Traditional loyalty programmes exist to encourage and reward behavioural change through incentivisation. So if you are simply paying for benefits in a subscription-based model to receive them upfront, what are the behaviours you are looking to change or encourage?

Many notable loyalty programmes have adopted the pay-to-play (subscription-based) model where members pay a recurring fee to stay in the programme in exchange for a heightened level of service/experiences and/or product-specific benefits that they can use anytime.

Companies offering this benefit form a substantial ongoing revenue stream that affords them the opportunity to provide richer, more tailored, and relevant experiences. It has also been stated that when members pay for a monthly service/subscription, they remain more engaged with a programme or brand than non-paying members.

Is it really true loyalty if you pay to access benefits?

Traditional loyalty programmes exist to encourage and reward behavioural change through incentivisation. So if you are simply paying for benefits in a subscription-based model to receive them upfront, what are the behaviours you are looking to change or encourage?

We've identified 3 versions of fee-based loyalty models that exist and are unpacked below:

1. PAY AND GET (BASIC SUBSCRIPTION / CLUB MODEL)

This subscription model offers instant rewards and does not require customers to accumulate a loyalty currency, making it an attractive alternative to a traditional loyalty programme.

The Entertainer is a good example of this. Members pay an annual fee to unlock an array of discounts in their chosen city. These include 2 for 1 dining offers, spa treatments and other experiences.

Similar to the Entertainer offering, Daddy's Deals, an online platform offering daily deals and offers on an array of lifestyle products and experiences in South Africa, also has a premium subscription. For a low monthly fee of R99 ($10) Club Daddy members unlock even deeper discounts (save up to 30% more), are granted early access to deals, and receive VIP call centre support. The discount level is so deep, that after purchasing just one of their deals, you can already make back the $10 spent on the membership that month.

Amazon Prime, a leader in the subscription-based arena, was reported to have a 94% retention rate after the first year and 98% of those users stay for a 3rd year. This is indicative that members of Amazon Prime truly see the value of paying the monthly fee.

2. PAY FOR LOYALTY MEMBERSHIP (PAY TO JOIN & ENJOY BENEFITS OF A PROGRAMME)

This model refers to having to pay to join a loyalty programme. Without paying a monthly or annual fee, you do not gain access to the programme.

This is particularly popular in financial services programmes or retail banking programmes. Discovery Vitality, a global insurance scheme loyalty programme, falls within this category. Vitality's fees range from $27 - $38 per month depending on how many beneficiaries belong to the main member's policy. Without paying the monthly fee, members cannot access any of the benefits associated with Vitality such as gym, retail or travel discounts.

3. PAY TO UPGRADE LOYALTY MEMBERSHIP

The combination of traditional loyalty and fee-based loyalty co-exist here.

These programmes are usually targeted at your loyal customers who are entrenched in your offering already but want more. They want more convenience and a premium. They are engaged in your programme already but want more.

Recent studies by RetailWire (USA) have shown that up to 62% of customers would sign up for a fee-based programme if their favourite retail programme offered one.

This indicates that globally there is an appetite for more exclusive products and services, even if it comes at an additional fee. We believe that there is a place for fee-based loyalty programmes to exist on their own or in parallel to existing programmes.