Coping with the big switch: How paid loyalty programs can help bring consumers back to your brand


The demands of the pandemic have challenged customer loyalty and increased the value of paid loyalty programs for companies that do them right.

Among the changes to lives and livelihoods during the COVID-19 pandemic has been a massive shock to consumer loyalty. McKinsey’s latest research on consumer sentiment has revealed that 35 percent of United States consumers have tried a new brand since the crisis began while 77 percent have also tried new shopping behaviors, including new channels, stores, and brands. That rate generally holds true for consumers surveyed around the world.

The reasons for that unprecedented shift include product availability and price, but the trend underscores the broader challenge to traditional loyalty models and programs. The shift away from points-only loyalty programs was already well under way when the crisis hit. In this new paradigm, paid loyalty programs offer an attractive option for companies both to attract new customers and to shore up long-term customer value in the midst of a tectonic shift in consumer loyalty and preferences.

A 2020 McKinsey survey on loyalty programs found that members of paid loyalty programs are 60 percent more likely to spend more on the brand after subscribing, while free loyalty programs only increase that likelihood by 30 percent. In addition, paid loyalty programs drive higher purchase frequency, basket size, and brand affinity compared with free loyalty programs (Exhibit 1). As a result, paying members can be worth several times more than nonpaying members, even setting aside revenue from membership fees themselves.

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