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Is it really loyalty if you have to pay for it?

Is it really loyalty if you have to pay for it?

Author: Ros Netto, CRM & Loyalty Consultant, Truth

Many notable loyalty programmes have adopted the pay-to-play (subscription based) model where members pay a recurring fee to stay in the programme in exchange for heightened level of service/experiences and/or product specific benefits that they can use anytime.

Companies offering this benefit from a substantial ongoing revenue stream that affords them the opportunity to provide richer, more tailored, and relevant experiences. It has also been stated that when members pay for a monthly service/subscription, they remain more engaged with a programme or brand than non-paying members.

Is it really true loyalty if you pay to access benefits?

Traditional loyalty programmes exist to encourage & reward behavioural change through incentivisation so if you are simply paying for benefits in a subscription-based model to receive them upfront, what are the behaviours you are looking to change or encourage?

We’ve identified 3 versions of fee-based loyalty models that exist and are unpacked below:

1. PAY AND GET (BASIC SUBSCRIPTION / CLUB MODEL)

This subscription model offer instant rewards and do not require customers to accumulate a loyalty currency making it an attractive alternative to a traditional loyalty programme.

In South Africa, the traditional club concept, popular amongst SA largest retailers, often includes a main “hook” for customers when joining a club in the form of affordable insurance such as funeral cover or basic medical / hospital cover.

Similar to the retail club offering, Daddy’s Deals, an online platform offering daily deals and offers on an array of lifestyle products and experiences, also have a premium subscription, which, for a low monthly fee of R99, unlocks even deeper discounts (save up to 30% more), provides early access to deals & VIP call centre support to all its Club Daddy members. The discount level is so deep, that after purchasing just one of their deals, you can already make back the R99 spent on the membership that month.

Amazon Prime, a leader in the subscription based arena, were reported to have a 94% retention rate after the first year and 98% of those users stay for a 3rd year. This is indicative that members of Amazon Prime truly see the value of paying the monthly fee.

2. PAY FOR LOYALTY MEMBERSHIP (PAY TO JOIN & ENJOY BENEFITS OF A PROGRAMME)

This model refers to having to pay to join a loyalty programme. Without paying a monthly or annual fee, you do not gain access to the programme.

This is particularly popular in financial services programmes or retail banking programmes. Discovery Vitality falls within this category. Vitality’s fees range from R259 – R359 per month depending on how many beneficiaries belong to the main member’s policy. Without paying the monthly fee, members cannot access any of the benefits associated to Vitality such as gym, retail or travel discounts.

3. PAY TO UPGRADE LOYALTY MEMBERSHIP

The combination of traditional loyalty and fee-based loyalty co-exist here.

These programmes are usually targeted at your loyal customers who are entrenched in your offering already but want more. They want more convenience and a premium. They are engaged in your programme already but want more.

Recent studies by RetailWire (USA) have shown that up to 62% of customers would sign up for fee-based programme if their favourite retail programme offered one.

This indicates that globally there is an appetite for more exclusive products and services, even if it comes at an additional fee. We believe that there is a place for fee-based loyalty to exist on their own or in parallel to existing programmes

ST Loyalty & Rewards_Is it really loyalty if you have to pay for it?_Ros Netto

This article by Ros Netto, Truth Loyalty & CRM, first appeared in the Sunday Times Loyalty & Rewards Supplement, 22 September 2019.