
Instead, in the revenue share model, the retailer and the vendor simply share in the revenue brought in by the membership fees. There is no upfront expense to the CHAPTER 5 retailer for the buildout.
This allows both parties to share in the rewards and mitigates the risk on the retailer.
It’s a true partnership that encourages the two parties to constantly work together on optimizing the program to make sure that members love it and want to renew year after year.
With that being said, let’s be clear that a premium loyalty program is not a breakage model.
In the simplest terms, a breakage model is one in which revenue gained by retailers comes through unredeemed gift cards or other prepaid services that are never claimed.
CHAPTER 5 - HOW DOES THE PREMIUM LOYALTY FINANCIAL MODEL WORK? 19 The classic breakage model assumes many people who sign up for an offer won’t actually use it meaning they won’t get a penny of value from it.
That’s the opposite of how you want a premium loyalty program to work.
You want your customers using your premium loyalty program as much as possible.
For your customers, the value comes in the great benefits they are receiving from your program every single time they shop or when they engage with the brand through all channels.
For you as a retailer, the value comes from the additional purchase frequency, AOV and LTV of your premium loyalty members who are loving those benefits.
At the end of the day, if your members aren’t getting value out of the program, they’re not going to renew.
Think of premium loyalty as a usage model - The opposite of a breakage model.
The more you get your customers to use the program, the more they are going to engage over time. You WANT constant engagement, unlike the stale programs that are out there today.
20 CHAPTER 5 - HOW DOES THE PREMIUM LOYALTY FINANCIAL MODEL WORK? CHAPTER 6 How Can I Get Customers to Sign Up?
CHAPTER 5 - HOW DOES THE PREMIUM LOYALTY FINANCIAL MODEL WORK? 21 If you demonstrate the value upfront to your customer, then it’s a no-brainer for them to sign up.
The challenge is really demonstrating that value. Unlike a free program that simply requires a customer to give you their email address, premium loyalty programs require some selling.
First, you have to present a compelling call to action. And you need to have a clear and easy to understand value proposition.
Lids does a great job of this with its Access Pass Premium loyalty program. For just $5 per year, members get 20% off all hat purchases and several other transactional benefits that can be used all the time.
It’s easy for consumers to do the quick math. The average hat costs around $20, so the annual fee pretty much pays for itself on the first purchase.
And given that most members will purchase multiple hats per year, it’s almost hard to justify not joining.
On the other end of the pricing and purchase frequency spectrum is RH.
The RH Members Program is $100 annually, but that gets members 25% off all full price items, 20% off all sale price items, and concierge service. It’s still easy to do the math. Chances are, a piece of furniture will cost more than $400, so the membership pays for itself after just one purchase.
From the consumer point of view, it’s a good deal that is easy to justify.
22 CHAPTER 6 - HOW CAN I GET CUSTOMERS TO SIGN UP? CHAPTER 6 - HOW CAN I GET CUSTOMERS TO SIGN UP? But it all comes down to communicating it to your customers. After all, if they don’t know about your program, they won’t sign up.
Your best customers don’t wake up in the morning and ask themselves, “Do my favorite brands have a premium loyalty program? And if so, I need to enroll today!”
Your need to promote messaging that creates awareness and a sense of immediacy.
This can be attained by having clear and concise benefits, messaging, and in-store associates that are properly trained on the program.
The value of passionate in-store associates cannot be underestimated.
In-store employees occupy the front lines of customer interaction and represent your best brand evangelists.
It is crucial they are fully trained to articulate the amazing consumer benefits associated with loyalty program launches or updates.
CHAPTER 6 - HOW CAN I GET CUSTOMERS TO SIGN UP? CHAPTER 6 - HOW CAN I GET CUSTOMERS TO SIGN UP? 23 Let’s face it: You can have the greatest loyalty program in the world, but if your associates aren’t educating customers about it in an effective way, customers won’t know about it.
