Article

5 Tips for Developing a Premium Program

Par 23 June 2022 May 17th, 2024 Aucuns Commentaires
Des gestionnaires de programme de fidélisation «Premium» analysent et discutent des données clients

Loyalty premium programs are proliferating in all business sectors. Despite the urge to keep up with the times, it’s imperative that you take the time to analyze.

 

Premium program: also known as a paid program, this type of loyalty program requires members to pay a monthly or annual membership fee in order to gain access to additional or exclusive services and benefits.

Several companies have tested a loyalty premium program in the past, but quickly had to revise or event terminate their program. The reason? Their model was based more on intuition than data. For this specific type of program, it is essential for any type of company to analyze the data and behaviours of their various customer segments.

To help you avoid going back to the drawing board, our experts have compiled a list of important points to consider before setting up such a program.

Présentation des bénéfices de Panera Bread et de son programme de fidélisation «Premium» Unlimited Sip Club Benefits

Panera Bread’s Unlimited Sip Club program. Source: screenshot from panerabread.com

1. Identify the most sought-after benefits and advantages

The relevance of a premium program lies in the added value of its benefits and advantages: free delivery, faster accumulation of points, exclusive benefits, VIP invitations, priority access, etc. While it’s interesting to brainstorm, the work doesn’t stop there.

The idea is not necessarily to offer the most sought-after benefits. Instead, identify the optimal combination to offer based on two factors:

  • Propensity to subscribe to the program
  • Profitability by considering the cost of the various benefits selected
Following the launch of its premium program (Unlimited Sip Club), Panera Bread saw a 70% increase in food sales accompanying coffee purchases.1

When making choices, you must also consider your different customer segments:

  • Occasional
  • Moderate
  • Loyal
  • Best customers

2. Target with precision

Not all segments are created equal. Research among your customers is essential to determine which segments are interested in a premium program.

Don’t systematically offer the program to all your customers. Instead, target those likely to generate the highest net profits.

3. Don’t forget the costs

When analyzing the impact of such a program on your business, don’t forget to estimate the costs of the various benefits involved. Services and benefits offered to customers are not free of charge, especially if you offer free delivery.

In addition to profits, you should also consider expenses related to:

  • Hiring employees if necessary
  • Technological integration
  • Operating expenses

If your strategy is well developed and your ROI analyses are accurate, the profitability should be quite high.

4. Plan your performance indicators (KPIs)

Define and measure relevant Key Performance Indicators (KPIs) from the start. Make sure they can be tracked once the program is running.

While it’s easy to measure the subscription revenues generated, the success of the premium program relies more on factors such as:

  • Changes in member’s behaviour
  • Increased frequency of visits and purchases
  • Share of wallet

5. Be ready for continuous improvement

Developing a premium program is not an end in itself. This type of program doesn’t have to be static. Many brands review their program configuration on an annual basis. Loblaws (PC Insiders) and Panera Bread (Unlimited Sip Club) are two good examples. They review both the price asked and the benefits offered on an annual basis.

You can increase the profitability of your premium program by modifying the subscription fees and/or the selection of benefits offered. Allow time and budget for your team to analyze results, obtain user feedback and improve your program.

The R3 approach

Are you wondering about the profitability of developing a premium program? Our approach helps you identify:

  • Which segments of your customers are most likely to subscribe to a premium program?
  • Which segments are most likely to be profitable for the organization?
  • The most sought-after benefits and the optimal combination of benefits to offer
  • The ideal amount to bill thanks to price sensitivity analysis
  • The return-on-investment (ROI) analysis model to be developed, based on all data and evaluating several scenarios (price vs. benefits offered)

Carried out upstream, this approach makes it possible to assess profitability very accurately, and to offer the optimum combination of benefits, at the right price.

Let us help you measure the profitability of this approach. Let’s work together.

 


1 Retail Wire, Will unlimited free drinks pay off for Panera?

 

Hans Laroche

Hans Laroche

With over 35 years of experience in relationship marketing, loyalty program management, and development, Hans Laroche contributes to the relationship strategies of numerous companies, including Nespresso, The Royal Canadian Mint, Fido, belairdirect, Cirque du Soleil, Énergir, McKesson, and Desjardins. He has also been sharing his passion with master's students at ESG UQAM and the University of Sherbrooke for 30 years.

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