Consumers fell in love with digital subscriptions during the pandemic. With no place to go and retail stores and restaurants closed, shoppers subscribed to a plethora of services from dog food and cleaning supplies to meal prep kits and vitamins.
But now that the economy has reopened — and inflation has increased the price of nearly everything over the past year — many consumers are rethinking their subscriptions and the money they’re spending each month.
That presents direct-to-consumer (DTC) brands with an opportunity to explore a different relationship with customers: membership programs.
What is a membership program?
While a subscription model involves consumers paying a recurring fee to get a product shipped to them on a regular basis, a membership model gives consumers access to a suite of benefits and perks. These could include discounts on certain products or categories, access to in-person or digital events, early access to new product launches or brand-curated communities and services.
Some membership programs are automatically activated after a customer spends a certain amount with a brand or simply when the customer decides to opt in, while others require the customer to pay a monthly fee to become a member, explains Alessandro Desantis, managing partner at e-commerce consulting firm Nebulab.
Whatever the setup, a membership model can help drive customer loyalty by offering a more curated approach. It’s not about simply layering a loyalty or subscription model on top of an existing product catalog. The best membership programs are designed to help the brand’s average customer in ways that will often transcend what the brand currently offers.
Consider the membership program offered by Petco. Pet-loving customers can enroll in its Vital Care Core plan, free of charge, and receive members-only pricing for store items, personalized care notifications for their pets and points back for every purchase to be redeemed later.
Customers that sign up for its Vital Care Premier plan pay $19.99 per month and receive all those same perks. But they also get 20% off grooming services, $15 a month in Vital Care rewards and unlimited routine vet exams at the company’s Vetco Total Care locations, among other benefits. It’s a comprehensive program that sends the message to pet owners that they’re part of a community that values and loves their fur-babies.
Rewarding the customer
As the Petco example shows, there are similarities between membership programs and subscriptions. They both can help stabilize a brand’s revenue by encouraging and rewarding a customer for continuing to shop with a DTC retailer. However, there are aspects of a membership offering that can often make them more appealing to both the customer and the retailer.
That’s because a well-designed membership program is about identity, not convenience. Yes, they’re genuinely useful to their customers, “But they also have an emotional component, in that customers are typically very bullish about them; the brand effectively becomes the customer’s point of reference for running a certain aspect of their life, like pet care, in the case of Petco’s membership,” says Desantis. “This is a much stronger bond than what you typically see with subscription and loyalty programs.” Because membership programs are not necessarily tied to a brand’s SKUs, they can often survive changes in customer preferences.
Memberships or subscriptions?
One of the more common questions from DTC brands is whether a membership program can be launched without first having established a subscription model. The answer is yes. Subscriptions and membership may share certain similarities, but they don’t have to be linked and one can be created without the other. However, according to Desantis, if a brand offers both, it makes sense to think about how a customer may want to transition from a subscription to a membership plan.
For example, he points out that at one time, Petco offered both a loyalty program and a membership plan under different names. The retailer decided to join them together by effectively turning the loyalty program into the “free tier” of its membership program, streamlining the customer experience and creating a more straightforward upgrade path for customers of the free tier.
For brands that have a subscription model and want to create a membership program, Desantis says the first step is understanding what the customer wants. How are customers interacting with the brand? What challenges are they facing? What do they wish the brand offered? What is the brand currently offering that is not appealing to the customer?
“Once they have enough quantitative and qualitative data, brands can design a membership program that revolves around their customers’ actual needs,” he says.
One thing brands need to keep top-of-mind when embarking on a membership offering is that they are inherently more competitive than subscriptions or loyalty programs. The bond that a DTC brands creates with the customer is deeper, and, as a result, it takes more effort to keep the relationship going.
Brands need to be cognizant of the fact that membership programs require constant curation and iteration. The ability to become a first-class citizen of the customer experience — rather than something that’s just bolted on top of an established offering — is the primary goal.
“Don’t overcomplicate things,” says Desantis. “While it’s tempting to go all-in with five or six membership tiers, the reality is that most DTC brands don’t have enough depth to be able to create such a complex program. It’s best to keep things simple in the beginning and iterate as needed.”
Learn more about Nebulab’s e-commerce consulting services and how they help brands drive customer loyalty and engagement.