A fully engaged in-store staff can effectively communicate your loyalty program’s benefits to maximize the impact.
To give you a real-world example, look at Bob’s Stores.
The Northeast-based family apparel, footwear, and sporting goods retailer was looking to launch a premium loyalty tier on top of its existing free loyalty program. Loyal customers and tenured employees were quite familiar with the benefits and rewards of the free program. But it required support and training to ensure customers and staff were fully aware of the enhanced benefits and rewards within the new premium loyalty tier.
The following points, which were critical to a successful rollout at Bob’s Stores, are recommended for any brand modifying its loyalty program: • In person, in-store training • Scripting for associates; what is the “elevator pitch” for the new program • Simple but descriptive in-store marketing, including but not limited to counter mats, in-store banners, window clings, and in-store radio announcements • Link to video training • Incentive program for store associates getting sign ups
How can you expect your customers to be excited about the program if you’re associates aren’t properly educated and excited as well?
24 CHAPTER 6 - HOW CAN I GET CUSTOMERS TO SIGN UP? CHAPTER 7 What Types of Benefits do Members Value Most?
CHAPTER 6 - HOW CAN I GET CUSTOMERS TO SIGN UP? 25 This depends on each individual brand.
What works for CVS CarePass won’t necessarily work for Overstock Club O. You really must understand your customers – both behaviors and attitudes – and pair those insights with your brand values to develop a winning premium loyalty solution.
But there is some information that can be used across the board.
Sixty-seven percent of consumers said instant discounts that can be used whenever you shop are the biggest perk that motivates them to invest in premium loyalty programs.
Sixty-one percent said it is faster, free shipping.
And 43% said exclusive deals only available to members were the motivating factor. Twenty-two percent said it’s exclusive in-store experiences.
What is true for most brands is that balancing transactional and experiential benefits is key.
Retailers are talking about experiential, but transactional benefits are still very important, especially when they’re instant. Forty percent of consumer ranked frequency of benefits as the factor influencing renewal.
That’s because transactional benefits make people feel smart. And they’re
26 CHAPTER 7 - WHAT TYPES OF BENEFITS DO MEMBERS VALUE MOST?” CHAPTER 7 - WHAT TYPES OF BENEFITS DO MEMBERS VALUE MOST?” expected. Things like coupons, cash back, discounts and free shipping are table stakes.
But experiential benefits make people feel special. Anyone can offer discounts, but VIP experiences, concierge service, and access to events not available to everyone make the difference.
People experience transactional benefits first and most frequently, but experiences
really allow retailers to differentiate themselves. Experiential is making sure your customers are staying engaged with your brand when they’re not transacting.
And that really comes into play when it’s time to renew. That’s when people evaluate what programs are adding value to their lives.
As already mentioned, your customers are faced with more and more subscriptions. Subscription fatigue becomes a very real concern.
CHAPTER 7 - WHAT TYPES OF BENEFITS DO MEMBERS VALUE MOST?” CHAPTER 7 - WHAT TYPES OF BENEFITS DO MEMBERS VALUE MOST?” 27 The good news is that only 31% of consumers said that cost was a top factor influencing the decision to renew a premium loyalty program membership. It really comes back to value and engagement. And a part of that is keeping those benefits fresh and relevant, whether they’re transactional or experiential.
Overstock Club O launched back in 2009, but recently added price-match guarantee and free returns as perks of the program.
Prime started out to solve the consumer pain point of shipping costs. Then it evolved over time and never stops adding new benefits to make the lives of members easier. The results speak for themselves.
Ninety-three percent of U.S. Amazon Prime subscribers continued with a membership after one year, while this jumped up to 98 percent after two years.
With premium loyalty, optimization is critical. You can’t “set it and forget it”.
28 CHAPTER 7 - WHAT TYPES OF BENEFITS DO MEMBERS VALUE MOST?” CHAPTER 8 Can Premium Loyalty Work with My Existing Program?
