Among the different types of loyalty programs is one that’s not so common. It’s the paid loyalty program.
Many people, customers and businesses alike, may think:
‘Why would anyone pay money to join a rewards program?’
‘Isn’t the purpose of a loyalty program to attract customers and get them to be loyal?’
‘Doesn’t a paid loyalty program sort-of defeat the purpose?’
Well, the answer isn’t so simple.
It’s why we’ll be taking a deep-dive into paid loyalty programs and what makes some of them successful. We’ll see why customers are willing to pay for one and how you can create a successful paid customer loyalty program for your business.
As its name suggests, a paid loyalty program is a program where you pay to get rewards.
Paid rewards programs are sometimes referred to as
According to McKinsey, the pandemic may have “challenged customer loyalty,” but it also “increased the value of paid loyalty programs.” Assuming, of course, that companies “do them right.”
One of the most famous paid loyalty programs is Amazon Prime, which we’ll cover in this article.
Many paid loyalty programs operate as a standard one would: Customers accumulate points when they buy products and services. Then, they can exchange these points for rewards.
So, what’s the difference?
The major difference between premium loyalty programs and standard ones is that the customer pays a fee. Accordingly, they expect bigger perks and rewards compared to non-paying customers.
Brands with paid loyalty programs offer exceptional benefits to their customers. They use their paid rewards program as a means to increase brand loyalty.
“Paid loyalty programs offer an attractive option for companies both to attract new customers and to shore up long-term customer value in the midst of a tectonic shift in consumer loyalty and preferences.” –McKinsey
Some brands may offer a free-to-join loyalty program along with a paid one. One company that does this is bookseller Barnes & Noble, which we’ll cover in the next section.
But what is the value of paying members?
Paying members, that is customers who pay to join your paid loyalty program, can “be worth several times more than non-paying” customers.
That’s not all. For many, a financial commitment, even as low as $10 a year, can act as an emotional connection.
Paid loyalty programs can be more incentivizing than standard programs. McKinsey’s research found that 59% of paid-program customers were more likely to choose that brand over the competition. They were also 43% more likely to buy from that brand on a weekly basis.
It’s worth mentioning that benefits like free products and discounts can “hook customers,” but may “not be enough to retain them.”
So, how do you entice customers to keep coming back and continually renew your rewards program membership fee?
“Brands must use the membership fees to invest in exclusive offerings with more emotional resonance,” advises McKinsey. These exclusive and emotional offerings can include creating personalized experiences and offering access to member-only events and perks.
Premium loyalty programs, like tiered loyalty programs, create a sense of community. They make customers feel like they’re part of a group, a clique.
You can use this to your advantage by creating customer surveys about your products and services, your customer support team, new products you want to add…etc.
Customers who join paid membership loyalty programs are 60% more likely to increase their spending with your company or store. This is compared to only 30% with free loyalty programs. (McKinsey)
Moreover, nearly 62% of consumers are more likely to “spend more on a brand” after joining its paid loyalty program. (McKinsey)
So, not only does the value of customers’ spending increase after subscribing to a paid rewards program, but also
This means that “paying members can be worth several times more than non-paying members, even setting aside revenue from membership fees themselves,” reports McKinsey.
Having a paid loyalty program means customers pay a fee, even a small one, to join. This can help you offset some of your marketing or loyalty marketing costs.
It can also act as another revenue stream for your business.
Now, let’s look at some successful examples of premium rewards programs. Despite their benefits, there aren’t that many of them.
Popular US bookseller Barnes & Noble boasts a successful book loyalty program, which includes the free-to-join B&N Rewards and the paid version called Premium Membership.
Under the free B&N Rewards, customers collect stamps (the equivalent of points), which later translate to rewards. For every $10 spent in-store or online at B&N, customers get 1 stamp. Every 10 stamps offer a $5 reward.
Meanwhile, to join B&N’s Premium Membership, bookworms pay $39.99 a year to enjoy major perks.
By subscribing to B&N’s paid loyalty program, bookworms can collect stamps like the standard B&N Rewards along with:
Among other perks!
But what do bookworms think?
Bookworm and communications analyst Rebecca Hill says she’s been a happy member of B&N’s paid rewards program for 15 years! (And still going strong). Her favorite perk is “the discounts on books,” which she uses for teaching and research.
As for the ‘special birthday offer,’ Hill notes that they’re usually for the B&N Café, which doesn’t use much. But she enjoys the coupons they offer throughout the year, which offer “even better savings,” she says.
Stella & Dot is a high-end jewelry brand with a two-tier paid loyalty program. Called Collectors’ Club, Stella & Dot’s premium rewards program comes with a ton of gifts.
However, the jewelry brand comes with a hefty monthly fee. Unlike other paid programs on this list, Stella & Dot is the only program that doesn’t have an annual fee.
