Engaging Customers for Better Retention
Membership programs, loyalty programs, rewards programs, and subscription services are closely related in the realm of customer engagement, but they differ in their focus, structure, and purpose. Here's a breakdown of their relationships and distinctions:
Membership Programs: Membership programs provide customers with access to exclusive benefits, services, or perks in exchange for a fee or as part of the enrollment process. The emphasis is often on exclusivity and providing members with privileges that non-members do not receive. These programs are typically used by retailers, service providers, and non-profit organizations.
Membership programs can overlap with loyalty programs or subscription services. For instance, a membership might include a subscription to specific products or services or offer loyalty points as part of its benefits. Examples of membership programs include AARP, AAA, Amazon Prime, and Costco.
Loyalty Programs: Loyalty programs incentivize repeat purchases or engagement by rewarding customers for their continued patronage. They are typically free to join. The goals are to foster customer retention by offering rewards, discounts, or other benefits and overall brand loyalty. Loyalty programs are often included within membership programs as an added incentive. They may also be offered as standalone initiatives to all customers, not just members or subscribers. Some of these programs have different levels or tiers.
Examples of loyalty programs include Starbucks Rewards, airline frequent flyer programs like United MileagePlus, and hospitality programs such as Marriott Bonvoy.
Rewards programs: A reward program is a broad term that includes both loyalty and incentive-based programs. These programs reward specific behaviors from customers such as repeat visits, purchases, recommendations to friends, or product advertisement. It can include cash-back, discounts, free products, or exclusive experiences.
Rewards programs are often featured in credit card programs, such as American Express Membership Rewards or Citibank's Thank You Points.
Subscription Services: Subscription services provide ongoing access to products, services, or content for a recurring fee. Subscriptions focus on convenience and predictability for customers, providing value over time through regular deliveries or services. Subscriptions can serve as a form of membership (e.g., subscribing to a streaming service also confers membership). They can also incorporate loyalty rewards to engage subscribers further and encourage retention.
Examples or subscription services include Netflix streaming, subscription boxes like Birchbox, meal delivery services like HelloFresh, and Peloton fitness classes.
Intersections and Synergies
Memberships and Subscriptions both involve an access fee, but subscriptions typically provide continuous content or services, while memberships focus on exclusive benefits. Many subscription services double as membership programs, where being a subscriber grants access to exclusive perks (e.g., Amazon Prime includes video streaming, fast shipping, and other benefits).
Memberships and Loyalty: Memberships often use loyalty programs to enhance value, offering rewards for purchases made by members. For example, AARP and AAA each provide access to a core set of benefits, including Medicare supplemental insurance for AARP and Roadside Assistance and Property and Casualty (P&C) insurance for AAA, complemented by a number of loyalty offerings in travel, hospitality, dining, and many other categories.
Subscriptions and Loyalty: Subscription services may use loyalty programs to incentivize long-term commitment, such as offering rewards for consecutive months of subscription or milestones. For example, Spotify offers discounts for long-term subscribers.
In essence, these programs are complementary tools used to foster deeper relationships with customers, increase overall engagement levels, enhance retention, and generate consistent revenue streams.
Ultimately, a good value proposition is the effective articulation and complementarity of these different tools to meet the needs and wants of a specific customer base. Elaborating the right value proposition that leads to customer engagement is challenging and requires time to develop.
