Loyalty programs became a norm for many customer-centric businesses as they use them as a competitive advantage and a way to retain customers and increase spend. In fact, by 2023 the consumer loyalty management market is expected to reach nearly $6.95 billion as compared to $1.93 billion in 2016 according to Allied Market Research.
Successful loyalty programs are structured to best fit the general character of the brand and target the preferences of top-tier clientele. Companies aim to build a unique and exciting program that motivates committed customers and keep them coming back. There are many forms of loyalty program from punch cards to exclusive memberships, and this article explores the difference between the paid (fee-based) and free loyalty programs in terms of member onboarding into the program. Once the goal behind the program is set, the following factors would help towards the final decision:
Although the advantages of a paid loyalty program might be more appealing, it comes with a huge responsibility to deliver on the reward program side keeping in mind that determining the right price of the monthly/annual membership is a science on its own, and certainly locking in the value customers get in benefits compared to the price paid for the membership. A free program could be a good start and eventually migrate to a paid program based on behaviour, or simply have a ‘Premium’ membership as an upgrade.
In conclusion, a loyalty program is an important factor of the company’s marketing strategy, and as such the program should align with the ultimate goal of that strategy. If attracting and engaging with a broader range of consumers fits the company’s marketing strategies, service concepts and budgets than a free membership program is perfect. However, if the goal is to identify the top tier consumers and prioritize their investment to encourage continued loyalty than a fee-based program is a better choice.