Photo credit: Samuel Thompson
The success of Amazon Prime and other paid enhanced loyalty programs proves customers will spend a bit more for the privilege of spending a lot more.
So-called “enhanced loyalty” programs are hot. The model — and the standard — is Amazon Prime, charging $119 a year for free shipping and access to first-run high-quality streaming video content and more. With 100 million members, Prime is a big success by any measure though on shipping, it “loses” millions of dollars. (But not really.) Of course, now that Amazon owns Whole Foods, Prime has even more value.
Now, I don’t mind paying a little extra for “membership” when I know the cost will be covered with savings and other benefits. Costco, for example, charges what is basically an admission fee to their big box locations, but also give extra perks, discounts and even cash to defray the cost of membership. I think it’s great, and I’m not alone.
“In the Bond loyalty survey, the share of respondents willing to pay for enhanced loyalty programs spiked to 37% in 2018 from 30% in 2017. Paying for loyalty programs has even greater acceptance with early technology adopters (69%), Gen Z (47%), Millennials (46%) and households with children (44%),” according to The Loyalty Report 2018, by Bond Brand Loyalty, an annual report based on the responses of 50,000 consumers in North and South America, and Europe.
The report is well worth reading. Among its revelations: “Loyalty programs have a higher influence on Gen Z and Millennial consumer spend than on Boomers (66% vs. 58%). However, younger consumers are less satisfied with their programs (30%) compared to their Boomer parents (49%), creating an opportunity for brands who focus on rewarding members through experiences beyond points. 85% of consumers find ‘alternative’ currencies such as Wi-Fi access, an empty seat next to them on an airplane, quicker checkout lines for members only, and others to be highly valuable.”
These “alternatives” must present value or the programs will fail. But it’s clearly not a one-sided relationship. Obviously, if retailers don’t also benefit, the programs are valueless and not worth maintaining. Again, according to the report, members of loyalty programs spend more than a third (37%) more than non-members. The five categories loyalty program members outspend others by the greatest amount are gas station programs (99%), hotels (82%), drug stores (63%), movie theatres (61%) and grocery stores (57%). That’s pretty significant!
Companies and brands spend millions — billions, even — to connect with customers. If they approach it from the perspective of what delights and pleases the customer, they can establish a bond that will last long after their latest campaign fades from memory. Work backward from there and provide genuine opportunities, offers, products, perqs and more, imbued with authenticity and consistent with the values of the brand. Monetization of the relationship will inevitably follow if the connection is made. But if it’s a schlocky, fake, insincere and exploitative attempt at a relationship, customers’ BS detectors will render the effort null and void.
Richard Pachter is Editor at Large for The Wise Marketer.