CHAPTER 7 - WHAT TYPES OF BENEFITS DO MEMBERS VALUE MOST?” 29 Some retailers feel like they might need to completely let go of their current free loyalty programs. But premium loyalty doesn’t mean leaving your existing program behind.
If you already have a free loyalty program, that’s fine. There’s no reason why you can’t add a premium tier on top of it. In fact, free loyalty and premium loyalty can coexist to ultimately serve your entire customer base.
A free loyalty program can transform a sporadic shopper into an occasional shopper. But a premium loyalty program can transform those occasional shoppers into your best and most loyal customers.
AMC Theatres has found success with offering Stubs Premier and a free tier as well. AMC actually went the opposite route and added the free tier to an already established and successful premium loyalty program.
Just two months after launch, 1.2 million more households had signed up. Adding the free program encouraged more signups and provided AMC with a much larger member database and insight on their preferences.
It’s also easier to demonstrate the value of the premium tier to existing free tier members than it is to try to get program acquisitions from non-members. Even if a paid member downgrades to the free program, they are still in the Stubs ecosystem, making an upgrade to premium easier in the future.
So, it’s not a question of which type of program to offer, but rather how they can best work together.
Free loyalty programs are great at generating program enrollments.
30 CHAPTER 8 - CAN PREMIUM LOYALTY WORK WITH MY EXISTING PROGRAM? CHAPTER 8 - CAN PREMIUM LOYALTY WORK WITH MY EXISTING PROGRAM? That’s because the barrier to entry for customers to sign up is so low. Often, they must simply provide contact information and some basic details. In exchange, they receive a membership and can begin accumulating points to redeem for rewards later. Most free programs are similar in their design.
But, while lots of customers may sign up, the engagement often isn’t great. Traditionally, there hasn’t been much differentiation between brands, so there’s not much pain in switching brands if a customer finds a lower price somewhere else.
So, while a free program targets all customers, including your casual customers, a premium loyalty program targets your best customers. These are the customers that already have some affinity from your brand. They’re the customers that would get the most out of the enhanced benefits of a premium loyalty program.
By offering both tiers, you can provide value to your entire customer base. Members can also self-select and move between the tiers depending on their needs. The same goes for private label credit cards (PLCC).
Loyalty programs act as a major catalyst that perfectly complement an existing PLCC.
CHAPTER 8 - CAN PREMIUM LOYALTY WORK WITH MY EXISTING PROGRAM? CHAPTER 8 - CAN PREMIUM LOYALTY WORK WITH MY EXISTING PROGRAM? 31 Many retailers with multi-tender loyalty programs receive higher penetrations for their private label and co-branded cards than retailers who focus their program solely on their own credit card.
The combination of a loyalty program and a PLCC not only makes the card more attractive to a broader group of mid-tier customers, but also creates customer retention and higher spend in more customer segments.
PLCCs largely offer the same benefits for cardholders, but a loyalty program provides that differentiation through targeted offers/rewards and personalized communications.
Banks also place restrictions on how retailers can communicate with their PLCC holders. Many retailers quickly realize that implementing a PLCC without a comprehensive loyalty program is akin to leaving the glass half empty.
When a retailer complements a PLCC with a loyalty program, the appeal to sign up is greater. Without the loyalty program, customers who purchase a lot from a specific merchant may avoid the logistics involved in signing up for a PLCC alone or the cardholder may not use the card again beyond the introductory offer.
Premium loyalty is for your best customers who want the best of the brand. They are for people that really love the brand. They’re further reaching than your PLCC, but more targeted than free programs. Premium loyalty solutions allow you to focus on the top 20% of your customers.
32 CHAPTER 8 - CAN PREMIUM LOYALTY WORK WITH MY EXISTING PROGRAM? CHAPTER 9 Ready to Dive Deeper on Premium Loyalty?
CHAPTER 8 - CAN PREMIUM LOYALTY WORK WITH MY EXISTING PROGRAM? 33 Hopefully we’ve answered your biggest questions about premium loyalty. Just to recap, premium loyalty is a loyalty program that’s so valuable, your customers are willing to pay for it, just like Amazon Prime, Lids Access Pass Premium, and CVS CarePass.
