Loyalty programmes are essential to retailers of all stripes; they help build customer engagement, creating a sense of belonging and increasing customer trust through relevant rewards and personalised offers. They’re also evolving to become key revenue drivers and brand differentiators.
Across the globe, more retailers are enhancing their existing loyalty programmes by layering paid subscription plans and membership programmes on top. These initiatives provide consumers additional benefits while creating a new recurring revenue stream for the retailer. According to Gov.UK., consumers across the nation are also becoming more familiar with subscriptions overall, with an increasing number subscribing to many entertainment-based or product delivery subscriptions.
One example on these shores is Tesco, which introduced the Tesco Clubcard Plus for mobile users several years ago; the monthly fee of £7.99 earns members up to £40 worth of monthly savings. Over in the U.S., the mass retailer Target announced a paid membership tier in March 2024 for its Target Circle 360 loyalty programme that includes free delivery in less than an hour, extended time on item returns and more personalised promotionsavailable only to subscribers.
There are other, more established subscription programmes like Amazon Prime, but it’s clear that many retailers see a growing and lucrative opportunity in a paid loyalty model. Retail executives surveyed in Deloitte’s 2024 retail industry outlook said that “strengthening loyalty programmes” is their leading “growth opportunity,” which could easily include subscriptions.
However, retailers cannot simply offer free delivery in exchange for a membership fee within a subscription-based opportunity for growth. They must be innovative in providing members with more value and engaging them once they’ve subscribed, using technology such as AI to make subscribers’ lives easier and more convenient, primarily through the power of personalisation.
Enhancing Loyalty Through Subscriptions
Within Target’s recent announcement of Target Circle 360, Cara Sylvester, the retailer’s Executive Vice President and Chief Guest Experience Officer, described its subscription plan as one that delivers discounts and rewards online and in-store “so that every visit feels personal, rewarding and made just for you.”
Like Target, other retailers are exploring how subscriptions can enhance already-established loyalty programs. Canadian retail giant Loblaw, for example, launched its PC Insiders membership service just a few years after the PC Optimum loyalty programme came into existence, in part to discourage its most valuable customers from cross-shopping with competitors.
Woolworths Australia’s Everyday Extra, a subscription add-on to its Everyday Rewards program, incentivises customers to consolidate their spending with a monthly omnichannel discount of 10% off. UK high street brand Liberty engaged customers who were shopping for a critical category for the retailer – beauty – by layering its popular Beauty Box subscription on top of its existing loyalty programme. Pret a Manger used its Club Pret coffee subscription in concert with its broader Pret Perks programme to extend the scope and value of its overall loyalty proposition.
Despite the success these retail brands have had with their membership services, delivering customised, hyper-targeted personalised communications at scale through the subscription channel isn’t easy–and many other retailers currently struggle to achieve that.
Here’s how technology can help retailers get there in two important ways:
- Leveraging and optimising customer data. Through automation and analytics, retailers can leverage their customer data and let machine learning suggest optimal promotions for each paid member. Maintaining consumer information for millions of consumers can be cumbersome; machine learning speeds up the work for retail teams and helps retailers become more efficient in how they deliver precise, relevant, and customised promotions.
- Providing real-time connections. With API-based, cloud-native technology, retailers also move faster in how they service loyalty members and subscribers. Automated, flexible platforms allow retailers to connect with customers in near real-time, keeping them active and engaged in programmes for much longer. Members of the subscription service can access offers wherever they are and get up-to-date information on points levels or benefits, inventory levels for delivery, and even targeted promotions based on their current location.
Technology is fundamental in driving the success of any loyalty program, regardless of whether it’s based on a subscription model. Leveraging a retailer’s customer data and insights from external sources, such as weather forecasts or macroeconomic trends, enables the creation of highly relevant offers and communications tailored to each member’s needs and preferences. This, in turn, helps retailers keep their customers actively engaged, which leads to lasting customer relationships.
Increasing Customer Retention Rates
Retailers naturally want to maximise sign-ups for their membership programmes, yet renewed subscriptions are the true measure of success. Launching a paid programme that actively engages members is crucial. By keeping members engaged and satisfied by offering them real, tangible value, retailers can grow a loyal customer base that renews their subscriptions year after year, solidifying the programme’s long-term viability and profitability.
According to our own findings, a 5% increase in customer retention rates can lead to as much as 25% profit growth. Subscription-based businesses grow at a rate five times faster than traditional businesses and are more profitable on average.
A study by subscription platform Chargebee found that providing personalised rewards and offers decreases the rate of new member churn by 40%. Platforms that help retailers deliver scalable, personalised promotions are key to retaining customers inside a paid programme.
Levelling Up Loyalty Through Paid Memberships
While some customers of traditional retailers might initially be sceptical about the notion of paying a fee to get more out of their loyalty programme, making the value proposition as visible and transparent as possible and maintaining a steadfast commitment to customer-centricity can radically transform this perspective. Paid memberships, underpinned by these areas, are designed to offer substantial, tangible value to a retailer’s most valued consumers.
It’s also important that members recognise that value, which is why successful subscription programs like Club Pret offer a calculator tool to show in plain terms how much subscribers are saving by participating in the programme. By focusing relentlessly on each customer’s needs and preferences, retailers can ensure that their paid programmes provide significantly more in return, effectively addressing any initial doubts and fostering a deeper sense of loyalty to their brand.
At the heart of any subscription program must lie unwavering loyalty, with the customer-retailer/brand relationship being the focus. Technology is a crucial conduit in this model, supporting the need for highly personalised messaging, benefits, and promotions that resonate with each individual. This tailored approach demonstrates to customers (and members) that the retailer or brand understands and values their unique needs and preferences.Ultimately, this relationship between customer and retailer paves the way for a future where loyalty is acknowledged and rewarded and where customers and retailers enjoy the lasting benefits and growth of their participation.