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December 9, 2020 | Authored by: Vivian Xie

Paid retail memberships are becoming the new normal

The COVID-19 pandemic has completely changed the way people shop, and there’s no telling when consumer activity will return to normal. Brick-and-mortar retailers, in particular, have felt the brunt of these disruptive changes, with day-to-day foot traffic drying up in the wake of the global health crisis.

Even before the novel coronavirus reared its head, consumers have increasingly opted for digital retail options over traditional in-person shopping — recent events simply exasperated an already difficult situation for physical retailers. A recent McKinsey & Company survey revealed that more than half of consumers in the U.S. intend to shop at different retailers this holiday season than they did last year. The lingering effects of COVID-19 threaten to undo years of brand loyalty and established relationships as 78% of respondents reported having already changed stores, brands or the way they shop as a result of the pandemic. Grappling with tighter household budgets, many people are exploring their retail options in search of better value, convenience, control or service delivery.

Faced with an uncertain future, traditional retailers need to adapt to these changing conditions and go beyond embracing digital channels (they already have) by delivering a brand experience that can continuously re-engage customers who might otherwise look elsewhere. Creating or redesigning paid retail memberships to appeal to today’s consumers is essential for survival, and retailers need to start building “forever transactions” that resonate with their target audience. Here’s how to make it happen.

Tailor retail memberships to the right audience

Building an effective retail membership program is more complicated than simply sending out exclusive promos, offers and rewards every few months, or even every other day. You need to carefully construct your programs to meet the demands of your customer base and resonate with prospective customers.

First, it’s important to segment your customers so you can tailor communications to different demographics. That includes distinguishing between paid members, newsletter subscribers and other audience segments. Retail memberships thrive on exclusivity, after all, and bombarding members with the same 10% off coupons that any person with a valid email address could receive may devalue your promotions in the eyes of your most loyal customers. GAP and Victoria’s Secret have both fallen into this promo pitfall in the past, holding sales so frequently that they risk lowering the perceived value of their offerings.

On the other hand, there are several successful examples that retailers can look to for inspiration. Costco, for instance, built an entire business model around its membership program, creating both a sense of exclusivity and opportunity by giving members major discounts on bulk purchases. Restoration Hardware went in a different direction, eliminating promotions and sales altogether in favor of an annual subscription program that gives members 25% off all purchases in exchange for paying an annual fee. Another North American modern furniture company, Rove Concepts, highlights the benefits of joining the Rove Members Program, as an annual membership is bundled in with new customers’ first major purchase.

Determining which approach is best for your brand requires a thorough analysis of your customer base, including gathering feedback from your target audience. For example, Restoration Hardware’s membership program was created in direct response to customer feedback and input.

Engage customers digitally in new methods

Retailers can use memberships to bridge the divide between physical and digital experiences. Where should they begin? A steady stream of exclusive offers and discounts is a good starting point, but you should explore every possible opportunity to improve the member experience. That can include helping users get more value out of the membership program or products they already own.

E-commerce platforms like Honey promote online shopping by awarding extra points and discounts to users who purchase from certain brands and stores online. People are always on the hunt for a better deal, and Honey continually provides new opportunities to increase savings and try out new brands.

Hess Winery created a virtual wine-tasting program where customers receive a tasting kit in the mail and can then schedule an online session with one of the company’s expert sommeliers. By recreating experiences for the digital realm, companies like Hess Winery are completely re-envisioning what the customer journey looks like in today’s environment. The age-old “wine club” is being rebranded into a valuable membership that’s possible to be enjoyed from anywhere.

Panera Bread launched a subscription service giving customers unlimited coffee at any of the chain’s locations. This hybrid approach lets users manage their subscription digitally through the MyPanera app while relying on in-person touchpoints to deliver the actual product.

Membership programs need to continually captivate users and deliver meaningful value, so subscribers keep coming back from more, whether that’s actively browsing a mobile app or placing orders through a retail site.

Join forces with others to accelerate growth 

The great thing about membership programs is the opportunity to build a two-way relationship with customers and use each customer’s inputs to continually refine their brand experience. Realistically, though, most programs aren’t going to be able to satisfy every single need for every single customer. That’s where strategic brand partnerships can be leveraged to give customers a fuller subscription experience.

Shake things up and introduce fresh offerings by partnering with brands and products that complement the primary membership. This is another area where box subscriptions have traditionally excelled. Cratejoy has forged partnerships with many of the subscription services listed on its marketplace to deliver branded products to customers.

When taking this approach, many companies worry about managing partnerships that benefit both parties equally without one brand encroaching on the other’s territory. A good strategy is to take a hard look at the gaps in your product or service offering and choose business partners that can fill those holes. Another direction to consider is working with brands that have ready access to a customer segment you want to reach.

Brands should also explore membership “groups” as potential engagement opportunities by adding a social element to retail memberships. You can expand the scope of your personalization strategies to target entire families and social circles who have shared interests. Given how popular subscription sharing is today, it only makes sense to lean into that trend rather than fight against it. By targeting larger groups in addition to individual subscribers, you can reach new customers through a more focused effort to generate word of mouth.

Build for the future with retail membership programs

It’s difficult to say for certain what the retail landscape will look like once the pandemic has ended, but there’s no doubt that digital experiences are here to stay. Digital experiences were picking up steam long before COVID-19. Retailers need to adapt and evolve alongside changes to customer behavior and sentiment in order to not only weather this current storm, but position themselves for future growth and success.

Vindicia’s subscription platform approach can provide the foundation needed to support cutting-edge membership programs that include different types of members, personalized promotions and complicated billing processes. No business model is too complex to manage, empowering your brand to explore every opportunity to engage your customers and build lasting relationships. I encourage you to reach out today to find out how Vindicia can propel your subscription’s growth.  

About Author

Vivian Xie

As Product Marketing Manager at Vindicia, Vivian is constantly sharing industry knowledge. Previously, she lead product marketing at 500 Startups where she used her background in data analytics and growth marketing to bring to life company stories told by numbers. Familiar with a broad range of industries from fashion to blockchain to subscription churn, Vivian strives to create content that informs and delights. She holds degrees in economics, development studies and English literature from the University of California Berkeley.