And studies show that customers are more than willing to pay to be members of premium loyalty programs if the value is there. In fact, a big reason people don’t sign up for these programs is simply because their favorite retailers don’t offer them.
If the benefits and experiences are good enough, your customers will raise their hands to become members and engage more with your brand. And engagement is the key. That leads to membership renewals and ultimately increased order frequency and AOV.
If you’d like to learn more about premium loyalty, here are some great resources.
2019 Premium Loyalty Data Study
eBook: How to Build a Loyalty Program for the Modern Consumer
Article: Premium Loyalty? Subscription Loyalty? What Do We Call This Paid Loyalty Trend?
Article: Is Premium Loyalty Right for All Your Customers?
Article: 3 Megatrends Creating the Rise in Premium Loyalty
claruscommerce.com
500 ENTERPRISE DRIVE SECOND FLOOR ROCKY HILL, CT 06067 34 CHAPTER 9 - READY TO DIVE DEEPER ON PREMIUM LOYALTY? claruscommerce.com
500 ENTERPRISE DRIVE SECOND FLOOR ROCKY HILL, CT 06067 CHAPTER 9 - READY TO DIVE DEEPER ON PREMIUM LOYALTY? 35 THE RISE OF PREMIUM LOYALTY What Do Your Customers Expect in 2020?
CLARUS commerce TABLE OF CONTENTS
03 Introduction
06 Premium Loyalty Is on the Rise
10 Loyalty Members Expect Clear Value
15 Millennials and Premium Loyalty
19 Popular Premium Loyalty Programs
22 The Time Is Now for Premium Loyalty
24 Methodology A New Decade of Premium Loyalty
A new decade signals a fresh start. to spend now to receive benefits For retail brands, 2020 presents an later, premium loyalty programs opportunity to drive major change give customers what they want, in the way they attract and retain when they want it. As a result, customers going forward. premium loyalty members have higher engagement rates and In 2020, loyalty is critical: Nearly often become valuable brand two-thirds of customers say their ambassadors that bring in even loyalty is more difficult for retailers more satisfied customers. to maintain than ever before, confirming what we already know Whether by communicating clear to be true: With unlimited choices value and specific benefits or at customers’ fingertips, earning adjusting existing loyalty programs loyalty today takes more than just to cater to the needs of emerging a plastic punch card or weekly generations, brands must be coupon. Consumers expect more cognizant of premium loyalty’s than just traditional loyalty programs power in motivating today’s easily to keep them coming back – they distracted customers to return to expect the instant benefits and their brand time and again. experiences that premium loyalty programs can offer. Based on a survey of 2,500 consumers, the following report Premium loyalty programs give digs into and analyzes what retailers’ most dedicated customers today’s customers expect from a instant, 24/7 transactional benefits premium loyalty program and how like discounts and free shipping retailers can adapt accordingly to as well as top-tier experiences in keep long-term customers close exchange for an annual or monthly as loyalty becomes even harder membership fee. Rather than to come by. requiring your customers
Clarus Commerce — Premium Loyalty Data Study 2020 3 Comparing Premium and Traditional Loyalty Programs
Premium Traditional
Recurring membership fee in exchange What it takes Accumulate points with each transaction to earn for instant transactional benefits plus to earn benefits benefits over time exclusive experiences
Intended audience The top 20% of your customer base Casual shoppers
Increased engagement, AOV and frequency A high volume of signups across a broad segment Results among your best customers, while paving the way of consumers, but limited engagement for greater brand advocacy
Clarus Commerce — Premium Loyalty Data Study 2020 4 Key Findings
69% 94% of premium loyalty members of premium loyalty members shop plan to join additional premium at that program’s retailer at least programs in 2020 once a month
70% 88% of those not in a premium program of respondents are likely to choose would join if their favorite retailer a retailer whose premium loyalty offered one and the benefits program they belong to over a were valuable competitor that is offering a lower price
74% of millennials plan to join additional premium loyalty programs in 2020
Clarus Commerce — Premium Loyalty Data Study 2020 5 SECTION 01
Premium Loyalty Is on the Rise The steady growth of premium loyalty Premium loyalty is on the rise — which is good news for retailers hoping to enter the premium loyalty arena and secure long-term loyalty from their customers this year. The survey found that 66% of respondents currently belong to a premium loyalty program. This is a promising increase when compared to the 58% reported in 2019.
