lululemon’s and Loblaw’s Fee-Based Loyalty Programs: What You Need to Know
Would you pay for your loyalty? The answer for a growing number of consumers is yes. According to a report by eMarketer, 46% of millennials responding to a survey said they would pay a fee for enhanced benefits. Across all age groups the percentage of consumers that would pay for more benefits is 37%. A customer with more skin in the game is more valuable. Amazon Prime members, for example, spend nearly twice the amount per year than non-members. With more than 100 million people enrolled in Amazon Prime, many retailers are rethinking how to foster and nurture one of the most important assets for any business, customer loyalty.
1. lululemon is one retailer that is testing a paid loyalty program. For $128 per year members receive a variety of benefits including a pair of yoga pants or shorts, free expedited shipping for online orders, and admission to yoga classes and events. This type of program is likely to work well for a lifestyle brand like lululemon. People want to have a sense of community. It is not just about getting something. It is about being a part of something. A program like this can provide a sense of belonging and increase word of mouth associated with the brand. Speaking about the program on an earnings call in December 2018, lululemon’s CEO, Calvin McDonald said: “the response [to the program] was very strong, and exceeded our expectations.”
2. After a year of testing a paid loyalty program called PC Insiders, Loblaw recently expanded the paid subscription service to all 16 million members of its free loyalty program PC Optimum. It costs $9.99 a month or $99.99 per year to enroll in PC Insiders. Some of the membership privileges include free online grocery pick up (click & collect), free shipping from shoppersdrugmart.ca and joefresh.com, an extra 20% back in PC Optimum points on all brands of baby diapers and an annual $99 travel credit for eligible PC travel bookings.
Loblaw first launched the pilot in 2017 as an invitation only offer to 5,000 members of its free loyalty program, PC Optimum, but then expanded the invitation to 25,000 people as the popularity of the program drove word-of-mouth demand. Even after Loblaw expanded the program to more customers there was a waiting list of 3,000 people who wanted to join. For retailers like Loblaw that have multiple lines of business, having this type of program can be a great way to introduce customers to additional products and services. Many customers may not have known about Loblaw’s travel service before the launch of PC Insiders, now they do.
3. For $125 per year members of Restoration Hardware’s (RH) loyalty program receive a number of benefits including 25% off all full-priced items and an additional 20% off all sale items. Members of the program also receive early access to clearance items and complimentary interior designer consultations. In a 2017 earnings call, RH’s CEO, Gary Friedman, said that its paid loyalty program members generate 95% of the company’s revenue. One of the reasons for launching the program back in 2016 was to make customers less dependent on discounts. The company found that even affluent customers like deals and the loyalty program was introduced as a way to shift customers away from their focus on ongoing discounts which became commonplace since the last recession.
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