25 March 2019
Loyalty for sale
Consider whether you can get your customers to pay for their loyalty. Jens Vandborg talks about a new, strong trend in loyalty programmes and customer clubs.
Are you finding that retention rates are dwindling in your customer club? Or that your loyalty programme is not really succeeding in driving sales – neither additional sales, upselling or cross-selling? Then perhaps it is time to try something new.
This could be letting your members pay for access to benefits. Several large companies are already doing this with success. There are three compelling reasons for this, which I will introduce you to in a moment:
1) Capitalise on services you already offer
If your customers have to take money out of their pocket to be a part of your loyalty programme, they must be able to see a clear advantage to doing so. Therefore, the programme must be related to the core business which made them customers in the first place.
This is a good thing because you can capitalise on the services you already offer. For example, that is what Europe’s second largest airline, Ryanair, is doing now:
This summer, they are introducing a programme called Ryanair Choice, where, for an annual fee of 199 euros, customers will have free access to priority boarding, fast track, fixed seat selection and 10 kg luggage (similar services would cost about 40 euros per flight as a non-member ). This is all related to Ryanair’s core business, and they are services which they already offer – and which do not even cost them much. This brings us to reason number two:
2) It is good business
The traditional earn and reward drivers in the form of discounts and credits are under pressure as transparency, digital options and customer focus have all increased – and on top of that, they cost money:
If the discount amount is the only thing you have to compete on, it quickly becomes a “race to the bottom”, where you make consumers used to ever-increasing discounts. Imagine if your customer club itself generated earnings because being part of the club required a fee? Like Ryanair, perhaps you even have something in stock which your customers are willing to pay for but does not cost you much to provide.
3) Lock your customers in
The third and final reason is about a simple insight into human psychology. If, for instance, a shop already offers you free delivery, you are reluctant to pay for it somewhere else. This way, the loyalty programme helps retain your customer – it practically locks the customer in.
One of the most successful examples of this is Amazon Prime. If you pay a fixed amount, you get free access to a whole package of services: primarily, free shipping. This makes Amazon the obvious first choice when you have Prime – and makes it correspondingly difficult for competitors.
On the whole, Amazon Prime is an example which is good to learn from: The package provides something which is already a core service, and they charge for it, keeping their customers even closer in doing so. Then you can expand with partnerships that will generate additional turnover.
Need a fresh pair of eyes to look at it?
There is a clear advantage to being a first mover in this field, because when moving first you have the opportunity to lock your customers to you. But of course, disrupting your own loyalty programme can be anxiety-provoking. And do you even have anything worth charging for?
To find out, it can be good to get a fresh pair of eyes to look at the matter: eyes which closely monitor developments in this field. Mine, for example. If you are ready for a free consultation, please do not hesitate to contact me.