Previously, we looked at loyalty programs that offered free higher tiers to members. Now I’d like to talk to you about how to set up a loyalty program where members pay to move up.
Loyalty programs with paid tiers are for customers willing to pay a membership fee to access exclusive and instant rewards. Remember that paid tiers are more than just memberships—they are opportunities to speak to your best customers and put them at the center of your brand relationship.
An exclusive opportunity that’s not for everyone
When a customer is prepared to invest in order to obtain a privileged position in your loyalty program, they are showing their engagement with your brand and prepared to interact even more. That said, paid tiers are not for everyone.
This type of program is aimed at your best customers—the top 10% to 20% of your base. They are the customers who spend the most with you (theoretically representing between 50% and 80% of your revenue) and who purchase from you on a regular basis. Which means you should be rewarding them proportionally for their loyalty.
For paid tiers to be worthwhile for customers, rewards must be exclusive and your best customers should be able to take advantage of them immediately.
Giving customers instant rewards is a concept that Amazon knows exactly how to exploit. For just $79CAD per year, Amazon Prime members enjoy access to Prime Video and Prime Music, unlimited photo storage on Amazon Photo, free 1- or 2-day delivery (or same day, in some areas), and more. Ordering an item online and having it shipped free—in just a matter of hours—is about as instant as a reward can get! This exclusive membership benefit is what sets Amazon Prime apart from everyone else in the field.
In the entertainment industry, Cineplex offers a paid level as part of their Scene program. This comes with 50% more points, free weekday access to a 3D or IMAX cinema, large drinks and popcorn at medium prices, and exclusive access to dedicated lines at concession stands—all benefits that members can enjoy immediately on every visit.
The key to both programs: immediate benefits that set the brand apart.
To create a program with paid tiers, you need to identify your customers’ needs and what they require to elevate their participation in your program. Benefits can be monetary, but should also include ways to enhance their experience with you.
How much should you charge?
When you offer a range of additional benefits, remember that you will have to absorb costs. That’s why membership fees are so important. Revenue generated by subscriptions to your program must cover part of the benefits you are providing. Be sure not to look at these fees as revenue for your business, but rather as a way to help finance rewards to your best customers. The goal here is to ensure they renew their membership year after year, and feel the program rewards are well worth the cost.
To determine what fee to charge, take into consideration the cost of the benefits a well as its impact on your operating costs, such as manual labour.
Paid membership and traditional loyalty programs
By focusing on instant rewards, a paid membership is in many ways the opposite of a traditional loyalty program, which rewards customers for past behaviour. That said, both can exist together under one program and, in fact, can complement each other nicely.
You’ll need to start with a strategy that addresses each phase in the customer’s life cycle as well as each customer segment. Customers in the free program should be able to migrate to the paid program at any time, and paid customers can end their membership while still enjoying the rewards of the basic program.
Both types of program provide excellent ways to help your loyalty program stand out, offer gamification, and personalize your customers’ brand journey. Get the most out of your program by carefully determining and planning each tier based on customer value. If you do this work upfront, you will be rewarded with customers who are more committed and loyal to your brand than ever.