Frequency of consumers who shop with retailers while participating in their premium loyalty program
11% 25% 22% 25% 11% 6% Every day Every few days Once a week Once every Once a month Less than once few weeks a month
Percentage of consumers who plan to join premium loyalty programs in the future
30% 40% 26% 4% Definitely yes Probably yes Probably not Definitely not
Clarus Commerce — Premium Loyalty Data Study 2020 7 Here’s even better news: Once Beyond this spike in membership, For which of the following categories consumers become premium loyalty consumers also expect premium would you be willing to join a premium members, they use the programs to loyalty programs to exist in more their fullest. In fact, respondents use shopping categories. While loyalty program? their current programs frequently, staples like groceries and gas with the majority making a purchase remain obvious frontrunners, at least once a month, and many new categories like clothing, 60% Grocery shopping weekly. entertainment, and health and beauty are seeing a boost in And as an added bonus, interest compared to 2019 data. an overwhelming majority of For brands that offer products in respondents (69%) plan to join these categories, this is the year to 54% Clothes and accessories more premium loyalty programs consider how premium loyalty in 2020. could elevate the experience for your customers.
41% Gas
38% Entertainment
35% Health and beauty
34% Travel and hospitality
23% Furniture
Clarus Commerce — Premium Loyalty Data Study 2020 8 Traditional and premium programs work together
Traditional loyalty programs can In fact, 67% of respondents are boost the growth of a premium likely to join a premium loyalty program by acting as excellent program if they already belong to recruitment sources. A free that retailer’s free loyalty program. program gathers a ready-to-use pool of customers that already Currently, over half (52%) of survey enjoy your brand enough to join respondents who don’t belong to a a loyalty program once. With the premium program already belong to right mix of added value and clearly a free program. That’s a significant communicated benefits, customers group of consumers from which to will jump at the chance to level recruit for premium programs in up and join the premium program the future. so they can experience it for themselves.
Likelihood consumers will join a premium loyalty program if they already belong to a free loyalty program
28% 39% 18% 14% Very likely Somewhat likely Somewhat unlikely Very unlikely
Clarus Commerce — Premium Loyalty Data Study 2020 9 SECTION 02
Loyalty Members Expect Clear Value Premium members are brand evangelists “Brands can’t wait for customers to So, what drives consumers to join a premium loyalty program? It comes down to consumers clearly seeing the value that the program offers its members: stumble on the program themselves — 70% of all respondents who are not yet in a premium program said they they need to be proactive about showing would join one if it was offered to them and the benefits were valuable. The the clear, personalized value of upgrading key word here is “offered.” Brands can’t wait for customers to stumble on the to a premium program.” program themselves — they need to be proactive about showing the clear, personalized value of upgrading to a premium program.