Here’s how the brand describes its rewards program:
“Think of the Club as having your birthday 12 times a year! Get a special savings and early access to meaningful accessories made to last, love and layer, delivered right to your door every month.”
Customers who wish to join Stella & Dot’s rewards program get to pick between the $59.95 tier and the $79.95 tier.
And what do customers get for paying these fees every month?
Considered one of the best beauty loyalty programs, Aveda is an award-winning, paid customer rewards program.
So, what’s in it for customers with Aveda Plus Rewards?
With Aveda, customers participate in the standard points-system, where they earn points for purchases. Customers get 10 points for each $1 spent at “Aveda-owned retail store[s], participating salons, spas, retail locations and institutes and on aveda.com.”
Customers also get 200 points for downloading and using the Aveda app along with double points on their first purchase.
In addition, customers benefit from
The Swarovski Crystal Society is the paid loyalty and rewards program for Austrian jewelry maker, Swarovski.
Considered one of the top luxury loyalty programs, the Swarovski Crystal Society comes with an annual joining fee of $55. Customers can choose the 3-year subscription for $125, or gift others a subscription at the same value.
To renew their membership, customers pay $45 per year to renew or can choose the 3-year option for $115.
This tiered luxury jewelry rewards program offers customers a variety of benefits including
These are the basic benefits. As customers rise in loyalty tiers, they get even more perks.
Amazon Prime is by far the most popular paid loyalty program on the list. It’s why we saved it for last.
To get Amazon Prime perks, customers pay a monthly or annual fee. However, the fees and perks differ from one country to another.
That said, essential Amazon Prime benefits include:
By now, you’ve seen the varying annual and monthly fees brands include in their paid membership rewards programs. You also know that paid loyalty programs aren’t confined to a certain industry.
So, how do you go about creating a successful paid loyalty program?
Here are some tips:
Be upfront about the type of loyalty program you’re offering and the fees involved. The B&N website is clear about what’s in it for their customers, whether those joining the free rewards program or the paid one.
If you opt for the annual fee, you can also offer customers the opportunity to renew at a discount.
An annual option also justifies the fee. Paying $40 a year is the equivalent of paying $3.5 a month, which is more than you’d pay for a book.
Similarly, paying $55 a year means you’re paying roughly $4.5 a month to get jewelry from Swarovski.
Meanwhile, Stella & Dot’s membership costs $60 a month, which can tally month-on-month. To some, Stella & Dot’s program looks like a subscription box and less like a rewards program.
One of the most important points in the success of any loyalty program is being clear about how it works.
Some brands have a ‘how it works’ page, while others divide the information between their loyalty program landing page and the frequently-asked questions (FAQs) page or section.
Explaining how it works tells customers and potential subscribers what they get in return for choosing you.
We recommend creating a loyalty program explanatory page to cover all your customers’ questions.
Above all else, the rewards and perks you offer in a paid loyalty program MUST exceed the cost or fee.
Jewelry-maker Swarovski notes that their annual crystal membership gift “has a higher value than the annual membership fee itself.”
Aveda charges a one-time fee of $10, so it doesn’t look like an over-the-top commitment. Barnes & Noble charges almost $40 a year. Both brands offer perks that supersede the fees they charge for joining their loyalty programs.
B&N also has a free-to-join loyalty program for customers who don’t want to pay $39.99 for the extra perks.
As an avid reader, Rebecca Hills notes that B&N’s year-round coupons “offer even better savings.”
Having enticing perks is the first step. However, these perks must also be meaningful to your customers.
For Rebecca, for example, the B&N Café perks aren’t that important. Whereas, the discount coupons matter more.
After all, B&N is a bookstore. And what do you buy from a bookstore? Books! (Duh!)
If you’re not sure what qualifies as a good perk, ask your customers.
If you’re considering having the free and paid rewards programs, you can have a small perk in the first and a larger, better one in the paid version.
When customers subscribe to paid loyalty programs, there are two essential perks they expect to get. These are free shipping and better discounts.
When surveyed about the paid loyalty program perks, 60% of US shoppers expected free shipping with no minimum order value.
Other perks they expected included same-day delivery (40%) and more shopping options than in-store options (31%). (Statista)
So, whatever you do, add these perks to the top of your list.
When charging a membership fee, you increase your customers’ expectations. They expect gifts and surprises. They’re paying you to increase their perks, so including surprises is a great way to keep customers curious.
Unlike many rewards programs that offer a gift on your umpteenth order, Stella & Dot promises customers free gifts on their fourth and seventh orders.
The brand doesn’t mention what these gifts are, creating mystery and suspense. But they should be valuable enough to entice customers to pay the next monthly fee.
Good surprises and valuable gifts can increase customer satisfaction and retention, which means more sales and profits for your business.
