In 2023, your brand’s success hinges on nurturing your most loyal customers – those consistently engaging and making repeated purchases. They’re the most powerful segment of your customer base and should be rewarded for their loyalty. 

So do brands see the value in membership and loyalty programs? Well, according to the Global Customer Loyalty Report 2023, 56% of companies view customer loyalty as essential to overcome the inflation crisis and 79% of surveyed companies with existing loyalty programs plan to enhance them within the next three years. Gartner’s research predicts that 1 in every 3 businesses without some sort of loyalty program will have one by 2027.

Even the most prevalent corporations are rethinking loyalty. Consider Walmart with its Walmart+ membership, expected to surpass 29 million members this year, as a testament to the effectiveness of well-executed loyalty strategies. 

‍Membership programs offer brands a dual benefit: they enhance customer experience through perks such as discounts and exclusive rewards, while also generating additional revenue. However, simply establishing a membership program doesn't ensure success or financial gain. It requires strategic planning and careful structuring to strike the right balance, ensuring it delivers genuine value to customers while also driving profitability for the company.

‍

What is a membership program?

A membership program enhances the customer experience for its members, offering additional rewards in exchange for a recurring fee.  These extra rewards may be discounts, exclusive or early access products, special benefits or treatment, and even a VIP experience above other non-members. Membership programs demonstrate enough value for loyal customers that they’re willing to pay for the benefits. This fee can end up being a tangible source of revenue for the company. 

Although membership programs are sometimes referred to as loyalty programs, there are a few key differences between the two. All membership programs are loyalty programs but not all loyalty programs have the membership fee that makes it a membership program. For now, understand that the largest difference is a loyalty program can be free to enter but a membership program always requires a recurring fee. 

‍

Basics of a successful membership program

We’ve alluded to how membership programs can be beneficial to both the customer and the company, but it’s far more complicated than it seems. The delicate balancing act of constructing a successful membership program comprises a lot of different key elements. Some of these key elements are: 

Clear value proposition

We’ve spoken about value for the customer before, but what does this actually mean? Contrary to popular belief, value is not just the financial benefit that a customer sees in something. In the article How to Choose the Right Rewards, we outline the necessity to identify the psychological need that your brand fulfills for the average customer. Crafting membership benefits around these needs and desires will demonstrate value to a prospective member. If a customer can’t see the value in a membership program, they won’t understand why they should join your program. 

‍

Exclusivity

Membership benefits should enhance a customer's regular experience with a brand. This means offering special, exclusive perks and experiences just for members. These experiences can sometimes be unique and new but often are an upgrade over the normal shopping experience with a brand. Free shipping, skipping the lines, or having access to an exclusive members-only community space are all common examples of exclusive benefits. 

‍

Engagement

Members won’t feel appreciated if they’re mostly ignored by your brand, or if you only contact them when you want something. Enhancing their experience with perks such as exclusive events, merchandise, or content can foster a stronger connection. Encourage an open dialogue to nurture ongoing, meaningful engagement between your brand and your customers.

‍

Flexibility

Accepting valuable feedback from your members means that your brand needs to be flexible enough to change tracks and adapt to the desires and preferences of your members. Ensure that your team remains open to feedback and has a strategy for creating new rewards or benefits to appease members. 

‍

Feedback mechanism

Of course, feedback can’t be collected if your membership program doesn’t have an established channel of communication between you and your customers. Exclusive member communities can act as this. Surveys and the analysis of how members are utilizing their benefits can also be an effective strategy for collecting feedback on your members and improving your membership marketing strategy and future benefits. 

‍

Integration with other business functions

A membership program will never be successful if it isn’t thoroughly integrated and connected to the rest of your brand’s business functions. These key functions may be marketing, sales, and service strategy. As an example, if your brand’s marketing strategy is focused on emphasizing the financial benefits of shopping with your brand, a membership program that focuses on a VIP experience may be entirely disconnected from the needs of your average customer. If your sales department is struggling to generate leads, you’ll have even less success converting the scant customers your brand converts into members. 

‍

Sustainability

A common mistake is for a brand to establish a membership program that isn’t sustainable for the company. What does this mean? In terms of providing benefits, how much resources does it cost your brand per member? How many members do you need for a membership program to start being successful? How many repeat customers do you currently have and how many can you expect to convert to members? Remember that resources aren’t always financial. The technical requirements of a membership program, the employees dedicated to the program, and brand perception are all examples of resources that may be expended while a membership program gets off the ground. 

‍

Challenges to anticipate

As you take the first steps in establishing a membership program, consider a few additional challenges that you’re likely to face down the road. Prepare for these challenges, as they will make or break whether or not your membership program will stand out from the competition. 

‍

Maintenance and consistent value delivery - In the Deloitte Consumer Review, whether or not a brand offers good value for the money was the top driver for loyalty in 64% of customers. The issue is that what your members perceive as value may change over time. For example, the emergence of new technologies can set new standards for what a customer expects from a brand’s membership program. For example, the emergence of smartphones set a new standard for membership programs to have a dedicated app.

‍

Evolving customer expectations - The Deloitte Consumer Review also states that the climate of modern membership and loyalty programs can influence what a customer expects a brand to offer above the competition. Deloitte also states that traditional loyalty schemes, such as points-based systems, are not agile enough to meet these rapidly changing customer expectations. To this end, businesses should be focusing on developing technologies and preparing to make rapid changes to their loyalty program to account for sudden changes in preferences. 

‍

Integrating technology for smooth operations - In a digital era, new technologies should always be analyzed and considered when analyzing what influences customer loyalty. The Deloitte Consumer Review cites the digital revolution as transforming customer loyalty by granting customers access to far more purchasing options than were previously available. But new technology can also be beneficial to your brand's membership program. Deloitte recommends looking toward technology solutions that enhance, upgrade, and improve a customer’s experience. 

‍

A membership example: My Best Buy

This year, tech retailer Best Buy announced a new tiered membership program called My Best Buy. By signing up for the lowest tier, a free My Best Buy account, members are granted access to free standard shipping. 

My Best Buy Plus Benefits

With a $49.99/year price, members are granted access to: 

• Free two-day shipping
• Exclusive discounts
• Exclusive events and products
• Extended product return window

‍

Take note of how this relatively low-cost tier upgrades the regular customer experience with free shipping and regular discounts. The value is demonstrated in the form of discounted member-priced products that they’ll have regular access to. But, it also provides additional benefits in the form of exclusive members-only events and products to enhance their regular experience. 

My Best Buy Total Benefits

With a $179.99/year price, members are granted access to all previous My Best Buy Plus Benefits plus: 

• Protection plans
• Unlimited tech support
• VIP member support
• 20% off repairs

With this highest tier, members get access to a VIP experience where they get unlimited access not only to all of Best Buy’s discounted products, but also services. With unlimited tech and member support, members are granted value beyond just discounts or financial benefits. Instead, they’re granted tech security if they’re concerned about their devices being damaged or rendered unusable.

‍