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Freemium Loyalty Programs

The Freemium Model in Loyalty Programs – The Next Big Trend

While talking with other marketing professionals, I’m often asked whether loyalty programs can be a revenue center. Though loyalty programs can certainly have a positive ROI — our Global Customer Loyalty Report 2023 backs that up — many businesses feel the need to make their program’s membership paid instead of free. But wouldn’t the paywall scare away potential customers, you ask? Luckily, there is a third option: the freemium model. With it, loyalty programs can deliver the best of both worlds: the option to access premium benefits while still catering to a large audience.

If you’d like to learn more about the most up-to-date loyalty program trends, make sure to download Antavo’s Global Customer Loyalty Report 2023.

A banner recommending to download Antavo’s Global Customer Loyalty Report 2023.

What Does Freemium Mean?

If you’re familiar with B2B business software, then you have most likely encountered the freemium model before — maybe without even knowing it. The name comes from the combination of the words ‘free’ and ‘premium’ and, as the name implies, it’s about charging an extra fee for nice-to-have or convenient features in an otherwise free system.

You might be surprised that some of the biggest names in the industry are using the freemium model.

  • Spotify is available for free, but their premium membership unlocks unlimited skips for tracks and also removes the ads, just to name a few benefits.
  • Everyone can use Canva for free, but access to premium templates requires a premium membership.
  • Most antivirus programs also follow the freemium structure.

However, limited-time trials don’t belong to this category. A true freemium program allows customers to use the free, basic version as long as they wish.

LinkedIn Premium service main page. 
LinkedIn also embraced the spirit of freemium with LinkedIn Premium. All features that matter for networking are available for free, but opting for a premium membership can provide a helpful boost. 

Introducing the Freemium Loyalty Program Model

Nothing captures the essence of the freemium model better than a loyalty program. The majority of loyalty programs are free to join but if the rewards are good enough, it can completely justify a price tag.

Just like in the traditional model, enrollment to a freemium loyalty program is free, and members have access to basic functionalities, such as point collection and tiers, and they can earn rewards for being active in the loyalty program.

Those who want to make the most out of their membership can pay a monthly, annual or one-time fee in exchange for faster progression or access to a better reward experience.

The loyalty program benefits of Barnes & Noble’s freemium model.
In 2023, Barnes & Noble re-imagined its long-running loyalty program, introducing a freemium program in which free members can earn & spend points, while paying members have access to a list of additional benefits with both a transactional and emotional value.

Why the Freemium Model Fits Today’s Loyalty World So Well

If you’ve ever thought about doing something radical and innovative with your loyalty program, then this is the perfect time! According to our Global Customer Loyalty Report 2023, currently, 8.1% of loyalty programs follow the freemium model, meaning they have both free and premium elements.

More interestingly, however, is that 23.7% of future program owners say they want to launch a freemium loyalty program. In other words, freemium loyalty programs might become mainstream in the coming years!

An image taken from Antavo’s Global Customer Loyalty Report 2023, depicting trends about paid loyalty programs.
The results also show that purely premium loyalty programs are far less attractive for future loyalty program owners. 

This begs the question: why is freemium seeing a surge in popularity now? There are a couple of possible answers:

  • Many companies seek to turn their loyalty program into revenue centers, and a freemium program is a gentler approach than a full-fledged premium model.
  • Freemium programs are more inclusive, as they cater to both brand advocates (customers who engage with the brand but aren’t heavy spenders) and high spenders who week privileges and special treatment.
  • In the cost of living crisis, many customers may remain in the free bracket but are able to upgrade once their situation is more stable.
Sweetgreen loyalty program Sweetpass+ rewards. 
American salad bar chain Sweetgreen revamped its stamp-based loyalty program in early 2023, turning it into a freemium program. It shows that the freemium model is an excellent match — even in an industry where loyalty programs are predominantly free. Learn more about it in our review.  

Building your Freemium Loyalty Program Concept

In an article, Forrester describes five tenets that drive customers to keep paying for a subscription program. These tenants apply to freemium models, too, since they include a paid element:

  1. An ever-expanding value offering: It’s not enough to start off with some great rewards. You need to keep the experience fresh and relevant by constantly adding new benefits and earning opportunities.
  2. Provide differentiated convenience: Members who pay for premium membership will have higher expectations. Instead of just offering more of what free members already have (higher discounts, better birthday gifts), come up with rewards and benefits that are exclusive to the premium member base.
Emirates Skywards+ is the premium loyalty program of Emirates for its most dedicated passengers.
Emirates Skywards, the Middle Eastern airline’s loyalty program, offers premium benefits on top of free ones. Emirates’ premium perks include extra discounts, more point gains, and exclusive privileges, such as access to the airport lounge. Find out more in our review.
  1. Push personalization to the limits: Rewards that are part of a subscription also call for better presentation. For premium members, consider sending a separate newsletter with more effort and production value behind it, as well as hyper-tailored product recommendations.
  2. Fit into a larger ecosystem: A great selling point for a freemium program is that paid members receive access to partner rewards, or that premium members are allowed to use their points across a coalition or umbrella ecosystem.
  3. Appeal to members’ emotionsFocusing on emotional loyalty helps to build a true, long-lasting relationship with customers. For example, premium members may be able to earn points in more ways, such as through their athletic endeavors, by bringing back used products for recycling, and so on.
Page showcasing the IHG freemium loyalty program offerings. 
Another way the freemium model can be utilized in loyalty programs is by tying them to specific services, such as credit cards. For example, IHG offers bonus points, free nights, and instant high-tier access for members of their loyalty programs who pay for a special credit card. 

VIP Clubs: A Different Take on the Freemium Model

It’s worth mentioning that the premium element in a freemium loyalty program doesn’t necessarily have to cost real-world money for participants. In fact, in a freemium loyalty program, you set up a system, where members pay for their premium subscriptions using loyalty program points. Think of it as a subscription-as-a-reward.

Imagine the following scenario: your customer signs up to the loyalty program for free, earns points by making purchases or engaging with the brand in other ways, ranks up through the tiers, etc. However, instead of claiming a coupon for 100 points, they can wait until they have 1,000 points and spend them on a one-year subscription for the premium membership. Since earning that many points require frequent and large AOV purchases, this approach still contributes to a higher ROI.

Mockup of a VIP club feature within a loyalty program that provides early access for 1000 points.
Because the entry fee is paid in points, VIP clubs help to further gamify the system. They also take away the edge that some customers might feel upon seeing a premium paywall. 

Achieving the Best of Both Worlds

I strongly believe that the freemium model in loyalty programs will see wider adoption in the coming years. This trend has already started with the likes of Sweetgreen, who have demonstrated that this type of loyalty can fit in any industry or vertical.

Do you wish to be a trendsetter in customer loyalty and launch an engaging freemium loyalty program? Antavo’s loyalty experts would be happy to showcase how our technology can empower your vision. So make sure to send an RFP or book a demo.

And if you wish to learn more about the most up-to-date loyalty program trends, statistics and benchmarks, make sure to download Antavo’s Global Customer Loyalty Report 2023.

A banner recommending to download Antavo’s Global Customer Loyalty Report 2023.
Antavo
Author: Antavo

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