Archive for November 20, 2013

Amazon “Prime”….a “Prime” Example for Others?

Shopper loyalty is being redefined everyday.  New mobile applications and other new shopper touch points are raising shopper expectations and also raising the bar on what it takes to secure some semblance of loyalty from an empowered shopper.  With that challenge as a backdrop, the value proposition of many of the long-standing loyalty programs are becoming insipid and less engaging as time wears on and the number of cards shoppers carry increase.

One infrequent, but yet interesting approach to adding some punch to lackluster loyalty programs involves the creation of a “pay for benefit” club that is a “premium tier” of loyalty.  Not an unheard of concept, especially to those of us that shop Costco or Sam’s Club.  But in the context of most retailer’s loyalty programs, paying for benefits remains a rare occurrence.

It should be obvious to all that the key to being able to charge the shopper for any service or commodity is to create a viable value proposition.  Consequently, if retailers are considering a “premium tier” to their loyalty program, a commitment needs to be made in terms of investment into incremental benefits that are worthwhile to the shopper to warrant a fee.

Not a complicated concept.  So why aren’t many retailers pursuing this strategy?

BigYSilverSavingsClubLet’s start first with examining a few retailers that have ventured into premium, fee-based tier of  their loyalty program.   New England supermarket chain, Big Y and Amazon are two retailers that have explored this concept with some success.

Big Y stepped out a few years ago with one of the very few pay for benefit cards in the traditional supermarkets space.  For a $20 annual fee, Silver Savings Club members receive benefits such as;

 

 

The “Silver Savings Club” has endured. I interpret that as it must being providing both Big Y and its members value. Sams, Costco and other pay-for-benefit clubs have proved that the model works.  But we have not seen many of the other major retailers offer a pay-per-view upgrade edition of their loyalty programs.   Often the problem lies in the potential investment the retailer must offer to warrant a $25-$100 annual subscription fee.  My guess is that many retailers are not ready to make that commitment, nor invest in the human resources to management an elite loyalty program.

amazon prime2The Amazon.com model, adroitly named  “Amazon Prime” offers free two-day shipping, free movies, and eBooks as their major features for a $79 annual fee.  Early reviews are positive.  The premise makes good business sense.  By providing an upgrade for moderate to heavy Amazon users, the “Prime”  shopper feels vested in the process with their annual fee.  The return on investment is easy for the shopper to calculate and for those that find the Amazon Prime benefits appealing the investment is a good one.

 

I believe Big Y and Amazon have paved the way for “fast followers” to launch their own elite programs.  While it requires thought, investment, and on-going commitment, such programs can provide retailers a much needed boast in their loyalty program participation.  Done correctly, the subscription fee coupled with the incremental revenue generated from this “elite engagement” should self-fund the effort, but more importantly prove to be a solid step forward for retailers looking for “new news” for their programs that need a shot in the arm….or other extremities!

 

mh