Reasons why consumers do not participate in any premium loyalty programs
35% 42% 31% 5% They’re too expensive I don’t see the value I’m open to them, but Other the retailers I shop with don’t offer them
Clarus Commerce — Premium Loyalty Data Study 2020 11 When customers do see the value family or friends if the retailer’s and join, however, these members premium loyalty program become key ambassadors of the offers valuable benefits. program — and the brand as a whole. Consumers overwhelmingly To ensure the sustainability of Likelihood consumers will recommend choose brands they are loyal your program and the long-term to over price tags: 88% of success of your brand, it’s critical a retailer to friends/family if they find respondents are likely to choose to communicate the value your the benefits from that retailer’s premium a retailer whose premium loyalty program offers clearly, early, loyalty program valuable program they belong to over a and often. Your premium loyalty competitor that is offering a lower members are key evangelists of price. Plus 89% of respondents your brand, but they need to be would recommend a retailer to guided to fulfill that role. 53% Very likely
36% Somewhat likely
6% Somewhat unlikely
2% Very unlikely
3% No influence
Clarus Commerce — Premium Loyalty Data Study 2020 12 Where do today’s customers find value?
Communicating value is critical, First and foremost, 40% of so the important question is: What respondents expect to receive do consumers value in a premium their premium loyalty benefits loyalty program? immediately, not after 10 purchases and not after a month of consistent The answer is different for each buying. And when it comes to retailer and brand. It depends benefits, free shipping, instant on the industry, the competitive discounts and free giveaways top climate and the demographics of the list of incentives that would the consumer base. However, the encourage consumers to join a survey reveals some insights on premium loyalty program. While the “must-haves” that any good experiential benefits are critical, premium loyalty program especially when it comes to brand should include. differentiation, transactional benefits are often what get members in the door.
What was the main reason you joined Amazon Prime?
“Although I joined Prime for shipping, I ended up using many of the other 81% Faster/free shipping features... I would consider all those extras in the Prime membership as
11% Video streaming benefits 3% Customer events perks that motivate.”
2% Music streaming benefits 2% Food delivery
Clarus Commerce — Premium Loyalty Data Study 2020 13 Perks that motivate consumers to join a premium loyalty program
66% Free shipping 38% Holiday discounts
60% Instant discounts that can be used whenever you shop 35% Exclusive deals (i.e. access to pre-sales)
56% Free giveaways 27% Personalized offers
47% Faster shipping 19% Exclusive in-store experiences (i.e., a personal stylist, fitness classes, etc)
45% Surprise rewards 6% Nothing would motivate me to invest in a premium loyalty program
14 SECTION 03
Millennials and Premium Loyalty Ready to recruit the next generation? When it comes to premium loyalty recruitment efforts, millennials are the ones to watch. Not only is this age group gaining buying power in the market as they move into higher level jobs, but they are starting or expanding their families, which comes with different purchasing needs and categories.
Frequency of millennial consumers who shop with retailers while participating in their premium loyalty program
16% 28% 22% 22% 8% 4% Every day Every few days Once a week Once every Once a month Less than once few weeks a month
Frequency of non-millennial consumers who shop with retailers while participating in their premium loyalty program
11% 25% 22% 25% 11% 6% Every day Every few days Once a week Once every Once a month Less than once few weeks a month Clarus Commerce — Premium Loyalty Data Study 2020 16 This could explain why 74% of millennial respondents are likely to join a And in terms of recruitment, another 74% of millennial respondents plan to premium loyalty program if they already belong to a retailer’s free program join additional premium loyalty programs in 2020. Sixty-five percent already — a healthy jump from the 67% of total respondents who say the same. shop with their premium loyalty programs at least once a week, and 1 in 4 are willing to pay up to $100 a year for premium loyalty membership.
Percentage of millennial consumers who plan to join premium loyalty programs in the future
38% 36% 23% 3% Definitely yes Probably yes Probably not Definitely not
Percentage of non-millennial consumers who plan to join premium loyalty programs in the future
30% 40% 26% 4% Definitely yes Probably yes Probably not Definitely not
Clarus Commerce — Premium Loyalty Data Study 2020 17 Millennials holiday shop early
If brands are itching to recruit “Early” is even earlier than brands millennials to their loyalty programs might initially think for the holiday in 2020, they should start early. shopping season, especially for this During the holiday season, demographic. In fact, nearly half millennial shoppers are fiercely (48%) of millennials begin holiday loyal to their favorite retailers: 89% shopping before October, and just of millennial respondents are more under 1 in 4 do so before July. likely to holiday shop at a retailer where they are already a loyalty For those millennials who begin member. And among millennials holiday shopping before October, who are already premium loyalty 73% have joined a loyalty program members and plan to join more solely to use the benefits and programs in 2020, the number who rewards during the holiday choose their loyalty retailers during shopping season. the holidays jumped to 95%.
