Epsilon is a global marketing company with offices around the world. For more than 40 years, they’ve been helping brands improve their marketing, build better customer relationships and find new customers.

Loyalty360 sat down with Tamara Oliverio, Senior Director of Loyalty Strategy and CX at Epsilon, to discuss subscription-based loyalty programs within the landscape.

-In what ways have subscription based programs shifted the last few years?
Subscription programs have been around for quite some time but have taken on new life in recent years.  What began as content-based subscriptions (e.g. Book of the Month Club, Columbia Record Club, cable TV), then evolved into auto shipment subscriptions for products that required replenishment (e.g. beauty products, diapers) where consumers would pay for the convenience of having that product delivered to their house on a regular basis. Other benefit-oriented subscriptions emerged as well in the form of membership fees that provided members with special access to products, on-demand content, exclusive savings and/or events. Subscription programs saw exponential growth when start-ups and emerging players realized there was a consumer need in the marketplace and understood the benefits of creating a “sticky” customer relationship to garner more investment funding. Today, there are over 2,000 subscription box services and the subscription model is growing at 200% per year. This trend has been quite disruptive with virtually every well-established business.

The shift we’re now seeing is that many of those well-established businesses are starting to see the value in subscription based programs to help build customer loyalty, especially as consumers are beginning to value convenience more than ever.

-Is the subscription model industry dependent or all encompassing?
The subscription model could work for any industry but it should be carefully evaluated to determine how it could work in a given industry and customer base.  It’s about striking a balance between the perceived value of the benefit consumers would be receiving and the economic benefits to an organization. These principles remain true for every kind of loyalty initiative.

-What effects are younger generations having on the subscription-based model?
Millennials and Gen Z have ‘grown up’ on subscription programs and are arguably the first generations to have a positive experience with them. They have strong emotional associations with “fun” and “now” with subscription-based models – having grown up watching cable TV and Netflix, as well as playing subscription-based gaming on virtually any device imaginable. It’s important for brands to keep top of mind how mobile naturally encourages the subscription model, and ‘the popularity’ of mobile within this segment.

Additionally, younger generations are now influencing older generations. For example, they are showing their parents and grandparents the benefits as to why they should subscribe to Hulu or become an Amazon Prime member.

-In terms of subscriptions, what is the most common mistake you see businesses making with their loyalty program? How can they remedy this issue?
The most common mistake is what I’ll call “shiny object syndrome”. In times of disruption like now, it’s common to want to add the newest technology / concept (like subscription-based models) to your loyalty initiative but without a sound strategy on what that means to your brand, loyalty program and more importantly your members, the end result will be disjointed and potentially create a negative customer experience.

Benefits need to be evaluated. It’s dependent on the perceived value (which is different for all consumers) and marketers must understand that instant gratification is top of mind for the younger generations. Subscription based programs are a component of a brand’s strategy. It’s important for marketers to think of other ways to create emotional connections.

-What makes Emotional Loyalty more valuable than Transactional Loyalty?
Emotional loyalty is the “stickiest” kind of loyalty because people ultimately make purchase decisions with their hearts, not their minds.

Marketers need to evaluate their programs to decide which model is going to work best; regardless of the program, marketers need to have some type of emotional tie in.  And when you do that, you’re going to have more of a perceived value which yields a higher emotional connection.

If you can tie in emotions to a subscription based program, it’s more than just a subscription at that point. It becomes a life saver to the mom who didn’t have time to run that extra errand, the exclusive experience that the student can brag to his friends about, the surprise to the young girl who can’t wait to see what her new back-to-school outfit will look like, or the relationship-builder to the young couple who are learning to cook together.

For more on this topic, please see Tamara’s blog post.

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