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Building a Customer Loyalty Program for a Subscription Service

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As a marketer and a consumer, I’ve interacted with customer loyalty programs since I can remember.

In traditional markets such as retail, customer loyalty programs typically look like a points card or a coffee shop punch card. These programs have proven effective, or at least popular, among physical retailers. However, businesses are rapidly shifting to offering subscription services, both physical and digital.

Customer loyalty and incentive marketing programs need to keep up.

In this article, I will address several of the fundamental differences in incentive marketing for subscription services as well as provide a few subscription specific campaign ideas for you to try.

Why does customer loyalty look like it does today?  

I want to clarify one point before moving forward. Those physical and digital retailers running traditional points programs where you “Spend a dollar get a point” are not doing anything wrong. They are most likely working within the limitations of their business model, technical infrastructure and their customers’ attention span.

In the traditional transactional purchase, online or offline, the retailer has little to no ability to track an individual consumer’s behavior until they get to the checkout. After the customer pays, they leave the site or store to use the product. The customer then doesn’t interact with the business again (besides maybe opening the odd promotional email) until they come back to the checkout.

For the above reasons, the points card is the only effective reward system that can be used. Some companies have rebranded the points program to a VIP program but it’s effectively the same thing as it rewards a consumer for spending more.

Why is incentive marketing different for subscription businesses?

Probably the most obvious difference, but also the most important one is that subscription businesses run on a very different business model than traditional retailers.

In a subscription service, it’s common for the first month or more of a customer’s lifetime to cost you money. This is because, based on the average lifetime value (LTV) of a subscriber, it’s worth spending more than a single month’s subscription to acquire a new customer. In contrast, more traditional businesses need each transaction with the customer to be profitable.  

As a result of these different business models, subscription services need to focus on different goals throughout their customer loyalty programs.

Cost of Acquisition

Subscription businesses have different customer activation points than traditional retail businesses. In a subscription business, an activation point is when a customer becomes a committed subscriber that sticks around for longer than a few months. In a traditional business, activation essentially happens along with conversion, at the time of purchase as there is no need for the customer to continue purchasing.

Suggested Campaign: Activation Offer.

Reward customers after they pass your customer activation point such as inviting 3 colleagues to join a project or purchasing a specific number of times or months in a row. These programs are great for increasing trial to paid conversions and increasing customer lifetime value.

Customer Journey

Consumers can have many more touch points when using a subscription service than when purchasing from a traditional retailer. Such as signing up for a trial, making their first purchase, using the tool/service, upgrading, downgrading, and sadly canceling. This contrasts with traditional businesses where the journey only stretches from putting an item in the cart to purchasing it.

Because of this, it’s essential that your customer loyalty program keeps people moving along the most desired parts of the customer journey.

Suggested Campaign: Customer Referral Program.

Use your happy customers to acquire more happy customers through a customer referral program. Rewarding existing customers for referrals gives them an added reason to continue using your service. As an additional perk, referred customers have lower churn rates and submit fewer support tickets.

User Information

Personalization is a powerful marketing tool. With a subscription service, everytime someone interacts with your service you have a chance to learn more about the customer to improve your marketing personalization. You can collect both implicit information such as purchase habits and explicit information such as a customers birthdate.

Suggested Campaign: Birthday Reward.

Send subscribers a special present on their birthday to let them know you’re thinking about them. A great way to keep customers actively using your system and keeping a positive view of your company.

Geography Specific Launches

Subscription services typical launch region-by-region such as by country, state or city. For subscription businesses offering local delivery or services, it’s crucial to quickly gain a critical mass in newly launched regions. This is often to balance both sides of a marketplace or to support local operations.

Suggested Campaign: Location-based Welcome Bonus.

Reward new users who sign up from a specific geography with a special welcome bonus such as dollars of credit, discounts or free shipping. Great for accelerating growth in new territories or holding off new competitive entrants.

Wrapping things up

I’ve talked about a few of the specific differences subscription businesses encounter when launching a customer loyalty and incentive marketing program. However, each business is different and the market is constantly evolving so I want to leave you with some questions you can use to analyze your customer loyalty program designs:

  • What part of the customer journey will this improve?
  • Is this reward right for where the customer is in their journey?
  • Does my program engage the customer at every step of the journey?
  • How does this work with our larger (growth, acquisition, revenue) strategy?

If you’re ready to launch a customer loyalty and incentive marketing program for your subscription service check out the SaaSquatch Platform. It’s custom built to understand all types of subscription businesses and has a constantly growing library of new campaigns so you can focus on growing.