Is your loyalty program ready for a paid subscription level?

The recent news that one of Australia’s longest living loyalty programs -  flybuys (est. 1994) is working on a paid premium subscription tier, (‘flybuys max’), highlights the potential of offering a paid level with relevant benefits within programs.

Programs (loyalty/rewards/benefits/VIP/membership) offering a subscription fee, whether one off or ongoing, part of a tiering structure or not, is not new.

A few examples (there are many others) with permutations of this are below (benefits not analysed):

1. One-off: Qantas Frequent Flyer = one off $89.50 joining fee 

2. Ongoing: Amazon Prime (Australia) = $4.99/month 

Have a look at their fascinating statistics on their US success

3. Ongoing: Costco Gold Star Membership - $60/year

Recent report on their success

4. Ongoing: The Coffee Club VIP = $25/year

5. One off: Kathmandu Summit Club = $10 joining fee

6. Ongoing: Hoyts Rewards - $13/year for Silver tier (free to join bronze)

One-off: SuperCheap Auto Club Plus - $5 joining fee

While this article does not analyse the detail of the benefits received for the fee, a paid subscription proposition needs careful planning to ensure it is a sustainable offering – profitable to the business and meaningful to the members.

Here are seven factors to consider when you are planning to have a paid subscription offering as part of program or the program itself:

  1. Fit for purpose = category and program vs customer behaviour
    • Be clear on how relevant your category and hence program and the purchase behaviour of your customers/ members (frequency and spend) suits a paid subscription offer.
  1. Is your business ‘subscription ready’?
    • The process and people to manage a renewal-based paid program is more onerous than a one-off fee. The member care for ongoing subscriptions needs to be available to manage retention and expectation of paying members.
  1. Don’t let the subscription fee revenue affect your focus on the long term financial returns that a well-managed program delivers.
    • The Subscription revenue is only one income source for a program.
    • Model the long term value and viability of a program as if you didn’t have the subscription revenue.
  1. The value-exchange must be valuable, visible and ongoing:
    • Asking for a subscription fee means providing extra-ordinary value (real and perceived), for both one-off and ongoing paid subscriptions.
    • The value exchange must be valuable and visible when onboarding paid members.
    • For the renewal-based subscriptions, the visibility of value is even more important at renewal-time - what they have saved by being paid member (transactional) and the other non-transactional benefits they’ve enjoyed.
  1. Volume of members vs quality of members
    • Your expectation on large volumes of members paying to join a paid program (or tier) should be balanced by a more committed and highly engaged member base with lower numbers.
  1. Be more than a transactional offer, build the emotional connections to belong:
    • Are there “more than money” reasons to belong?
    • Provide benefits that simplify your members’ lives, create a community, add elements of exclusivity and experiential benefits and always plan for random acts of kindness to delight them beyond what’s expected.
  1. Free entry level and tiered paid level
    • Consider a free entry level to gain membership volume.
    • Then add a tiered or paid subscription level where benefits are more valuable, exclusive and aspirational.
    • This offers the best of both worlds: The free level provides a known and contactable member base to engage with and leverage into the paid level. The paid level provides a revenue source, program funding and recognises and rewards a cohort of paying members seeking greater connection with the program.

Consider these seven factors as you go through the due diligence to decide whether your loyalty or rewards program is ready for a paid subscription level.

Have a happy loyalty day!

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