Extending loyalty through subscriptions and ecosystems

“Economy” and “booming” aren’t two words you would expect to see scrawled next to each other in recent headlines. But when it comes to the loyalty subscription economy, it is in fact booming. There is a subscription service for every consumer need and want—from Netflix and HelloFresh to Ipsy and Coursera Plus. Fueled by rapid adoption from younger generations, subscription models have found 6x growth in the last nine years. As Epsilon Senior Director of Strategic Consulting Lauren Wawrzyniak puts it, "subscriptions come back to convenience and predictability.  Younger generations and consumers alike highly value their personal time and actively seek out ways to protect and maintain it by taking advantage of these services."

Subscriptions have found great success because they’ve pinpointed benefits from both sides of the aisle. For brands it means furthering a consistent recurring revenue stream, locking in their best customers with built-in loyalty, differentiating from the competition and increasing their digital engagement. On the other hand, consumers are offered special perks and discounts, exclusive products or services, and convenience.

Building a subscription model – key considerations  

When it comes to building out a subscription model, there are four key stages.

Ideation:  In this stage, thinking about how to “wow” your consumers and creating a program that is engaging and sharable is vital. The use of customer research and analytical learnings to find unique opportunities comes into play as brands look for opportunities to differentiate from their competition. Digital channel trial and adoption should be encouraged.

Planning: This stage of forethought has a customer experience focus. Clearly defining objective, desired outcomes, hypotheses and KPIs is key to creating a top tier loyalty program. This also seems to be the phase where clients tends to run into the most challenges, according to Wawrzyniak:

"Coming up with a great idea goes a long way, but bringing it to fruition proves to be much more difficult especially in very service-heavy subscription programs that require new supply chain logistics and staffing models," she says. "Well-established businesses are often reluctant to embrace the changes needed to create these new revenue streams."

Validation: In the validation stage of creating a subscription, detailed financial modeling should be used to understand the cost and benefits of the program as well as pricing. Offerings should be right-sized for different segments and small in-market tests are carried out before launching at scale.

Evolution: Keeping a subscription model fresh, with for instance the addition of soft benefits, ensures consumer loyalty doesn’t stagnate. Prices and offerings should be continuously tested and optimized. Look to partners to help enhance and even fund the program.

From siloed approaches to connected ecosystems  

Loyalty is changing. While consumers used to expect value and relevancy and crave personalized experiences, they now also expect seamless digital experiences, crave trust, and look for human connections. Value exchange, too has shifted from transactional to emotional connections and immediate value-add, resulting in the need for brand loyalty initiatives to be fully orchestrated with an enterprise-wide loyalty culture. Limited and siloed experiences just won’t cut it.

In order to win, programs therefore must shift from siloed approaches to connected offerings, which is where loyalty ecosystems come into play. Labeled as the new frontier of loyalty, loyalty ecosystems enable brands to extend their rewards offerings across multiple corresponding partners or businesses.  

Unlike traditional coalition programs which are fragmented, only directly communicate with third-party coalition management systems and focus on "earn and burn" transactions, loyalty ecosystems connect brands directly through a central web. A partner ecosystem layout creates the ability for brands to offer both financial and experiential benefits across various mediums, increased access to member data and acquisition, incremental engagements, and a host of other IT benefits.

Wawrzyniak emphasizes that, “Partnerships are a great way to deliver additional value to your member base beyond your own offerings and capabilities. The key to identifying the right partners is rooted in not just data analysis, but customer empathy—understanding the needs, wants, and desires of your customer base can identify relevant pain points outside of your traditional relationship.”  

Dunkin’ recently announced the extension of their partnership with Shell’s Fuel Rewards Network, allowing Dunkin' Rewards members to earn fuel rewards on top of their Dunkin' Rewards' points. Wawrzyniak adds that, “Dunkin’ recognized that fuel prices are a major pain point for their customer base and worked with Shell to add greater value to the loyalty program beyond their core competencies.”

Loyalty ecosystems increase member touchpoints and engage members outside the traditional buying cycle. The ability to connect co-branded card partners with airline, ride-sharing or even shopping partners creates a world where the customer journey is seamlessly connected along every digital touchpoint.

That being said, subscription fatigue is becoming more common and services to manage unwanted subscriptions or centralize them are popping up. Verizon recently launched +Play, a service that is designed to manage multiple media subscriptions from a single app. Subscription models "cannot rely on customers’ forgetfulness as a long-term strategy. Rather, they must be very focused on what they seek to deliver and who they are targeting to maintain a successful and sustainable program," Wawrzyniak points out.

If you’re looking to learn more about how your brand can look to integrate into a loyalty ecosystem, Epsilon’s strategy team can help. As Wawrzyniak highlights, "the most effective programs offer a robust portfolio of benefits to their members, with an emphasis on rational and emotional value." Epsilon helps our clients focus on their customers’ needs and wants to help them create an offering with benefits that appeal to the head, heart, and wallet of their customer base all through a platform that can measure and track different types of behaviors in one place. 

And if you are looking to create a customer loyalty program from the ground up, Epsilon’s PeopleCloud Loyalty can help your brand create a 1:1 journey for each customer too.