Customers today aren’t interested in a one-and-done loyalty program. They want experiences. They want to see your brand connecting with them, and creating unique, personalized experiences for them.
A personalized experience isn’t merely including your customer’s name when they log into your website or mobile app. Or even when you email them.
It’s about tailoring their entire experience with your brands based on their preferences.
It’s about recommending products to them based on their previous purchases.
It’s about offering them birthday gifts that make them feel special and rewarded.
“A journey map that focuses merely on the purchase funnel, and not the entire end-to-end customer journey, is not a CX journey map. Those sorts of journey maps may assist with efforts to build awareness, inbound traffic and acquisition, but they cannot uncover the opportunities that influence customer satisfaction, loyalty and long-term advocacy.” – Augie Ray, VP analyst at Gartner Marketing Practice. (Gartner CX Survey 2022)
Paid loyalty programs have many benefits but you should know: Not everyone will join a rewards program with a fee.
As you’ve seen from the above list, subscription fees can range from a $10 one-time fee to a monthly fee to an annual one.
It depends on your products, offerings, your rewards program, and your customers, and whether or not they’re willing to pay.
Research by Bolt found 70% of consumers citing “membership fees” as the top reason for not joining a loyalty program.
While paid rewards programs can entice customers to buy more for better perks, they can also put off or scare away potential customers.
“Valuing paid loyalty programs like Amazon Prime are the exception, not the rule,” Bolt says.
As for why customers may cancel their loyalty program subscription, 31% said “it costs too much,” while 20% said they’d discontinue their subscription if they didn’t find the rewards valuable.
Finally, we want to offer a few tips from our experience helping customers in e-commerce and other industries creating successful rewards programs.
As a business, it’s important that you keep an eye on how your program, paid or not, is performing.
This means you’ll need to review several customer loyalty program success metrics, such as your
Successful loyalty programs are those that offer a variety of rewards. If you’re offering a premium loyalty program, you’ll need to think of more rewards for your paying customers.
Rewards can be in the form of double or triple points, birthday gifts, discount coupons, among others.
Like B&N, you can offer paying customers discount coupons that you don’t offer your non-paying customers.
If you’re a restaurant or coffee shop, one of your perks to paying members can be size upgrades. B&N and Starbucks offer such perks.
While the Starbucks loyalty program is free to join, one of its perks is free coffee and tea refills on a customer’s birthday.
One way to increase loyalty and attract more customers is to create partnerships with other brands. This allows you to expand your customer base and give customers more ways to earn points.
You can also limit the benefits from these partnerships to your paid loyalty program members.
Beauty brand Aveda does this. You can earn their points in select beauty salons and other locations. Similarly, Sephora, while not a paid program, lets customers earn points when buying Sephora products at non-Sephora stores.
We’ve mentioned that customers may not be willing to pay a fee to join your paid rewards program. And that’s ok.
You can, however, create a 2-in-1 loyalty program where customers can join the free program in exchange for certain perks and others can join your premium program for better rewards.
Free customers can upgrade to the paid membership loyalty program at any time they wish.
This option is for businesses who are planning to have a free rewards program and a paid one.
In this case, you can vary the value of points for each program.
For example, if customers earn 1 point for every $1 spent in your store in the free program, let customers who join your paid loyalty program earn 2 or 3 points for every $1 spent.
This way, it’s a win-win for you and your customers. This tactic can be used with free and paid loyalty programs. However, it’s the perks you add to your referral program that make all the difference.
We recommend rewarding both customers and their referrals. However, it’s best to reward both parties when the referral completes their first purchase.
One of the benefits you get when using Gameball as your loyalty and engagement program provider is the customer segmentation engine.
You can segment your premium loyalty program customers into ready-made or customizable segments and create campaigns for them. This is especially useful if your store offers lots of products.
You can also use Gameball’s RFM segmentation feature to group customers based on their buying behavior.
This helps you create new opportunities to connect with and reward your customers.
Combine customer segmentation with Gameball’s Challenges feature to engage and reward customers.
You can create seasonal Challenges, use our ready-made challenges, like the Birthday Challenge, or create your own.
To learn more about the different types of challenges you can create, visit the Gameball Help Center.
Creating a paid loyalty program takes time, effort, experimentation, and a lot of thinking. But it can be rewarding.
These premium rewards programs can be a great way to offer more perks to entice customers. But it’s important to remember that not all customers are willing to pay for a rewards program.
If you’re just starting out, paid loyalty programs aren’t the way to go. (Unless, you’re a super popular brand.)
If your business has been around for some time and has already attracted a large number of customers, you may choose to launch a paid rewards program, alongside the free one.
Need help creating your paid or regular rewards program? Sign up to Gameball and start creating experiences and rewards your customers will love.
Got a store on Shopify? Get Gameball from the Shopify App Store today!