Traditional, transaction-based loyalty programs—once the be-all, end-all of the industry—have in recent years become only one of many viable approaches to driving customer retention. One of the other, newer approaches that’s making waves in the industry is membership-based loyalty, which offers consumers unique offerings and exclusive experiences for a regular (usually monthly) fee.
To get an inside look at the trend, Loyalty360 recently spoke with two representatives of Lenati, the strategy and design division of PK, the experience engineering company that offers integrated solutions including a specialization in membership-based loyalty. The conversation with Antje Helfrich, Senior Manager, and Nate Waters, Senior Consultant, illuminated many of the challenges and opportunities inherent in this alternative approach to loyalty.
According to Helfrich, Lenati prides itself on going against the grain. She indicated that Lenati is particularly well-suited for brands that are seeking to reboot their loyalty programs, turning them into something different, something that may challenge the client’s current or past approach to loyalty.
Lenati eschews traditional rewards-based loyalty programs. Helfrich referred to Lenati’s offerings as “bespoke solutions.” These solutions, she said, are implemented in order to drive emotional and behavioral loyalty in a way that matches their brand, from vision to strategy to execution. Because of ProKarma’s diverse capabilities, Lenati offers end-to-end solutions, enabling it to design, build, and run digital experiences that engage consumers.
Helfrich and Waters have both seen that changes in the industry call for new, creative solutions. For example, Helfrich observed that a number of Lenati’s clients approach the provider because they have several disparate resources and want to unite them into a single experience for their customers.
Lenati achieves this unity through solutions that include digital-led in-store experiences, consumer-friendly online checkout, and apps that guide consumers in store. These solutions bridge the gap between a brand’s brick-and-mortar experience and its digital experience.
Helfrich also stated that she has observed a trend toward a membership-based approach to loyalty. These offer brands an opportunity to better understand customers through data collection. Furthermore, memberships enable brands to offer customers access to exclusive experiences. Helfrich recalled that NikePlus, a program that Lenati assisted designing and implementing, was one of the first to offer exclusive experiences to members.
Helfrich indicated that membership fees do not necessarily scare away consumers. She said, “We don’t think a subscription service is for a small number of customers. After all, there are many businesses for whom subscription is the only business model. We’ve worked with companies that add subscription as a new way of inquiring and engaging customers, but then there are also companies that now start from scratch with subscription. All of their customer base is in this program, although you will always have customers who are more engaged than others.”
According to Helfrich, brands that serve customers primarily through a subscription service need to focus on creating customer profiles and devising incentives to engage various customer types more deeply. She also said that brands need to determine if the subscription model is really right for them, which is a decision that is best made on a brand-by-brand basis. She noted that, when considering a membership program, brands must start with their customers and see if they truly benefit from it. For example, brands that serve younger consumers might consider the subscription model because that segment of consumers tends to be more open to memberships than older ones.
On the other hand, some brands risk cannibalizing their existing customer bases by implementing a subscription program. Such programs can, inadvertently, make consumers less likely to purchase products. Essentially, a membership program must benefit both brand and consumer.
Waters believes that, once a brand has decided to go forward with implementing a membership program, it faces a two-pronged challenge. He said, “We see the subscription process in two separate phases. There’s the acquisition phase and the retention phase. A lot of companies do the acquisition phase extremely well. They’re able to offer a free month of service or, maybe, a free product or some great value prop early on.”
However, retention generally proves to be the more difficult phase. Waters said that Lenati has a specific approach to solve this issue. “The way that we look at this with our clients tends to be in terms of a flywheel, where customers sign up for a service, and they get some great reward, but then as time goes on, they’re met with new services or new content or increased access, which is consistently exceeding their expectations.” This approach ensures that customers are continuously offered value, which builds affinity for the brand.
Loyalty360 is finding that, in today’s loyalty landscape, while both traditional reward programs and innovative approaches like Lenati’s bespoke solutions have tremendous differences, they are increasingly working toward a common goal: engagement. We’ll be watching to see how Lenati helps brands engage customers in the near future.