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.
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.
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.
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!
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.
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:
- 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.
- 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.
- 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.
- 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.
- Appeal to members’ emotions: Focusing 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.
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.
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.
Zsuzsa is the Chief Strategy Officer and Co-founder of Antavo. She has experienced Antavo grow from a startup into a market-leading, global scaleup for loyalty program technology, serving global brands and retailers. She was named Personality of the Year at the 2024 International Loyalty Awards, and listed by Forbes as one of Europe’s top 100 female founders in tech, Zsuzsa is a former journalist recognized by the European Commission.
