Is it worth adding a paid subscription membership level to your loyalty program?

Subscription based membership programs are receiving lots of airtime, especially since Amazon Prime has become such a massive success for Amazon.

At $99 per year for membership, the numbers are pretty huge:

  • Volume: Amazon Prime now has 90 million members in the United States.
  • Growth: Over the past 12 months, Prime membership grew by 38 percent.
  • Member vs Non member: Prime members spend on average $1,300 annually, compared to $700 from non-members. (86% incrementally more)
  • Depth of membership into available customer base: 63 percent of Amazon customers are Prime members.
  • Retention rate: 95 percent of Prime members report that they will “definitely” or “probably” renew their Prime membership.

From this example (the only one I can find in the public domain with such incredible measures of success) it is clear that building a subscription based membership model whether as a stand-alone member offering or a level within a program is a worthwhile consideration.

However, as I was once mentored when chasing a new ‘shiny thing’ – hasten slowly!

Here are six factors to think about if a subscription member model (ongoing not one-off) is on your mind for your loyalty and rewards program:

  1. Fit for purpose = brand vs customer behaviour: Be super clear on how relevant your brand and the purchase behaviour of your customers (frequency and spend) fit a subscription model. Check out a few different one’s for some clues to identify ‘fit for purpose’:
    1. The Coffee Club – VIP
    2. Costco
    3. Qantas Frequent Flyer
    4. The BIG4 loyalty club 
    5. Hoyts Rewards 
    6. Others
  2. The value exchange must be valuable, visible and ongoing: Asking for a subscription fee means providing extra-ordinary value (real and perceived). The value exchange (here’s my fee… what’s in it for me) must be valuable and visible from onboarding to ongoing and bring it to life even more near renewal (if you want high retention).
  3. Volume vs quality: Your expectation on huge volumes of members should be tempered by a more committed and quality member base with lower numbers.
  4. Is your business ‘subscription ready’? Process and people - renewal systems and member care need to robust and ready to manage in the ins-and-outs of members.
  5. Be more than a transactional offer, build the emotional connections to belong: Are there “more than money” reasons to belong. What about simplifying their life, creating a community, adding in exclusivity and always plan for random acts of kindness to delight them beyond what’s expected.
  6. Don’t let the joy of the subscription fee revenue blind you to the real financial returns from the program. Carefully model with a long-term view as setup costs need to be amortised as well as ongoing cost to serve. It might be wise to be conservative on renewal rates.

Doing some rigorous due diligence is a statement of fact (rather than the alternative one) that will answer the question…Is it worth adding a paid subscription membership level to your loyalty program?

Have a happy loyalty day!

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