The arrival and growing popularity of Amazon Prime in Canada have turned traditional retailers upside down. Here’s a closer look at Amazon’s loyalty strategy, a premium program.
Premium program: also known as a fee-based membership program, this type of loyalty program requires members to pay a monthly or annual membership fee in order to gain access to complementary or exclusive services and benefits.
According to Business Wire, “62% of consumers would pay for a premium tier if their favorite retailer offered one”. Why are they willing to pay?
In the case of Amazon Prime, the answer is simple: for delivery. Conducted in collaboration with market research companies Leger in September 2019, our LoyalT study revealed that 68% of Canadian Amazon Prime members subscribed to the program in order to benefit from free, fast delivery.
No wonder Walmart has decided to do the same! For just under $100 a year, members of their Delivery Unlimited program can have their groceries delivered as often as they desire.
However, free delivery is not the only attractive benefit for consumers. Indigo’s Plum Plus ($39/year) offers a 10% discount on “almost everything”, as well as exclusive access to promotions and events in addition to delivery. This fee-based program exists alongside their free Plum Rewards loyalty program.
Moreover, adopted by 74% of Canadians (50% in Quebec), the PC Optimum private coalition program also has its own premium component, PC Insiders. 17% of “regular” members have already subscribed. Here, it’s the faster accumulation of points that is the main argument for switching to the paid option.
This same benefit is featured in SCENE Gold*, the paying component of Cineplex’s SCENE loyalty program. At a cost of $6.99/year, SCENE Gold allows members to accumulate 50% more points. This entitles members to a free movie after three visits instead of ten. The program also offers 50% off point redemption on Wednesdays, ticket upgrades (3D, UltraAVX or IMAX) and food formats, as well as exclusive screenings.
Therefore, this type of program requires a detailed understanding of its clientele and, above all, of its best customers. So it’s vital to decipher what’s important and interesting to them in exchange for their money and loyalty.
Profitability and loyalty: a gold mine
While creating added value for the best customers, premium programs are generally very profitable for a company. Not only do they generate substantial recurring revenues, but they also help to increase customers’ share-of-wallet due to their earned loyalty.
LoyalT’s research has demonstrated that a premium program increases customer engagement, visit frequency and purchase concentration. By paying a membership fee, members become more aware of the importance of buying from that retailer.
Nearly 10% of Canadian Amazon Prime members spent $35 per month on pharmacy products, $40 on groceries. The same si true for Costco, whose service offering is premium “by default”. In Canada, 60% of members spend $131 per month on groceries. Considering that over 40% of Canadians and Quebecers are Costco members, this is data that no retailer can afford to ignore.
Before embarking on such a strategy, a company must be willing to invest more in relationship marketing. But, as we’ve shown, the revenue potential and loyalty gains are well worth the price!
Is a premium program right for your company or brand? Let’s chat!
*Only available in Edmonton at the time of writing.
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