How brands can get more out of their customer base by offering membership schemes

Paul Hudson, global marketing manager for Collinson Latitude, explains how membership schemes can add revenue, while being part of a brand’s customer retention and engagement strategy.

There has been a lot of innovation recently from brands seeking new ways to engage their customers, from developments like foursquare that almost every sector can tap into, to the growth of mobile app integration into retail reward programmes. However, beyond this increased focus on social media and mobile technology, there is another huge opportunity for brands willing to think differently about their customer base.

Collinson Latitude recently carried out research into consumer demand for membership packages from trusted brands. These packages would comprise various ’enhancements’ to a brand’s main product or service and could include benefits such as mobile phone or travel insurance, airport lounge and wi-fi access, and gym or spa memberships, as well as online magazine and newspaper subscriptions. In short, anything customers genuinely want, that can be sourced and provided via a brand partnership.

Over 50% of the 1,000 consumers that took part in the independent Toluna survey said they would buy annual membership packages that provided these insurance, travel, leisure and lifestyle benefits, on the basis that the membership price offered a saving compared to buying the individual benefits separately.

Surprisingly, 73% of consumers are not currently being offered any of these membership-based benefits by the brands they trust. Clearly, marketers are failing to capitalise on an untapped consumer need, and risk missing a range of opportunities presented by their customer base.

Benefit packages can be tailored to suit a brand’s needs, by being completely flexible to match an individual customer’s life cycle stage or demographic and by effectively supporting a range of business objectives:

Generate extra revenue
The benefit to the bottom line of having your customer base contribute additional, recurring revenue is self-evident. Our forecasts indicate that through a revenue share model, £13 million profit could be generated over three years by signing up just 65,000 customers to a membership.

Extend the brand
We have seen leading brands use brand partnerships to take their business into new areas. O2, for example, has gone into financial services with O2 Money in collaboration with NatWest. This approach is equally viable and effective via a subscription membership model.

Boost retention rates:
The benefits for retention are also clear – O2 customers need to stay with the network to continue to use O2 Money’s services. Our recent research also indicated that in the telecoms and utilities sectors, providing these kinds of benefits as a complimentary offering could significantly reduce customer churn, of which the telecoms sector has the highest rate in nearly any industry: 38.6% for UK mobile customers in 2009. As all brands are aware, it’s far cheaper to retain customers than acquire new ones in the long run.

Generate greater engagement
Memberships create a significantly increased number of ’touchpoints’ between brand and consumer. This greater involvement in more areas of customers’ lives has hugely beneficial effects on engagement. For some industries, this also provides a positive reason to get in touch beyond charges or service issues. The sense of exclusivity memberships provide, and the greater recognition of individual customer needs makes people feel more important to a business.

In-depth customer insight
Brands benefit from a larger amount of customer data, both behavioural and transactional. This insight builds up over time, informing brands exactly what customers want, and how best to interact with them, generating both up-selling and cross-selling opportunities.

For brands to achieve these objectives, it’s crucial they choose partners that fit with both their own brand and product or service offering. A range of partners may be required, if truly bespoke benefits packages are available that match the full array of customers’ profiles, based on what they really want and value.

Currently, financial services is far and away the leading sector with regard to memberships, with two thirds of organisations claiming to offer additional products and services outside their core business. As well as seeking to add value to the customer proposition and drive retention, 80% of people in the industry believe these add-ons also help differentiate their brand.

Memberships are also often seen as something that require a burdensome IT infrastructure, when in reality the framework that surrounds the membership can be as lightweight and efficient as brands choose. The integration and management of membership programmes is often believed to be expensive and time consuming. However, from the right supplier, they can be developed from start to finish in around six weeks for no up-front cost, based on a revenue share payment model.

Marketers are consistently looking for new ways to gain customer engagement, and memberships could be viewed as a key channel for integration into a wider customer engagement strategy. In today’s fierce commercial environment, businesses across every sector need to establish what their customers’ value and how to adapt their brand offering to become relevant, and stay relevant to every aspect of their customers’ lives.

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