The success of Amazon Prime has prompted many established brands to rethink the structure of their existing loyalty programs.
While points-based programs were once ubiquitous, moving forward, loyalty programs will look a lot more Prime-like.
While free points programs sound good on the surface, long redemption times, poor awareness and understanding of the benefits and anemic usage mean we will see the death of points programs.
Paid VIP-style subscriptions provide brands with a more predictable source of recurring revenue, which can be used to subsidize more loyalty program benefits like free shipping, coupons, and exclusive events.
In turn, customers receive more value, and thus become more engaged, use the programs more frequently, and ultimately spend more money. From Prime to Instacart, the numbers back it up.
Instacart is building loyalty and engagement via its fee-4-VIP subscription-based Instacart Express program.
And, the numbers look promising—the average Instacart shopper spends about $95 an order, twice a month (roughly $2,300 a year); Instacart Express customers, on the other hand, who pay $99 a year for free deliveries, order twice as often and spend about $5,000 a year.
The Future of Loyalty Loyalty will be rooted in VIP subscription programs
Instacart is taking advantage.
So is GNC, who despite bankruptcy woes, revamped its old Gold Card Rewards program, launching myGNC Pro Access in early 2017.
For $39.99 per year, Pro Access members receive benefits like free shipping, quarterly member-only sales days, monthly customized Pro boxes (which contain samples, coupons, and new products that are tailored to their lifestyles and goals), and more. Pro members purchase twice as often and spend significantly more than regular non-Pro customers.
Bed Bath & Beyond has a loyalty program called BEYOND+, which runs $39.99 a year. It offers members 20 percent off purchases along with free shipping, and other benefits such as 50 percent off decor design services, exclusive offers, and member-only shopping events.
While BB&B continues to struggle, the one bright spot is the revamped loyalty program — BEYOND+ members shop 2.5 times more than the retailer’s average customer and generate four times more revenue. Restoration Hardware’s Rh Member program, at $100 a year, gives members 25 percent off and other perks like interior design consultation.
In 2018, CEO Gary Friedman said that 95% of Restoration Hardware’s business was driven by its nearly 400,000 members.
“We can confidently declare our move from a promotional to a membership model a success. Membership has enhanced our brand, streamlined our operations, and vastly improved the customer experience.”
Other brands that have relied on this model, or moved in this subscription direction include Costco, Overstock.com, Barnes & Noble, AMC Theatres, and Chinese e-commerce giant Alibaba—whose 88 VIP program functions as a super-subscription that extends benefits to a wide array of services beyond its core e-commerce platforms.
Points-based loyalty was long in vogue, from Air Miles to Amex. But the next chapter will be driven by fee-4-VIP loyalty, with Amazon Prime leading the way.