More Choices, Instant Value Driving Premium Loyalty Programs

If you are looking for one reason why building customer loyalty with consumers is a tough task, then Carlos Dunlap-Beard has a fairly simple explanation: choice.

The VP, Loyalty Solutions at Clarus Commerce points to the wide variety of shopping choices consumers have and, since the pandemic struck earlier this year, those numbers have increased even more.

“Consumers have a lot more time, and they have the internet at their disposal,” Dunlap-Beard says. “You can shop for anything and everything in a matter of minutes, and you’ll find options. People are looking to experience brands differently, and it’s tough for a brand to keep them without a really compelling reason.”

A lot of those choices also depend on the changing expectations of consumers compared to pre-COVID. With less people flocking to their favorite retail stores and instead moving online, loyalty is getting tougher.

“They want value every time they shop,” he says. “They want it more now, and they’re not willing to wait for it. That’s been driven by the younger generations X, Y and Z; they want it differently, and I think that’s one of the reasons why subscription-based premium loyalty programs are so much on the rise.”

Change in Subscription Services
Dunlap-Beard points to the launch of Walmart+ as an example of subscription services starting to become the “new norm” for consumers, and in the loyalty space. And with offerings like Netflix, Spotify, and HelloFresh, there are an increasing variety of subscription options available.

In a premium loyalty program, a consumer pays a membership fee to sign up in exchange for enhanced benefits like instant discounts and exclusive experiences.

“I think they’ve gotten the attention of a lot of retailers out there in the space,” he says. “Consumers want a superior experience, and they want equity or cashback that can be used on their next shopping trip. They want it fast, they want convenience, and they want free shipping on every order. Having to pay for shipping now is just so taboo.”

Clarus Commerce worked with Walker-Sands on a study done earlier this year that found 66 percent of consumers valued free shipping the most, and 60 percent of them preferred instant discounts and cashback as their second most coveted item.

“You combine that along with some experiential benefits and softer benefits that provide more value, and consumers are just eating it up,” Dunlap-Beard says. “Transactional benefits get people in the door; if they get a great value proposition, it makes them feel smart about their decision. But you add experiential benefits on there and they feel special − that just changes and enhances the relationship with the brand.”

Large Increase in Purchase Frequency
The Clarus Commerce Premium Loyalty Data Study found some other interesting intel with consumers during the pandemic, and Dunlap-Beard says they are seeing proof of it in their work with clients, including one that they have worked with for a number of years. After launching a premium loyalty program, the client saw a 40 percent increase in purchase frequency and a 24 percent increase in annual spend directly correlated with the premium program’s beginning.

“That’s pretty huge,” says Dunlap-Beard, who points to a McKinsey study released in October around how premium loyalty programs can bring consumers back to a brand. It revealed that 35 percent of U.S. consumers have tried a new brand since the pandemic began, and that they are looking for other options.

“Brands have a real opportunity now to engage with consumers in a completely different way,” he says. “It’s a better way and a deeper way by providing them with what they want, which is instant and immediate value. Consumers are willing to pay for it, and that’s the opportunity for the brand.”

With the relationship between consumer and brand changing so quickly, Dunlap-Beard says he isn’t sure that buying habits will ever “get back to normal” like they were pre-COVID.

“I don’t know what the new normal is going to be, but it won’t be what it was,” he says. “If brands are looking to hold on to their customers and drive a deeper relationship to drive cross-category appeal to new customers, they’re going to need a new tool. They’re going to need a different approach.”

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