Subscription Loyalty Programs Increase Customer Lifetime Value

by Bistriti Poddar |

Subscription Loyalty Programs Increase Customer Lifetime Value

Ever since Amazon announced that it has touched 100 million Prime members, there has been a lot of discussion and chatter around subscription loyalty programs. Netflix also became very interesting when the officials reported 1.96 million new subscribers the very first quarter. Why do you think 100 million subscribers have raised their hands to sign up for this very successful program? Now, some can argue that Amazon lacks real customer engagement and Prime is primarily a convenience offering and more of a transactional relationship with their customers.  Loyalty, however, is about high perceived value and when customers see that, they are more likely than not to become active brand advocates. It’s not about earning and burning points anymore, it’s a lot more about meeting customer expectations at every touchpoint in the customer journey. Prime members receive transactional benefits like fast, free shipping and experiential benefits like Prime video. A lot of brands are taking a page from such successful case studies like Amazon Prime by adding subscription services to engage loyal customers. Brands are waking up to the realization that the best way to thrive during uncertain economic times is to have loyal customers who keep buying and engaging with the brand. So, it’s more important than ever to envision new and exciting ways to retain customers in a world where choice comes easy and competition for customer’s attention, time and money is fierce.  It’s a battle for sure but a strategic loyalty program will definitely help retain your most valuable and profitable customers.

According to reports: 

  • The subscription e-commerce market has grown by more than 100% per year over the past 5 years, with the largest retailers generating more than $2.6B in sales in 2016, up from $57M in 2011.
  • Almost 15% of online shoppers have signed up for 1 or more subscriptions to receive products on a recurring basis, frequently through monthly deliveries.
  • A whopping 37% of customers admitted that they don’t mind paying a fee to access special perks.
  • Some subscription-based loyalty programs that got very popular in 2018 are Amazon Subscribe and Save, Dollar Shave Club, and Birchbox.

A subscription or premium loyalty program is a paid loyalty program where customers subscribe and pay a fee upfront in exchange for valuable rewards that can be redeemed right away. The goal is to put the customer at the center of the brand’s unique value proposition. Subscription loyalty programs increase brand equity. Customers love convenience services and instant gratification and will gladly pay for this high perceived value. This, by itself, will help maximize CLV.  With this paid subscription you can offer premium rewards, discount coupons, or special deals for the selected customers. You can easily incentivize the most loyal customers and attract them to spend more on your products. Finally, you will want to capture and monitor customer feedback and behavior which will help you to define future loyalty and customer retention strategies.

Before launching  a subscription loyalty program, consider reviewing these aspects: 

  • Does it make sense to have a subscription-based loyalty program for your kind of business? There are some businesses more adaptable to the subscription model. Carefully evaluate your business goals so you can make this decision.
  • Understand the capabilities of your technology platform. Is it well equipped to manage subscription based programs or will you need to re-platform?
  • It’s definitely not a one-size-fits-all strategy. Brands need to segment and determine the right audience for a subscription based program.

What does it take to build a successful loyalty program within the subscription-based model? 

  • Create a program strategy that focuses on customer service at the core of it. Adapt to the new age of loyalty programs that insist on simplicity, speed, exclusivity and personalization that your best customers expect. So, ensure that you offer the right mix of valuable benefits and improve the effectiveness of your program by constantly optimizing it.
  • Reward your customers for writing reviews and referring friends and family. Leverage this to identify their pain points, preferences, and needs. Ipsy rewards subscribers with points for reviewing the products they receive in the glam bag each month which they can use to redeem free products. By encouraging reviews and feedback, they get valuable insights into what their customers prefer, which can be used to improve their products. The Birchbox Loyalty Program not only awards members one point for each dollar spent but also awards 50 points for each friend referral.
  • Reward your customers for positive brand experiences. Make sure there are more relevant and personalized offerings too.
  • Provide transactional and experiential rewards for the most profitable customers to acknowledge their actions that help in building your brand. When you’ve piqued the interest of premium loyalty program members, take the customer relationship to the next level with experiential rewards they can’t find anywhere else. Transactional benefits like discounts and/or free shipping are standard but customers get even more excited about unique rewards tied to special events, access to exclusive sales, free products, VIP services, etc.

Engagement based loyalty programs in the subscription industry is a great way to reduce churn, increase retention and build long-lasting relationships with customers, thus increasing emotional loyalty. However, it’s important to determine what matters to the customers most and then works to optimize this experience.

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