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Fee Based Rewards Programs Deliver Value to Millennials

Posted by Sallie Burnett

Consumers Embrace Fee-Based Rewards Programs

This may come as a surprise to some marketers who tout the appeal of “free,” but not all successful loyalty programs are fee-free! In fact, two of the most all-time successful such programs are fee-based….and the fees aren’t cheap.Creating a loyalty program – fee-based or free of charge – is all about adding value. You are asking for a customer’s time and attention, and in return, you had better be offering something worth the same. In fact, according to a recent article in Direct Marketing News, busy 20- and 30-somethings are happy to part with some cash if the program delivers what they want and need.For most “millennials,” (those in the 18-35 age group), what they want and need most is more time. Fee-based rewards programs can deliver extra time by offering convenience, curated shopping lists, relevance and – most importantly – more time freed up for other things. Here are examples of two wildly successful fee-based loyalty programs.

Amazon’s Fee-Based Loyalty Program

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Amazon Prime charges its members $99 per year in one lump sum. This works out to $8.25 per month for members who count their pennies.

What do Prime Members Receive?
The biggest perk is Prime’s famous two-day free shipping service which applies to most products. But Prime members also receive access to hundreds of thousands of free movies, television programs, books, deals and curated sales. There are also bundled extra programs for moms and college students that wrap in with a Prime membership.

Why is Prime So Popular?
Prime delivers on all the perks shoppers today want most – free shipping, fast delivery, discounted products and more free time to do other things. And Amazon also gets what it wants – the average Prime shopper spends more than twice what the non-Prime Amazon shopper spends per year ($1,500 versus $625, to be exact). [Consumer Intelligence Research Partners, 2015]

Indigo’s Fee-Based Loyalty Programs

IRewards1Indigo makes up half of Chapters, the most successful and profitable bookstore chain in Canada. Chapters and Indigo merged in 2001 and the chain has just kept gathering strength since then. Indigo/Chapters actually has two rewards programs: iRewards and Plum Rewards.

Plum Rewards Versus iRewards
Plum Rewards is free and points-based – a more traditional rewards program complete with special birthday rewards. iRewards carries an annual fee of just $35 per year ($2.92 per month) and includes discounts on books and everything else the chain carries both in-store and online.

Why Does This Two-Tiered Program Work?
By giving customers the option of two different rewards programs with two different sets of benefits, Indigo leaves the final choice in its customers’ own hand – a perk in its own right and one today’s customers want and expect. iRewards also includes curated shopping lists, another expected perk for today’s online customers in particular. Ultimately, this system works because Plum attracts shoppers who spend less than $750 per year and iRewards attracts shoppers who spend $750+.

Fee-Based Loyalty Program Infographics

Fee-Based-Loyalty-Programs-Infographic

Sallie Burnett
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