Time of year millennials begin holiday shopping
10% January-March
10% April-June
24% July-September
56% October-December
Clarus Commerce — Premium Loyalty Data Study 2020 18 SECTION 04
Popular Premium Loyalty Programs Popular Premium Loyalty Programs
GameStop: PowerUp Rewards Bed Bath & Beyond: Beyond+
Price point $20/Year $29/Year
Exclusive offers and games, 20 points for every dollar 20% off discount on each purchase, free shipping Benefits spent, 10% extra trade credit, $60 annual rewards and 50% off design services. certificate, digital subscription to Game Informer.
A lot of benefits for regular gamers who frequent No more searching for and stowing away paper What’s the value? the store anyway, and the rewards credit pays for coupons for future purchases. the annual fee.
Clarus Commerce — Premium Loyalty Data Study 2020 20 Popular Premium Loyalty Programs
CVS Pharmacy: CVS CarePassTM Amazon: Amazon Prime
Price point $60/Year $119/Year
Free two-day, same-day and no-rush shipping, Free delivery, 24/7 pharmacist helpline, 20% off CVS video and music streaming, Whole Foods and Benefits Health® brands plus a $10 monthly promo reward. Amazon Fresh two-hour grocery delivery, Prime Day, Prime Reading and more.
This goes beyond the free program (ExtraCare®) Fast, free delivery for everyday essentials to bring added benefits for more frequent What’s the value? and everything in-between plus a long list of customers, critical for retail brands in the extra benefits. healthcare space.
Clarus Commerce — Premium Loyalty Data Study 2020 21 SECTION 05
The Time Is Now For Premium Loyalty Getting started with premium loyalty
Premium loyalty is growing steadily, or Amazon’s. Once you determine and retailers from all industries and that unique value point, you can put categories should consider the the corresponding customer needs benefits that premium programs can first as you develop the program. create. Not to mention, premium loyalty programs are often ROI- Then, find a partner that positive from the very first day — understands the ins and outs they cost little upfront and revenue of premium loyalty programs to flows almost immediately. guide the initiative as it grows and evolves. With a trustworthy guide However, a successful program isn’t to lean on for support and advice, something that’s one-size-fits-all. To you can be sure that your premium get started on the path to premium, offering continues to provide value you must determine where your years down the line for both your customers find value in your brand, business and customers. not your closest competitors’ brands
“To get started on the path to premium, you must determine where your customers find value in your brand, not your closest competitors’ brands or Amazon’s.”
Clarus Commerce — Premium Loyalty Data Study 2020 23 Methodology
Clarus Commerce surveyed 2,500 American consumers in February 2020. The respondents were broken down by a number of different factors, including their familiarity with free and premium loyalty programs.
Do you currently belong to any free loyalty programs? (i.e., Starbucks Rewards or a points program from a local business)
73% 27% Yes No
Do you currently belong to any premium loyalty programs? (i.e., Amazon Prime, CVS Carepass)
66% 34% Yes No
Clarus Commerce — Premium Loyalty Data Study 2020 24 About Clarus Commerce
Clarus Commerce is the only company solely focused on building, managing and optimizing customizable premium loyalty programs for retailers. The company is a true loyalty partner that not only provides a technology platform, but also a full suite of managed services including strategy, creative, marketing, analytics and client services.
Learn more at claruscommerce.com
©2020 Clarus Commerce LLC