Subscriptions and membership programs—5 lessons for marketers

Loyalty has never been more important as marketers navigate a difficult economic climate ahead of the holiday sales season. Both membership programs that provide customer perks and value, and subscription services that foster repeat connections, can help cement brand devotion from customers, but there are pitfalls. Earlier this month, Dunkin’ invited customer backlash when it changed its rewards program from DD Perks to Dunkin’ Rewards. Though the chain called it an “improved loyalty program,” customers were quick to point out that the new system changes the point structure, making it harder to earn the free drinks they have come to rely on from the brand. Such perks are especially important to customers amid inflation. DD: Good news! We are rolling out a new Dunkin' Donuts reward program! You used to get a free drink with 200 points, and now it takes 900 points!Me: How is that good news?DD: Well, its good news for US.— WasteLandRover (@WasteLandRover) October 6, 2022 Dunkin' President Scott Murphy released a statement about the criticism. “Change is always going to be an adjustment, but in the long run, Dunkin’ loyalists will benefit even more," he said. “Dunkin’ Rewards is all about choice for our members; with a more dynamic rewards structure where they start earning rewards at a lower spend threshold, they can redeem points for a wider variety of food and beverages, and choose when and how they use their points.” Consumers now have more subscription options than ever as marketers including Sephora, P.F. Chang’s and Taco Bell roll out new programs. Many programs are also expected to get a boost this holiday season as a gifting option—65% of consumers are planning to give a subscription for the holidays, according to a recent survey from The Subscription Trade Association. Sephora recently released a new same-day delivery service, taking a page from Amazon Prime, which also offers fast delivery for a price. The cosmetic giant’s new membership charges customers $49 a year to get beauty goods on their doorstep the same day they are ordered. It's only in its second month, but the offering is already resonating with customers, according to Nadine Graham, senior VP, general manager of e-commerce at Sephora. “In the U.S., we have seen 2X the number of client sign-ups that we originally forecasted for in the first month,” she wrote via email. Below, Ad Age outlines lessons and tips for marketers looking to start or change their own membership programs. Be honest Transparency is key when introducing something new, or changing up something customers already use. Dunkin’ angered its customers by promoting its new program as better than the old one. Instead, brand experts said marketers should be honest—many companies are going through cost increases and trying to navigate a difficult financial climate. Customers might be more understanding if a brand comes out and admits they are raising prices or making changes because of the tough economy. “Consumers are savvy and 'spinning' a narrative that isn’t based in fact can cause a bigger problem than desired,” said Kimberly Whitler, a marketing expert and professor at the University of Virginia's Darden School of Business. Anything that erodes trust, like changing a beloved loyalty program, can damage the consumer-brand relationship, she noted. “During a period of significant inflation, it should be expected that companies will start to reduce the value of their loyalty programs,” she added, noting that it is the communication on the change that matters. “Pretending to strengthen the rewards if in fact they have reduced the rewards is being dishonest and can lead to reduced consumer trust.” Make sure there’s a customer need The short-lived car subscription trend of a few years ago can provide valuable lessons to marketers. In 2017, many automotive brands, including Cadillac, made headlines for introducing their own subscription services, taking a page from category-disrupting companies such as Netflix. For a monthly fee—$1,500 in the case of Cadillac—members could switch vehicles whenever they’d like. However, the trend was slow to catch on for a variety of reasons, according to Jessica Caldwell, executive director of insights at Edmunds.com, the car research site. One was simply that drivers were reluctant to go through the hassle of switching car seats and other personal items from vehicle to vehicle on a more regular basis than every few years, she said. The service simply didn’t make sense. “It wasn’t necessarily fulfilling a need most people had,” she said. “Price, we know, is the most important factor, and you have to make sure when you are comparing the cost of a subscription versus the cost of ownership—are the benefits really worth it to the consumer to pay that much more?” Ad Age Next: CMO Get your tickets for the Dec. 7 event in New York Register here Be ready for questions When Swiss footwear brand On introduced a subscription program two years ago, it had a lot of explaining to do. The service, called Cyclon, allows subscribers to use items and then mail them back to On when the product reached its “end-of-life.” The materials are subsequently recycled and made into new sporting gear as a sustainability initiative. The program has been great in drawing in younger consumers but has also been a learning experience for the brand at explaining the offering, said Alex Griffin, chief marketing officer at On. His advice would be to “keep it as simple as possible,” he said, noting that On’s customer service team has been inundated with questions about Cyclon. Though the questions have been positive, he said it’s imperative that the brand be ready with answers. An internal Slack channel is dedicated to making sure On's customer service reps have the right answers and information for customers. On this month published a YouTube video explainer about the program. Have different options available and tweak as needed Some brands have found that offering different types of programs for customers, which include both free and paid options, can be beneficial. Sephora, for example, has a free “Beauty Insider” loyalty program that customers can use for perks around birthdays. Last year, the cosmetics giant rolled out “Same Day Delivery,” in which customers can pay a fee starting at $6.95 to get products delivered via Sephora partners such as Shipt. The more recent subscription, “Same Day Unlimited,” carries an annual fee. “Attracting new-to-Sephora clients is always our goal, but equally as important is ensuring that we’re serving the needs of our already-existing beauty community,” wrote Graham. Many marketers have adjusted their programs after researching customer data. Like Sephora, retailer Claire’s has a loyalty program but debuted its own subscription offering last year. Called “Cdrop,” the monthly offering initially started with three types of boxes made up of jewelry, accessories and toys, but the brand quickly narrowed it down to only two—one for ages 3 to 8 and one for kids over 9 years old. “We have so much data and information we’re able to see that we were able to launch then quickly pivot based on consumer feedback and sales,” said Kristin Patrick, Claire’s CMO, noting that aspects of the third box were incorporated into the other two.Read more: How Claire's is marketing to 'Zalpha' Test the offering first Taco Bell gained a favorable amount of buzz when it introduced a new taco subscription in January. The “Taco Lover’s Pass,” a limited-time offering that gave app holders a daily taco for 30 days with a $10 subscription, helped foster customer loyalty for the Yum Brands-owned fast-food chain. After seeing the program’s success with customers, Taco Bell resurrected it for Taco Bell Rewards on National Taco Day on Oct. 4, according to Matt Prince, head of marketing and communications. Bringing back the offering after testing it has helped the chain learn more about its customer. “It allowed us to examine how our digital consumers engage with a tool that ultimately pays for itself in just a few visits,” noted Prince. “Though the Taco Lover’s Pass was only available for a limited time, we always keep our eyes to the future on how innovative approaches like this can continue to enhance the Taco Bell consumer experience—especially for our Rewards members.” Brands on the rise A look at up-and-coming brands disrupting their categories Read more here

Subscriptions and membership programs—5 lessons for marketers

Featured Stories