Is Amazon a 'Prime' Example for Others?
Through a special arrangement, presented here for discussion is a summary of a current article from the Mark Heckman Consulting blog.
One infrequent and 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. Membership clubs at Costco or Sam's Club offer some examples. But in the context of most retailer's loyalty programs, paying for benefits remains a rare occurrence.
It should be obvious 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? Let's start first with examining a few retailers that have ventured into premium, fee-based loyalty programs.
New England supermarket chain Big Y and Amazon are two retailers that have explored this concept with some success.
For a $20 annual fee, Big Y's Silver Savings Club, introduced in 2011, offers members benefits such as:
- Deep Discount Silver Coin pricing on hundreds of items throughout the store;
- Express savings deals on thousands of items throughout the store;
- Discounts on gas;
- Discounts on movie tickets;
- Special offers and discounts at local attractions, area restaurants and other businesses;
- Opportunity to win Gold or Silver Coins (redeemable for discounts or freebies).
While "Silver Savings Club" as well as the growing membership ranks at Sam's and Costco show the model can work, my guess is that few retailers are ready to make the commitment or investment required to support an elite loyalty program that would warrant a $25-$100 annual subscription fee.
Amazon Prime, introduced in 2005, offers free two-day shipping, free movies, and eBooks as its major features for a $79 annual fee. By providing an upgrade for moderate to heavy Amazon users, Prime shoppers feel vested in the process with their annual fee. The return on investment is easy for the shopper to calculate.
I believe Big Y and Amazon have paved the way for "fast followers" to launch their own elite programs. Done correctly, the subscription fee coupled with the incremental revenue generated from this "elite engagement" should self-fund the effort. But more importantly, they should prove to be a solid step forward for retailers looking for "new news" for programs in need of a shot in the arm ... or other extremities.