The world has discovered a new marketing mantra- the paid loyalty program. What does a paid loyalty program mean? Who pays whom? Is it the brand owner paying the customer to be loyal to him? But that is what most loyalty programs do, right? The most valuable customers of the brand are ‘rewarded’ for being loyal to the brand… in other words because these customers have already demonstrated their affinity to the brand, the company behind the brand attempts to retain them by demonstrating to them that they are special.That is the model of the ‘traditional’ loyalty program.
The ‘paid’ or ‘fee-based’ loyalty program turns this paradigm upside down by ‘selling’ the loyalty program to the customers for a fee. In other words, the customer has to pay a fee to be considered special. What this means is that you are telling the customer ‘we know you are a high value customer, we know you are regularly spending large amounts on my brand but hey, you know what? If you want me to treat you as a VIP, you need to pay a fee to become a member of my loyalty program’. Does that sound odd to you as a customer?
But here are the facts.
Studies by well-known research houses have shown that customers would be willing to pay a fee to be a member of a loyalty program if the program were to be interesting.And studies on some of these programs have also shown that customers who paid a fee are exhibiting loyal behavior.
Consider this example:
The world’s largest ecommerce player, Amazon, runs the world’s most talked about marketing initiative called Amazon Prime. And what is Amazon Prime? It is a service which charges you a fixed sum (Rs999 per annum in India) to become a member of Amazon Prime. And once you become a member of this elite club, you are entitled to a bouquet of benefits. In case you don’t know what the benefits are, here is an indicative list:
· FREE One-Day Delivery to eligible addresses.
· FREE Two-Day delivery to eligible addresses.
· FREE No-Rush Shipping to eligible addresses and avail Rs.15 cashback.
· FREE Scheduled Delivery to eligible addresses.
· Discounted Same-Day Delivery to eligible addresses at Rs. 50.
· Discounted Morning Delivery to eligible addresses at Rs. 50.
· Discounted Express Delivery for Prime Now to eligible addresses at Rs. 49.
· No minimum order value required for FREE Standard Delivery.
· and a host of other benefits
Now that is an impressive list and I am sure no one would mind paying a subscription fee for availing these services. Looks like a hell of a lot of value for paying Rs 1000 per year when I pay Rs2000 per year just to get my newspapers! So I will pay ( Disclosure: I am a member of Amazon Prime) but the question is this: Am I loyal to Amazon?
There are numerous reports suggesting that Amazon Prime members displayed a higher level of loyalty in the sense that they bought more products, bought more often and were likely to buy again from Amazon. On the basis of which several articles have been written on the new miracle cure- the paid loyalty program. And retailers all over the world are preparing their blueprints for their own version of ‘paid’ loyalty program.
So, is the ‘paid’ loyalty program the real cure for all loyalty maladies? Or are there some negative aspects to this model? Does it have a downside? I will try and state my perspective in the next post.
In the meanwhile, what do you think? Do share. It will be interesting to know what the sharp minds in marketing feel about this issue.
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