By Morten Suhr Hansen
Back in 2005, an employee at the American internet giant Amazon had a great idea: Let’s make a subscription where customers with Amazon, in exchange for a fixed, yearly fee, receive free delivery on all products purchased at Amazon.com. Founder and CEO, Jeff Bezos loved the idea and later the same year, Amazon Prime was introduced. As you might already know, it became an overwhelming success.
This marked the start of the subscription model that many might know as the paid loyalty club, but at Subscrybe we call it by another name: The Green Fee model. A model which more and more retailers are embracing, with impressive results!
In the world of golf, Green Fee is a payment granting access to play. And it works the same way in the world of subscription. With a Green Fee model, subscribers buy access to unique benefits: Increased discounts, more points, free delivery and other benefits, exclusive to the ones who pay. In return, they place more of their consumption with the company offering the benefits. A win-win for the company and the subscribers. And an irritation for competitors.
As late as just last week, we finished an innovation project with a leading, Danish merchant platform, where we created an all-new Green Fee model. Our test shows that it will be an overwhelming success and that it will definitely move market share in the industry. Now, we’ve set out to make that test a reality.
Danish subscriptions, Aarstiderne and Matas are going the Green Fee way
Let me give a few examples of Danish retailers, who have gone down the Green Fee road.
Let’s start with the leading, Danish meal kit supplier, Aarstiderne, who have a strong climate angle when it comes to organic and plant-based meals. Danes might know Aarstiderne, but they might not know Aarstiderne Plus.
Aarstiderne Plus is a membership for the entire Aarstiderne universe. For 100 dollars a year, you get a 10% discount on alle meal boxes and all other groceries purchased at Aarstiderne. You also get free delivery, and there is even discounts in physical stores, cafés and restaurants.
Another example is Matas, Denmark’s leading retailer within health and beauty, both online and in stores. Matas have around 1,6 million members of the free loyalty club, Club Matas. But Matas have also launched Club Matas Plus, where subscribers for just $4 dollars a month get 3x loyalty points, free delivery from online shopping and specific and personal offers for Plus members.
Both Plus clubs are designed to strengthen loyalty even further, shield consumers from competitors and increase the incentive to shop even more at the company in question.
How do you succeed in creating the right Green Fee model?
So, if you’re thinking about building a Green Fee model, how do you ensure that the concept is a success? What does it take to create a strong loyalty club that members want to pay for? No companies and no concepts are alike. But through our work with a long range of Green Fee models, we’ve collected some points for you to consider:
- The right pricing – important driver for customer behaviour. It shouldn’t be too high – or too low!
- Create a connection to the subscription to make it clear for customers that they get more out of the subscription than they pay (NO-BRAINER).
- More than discounts … think about free delivery, great service and special events. That way, subscribers stay for longer.
- The most important KPI is not the degree of coverage, it’s the contribution margin. Too many retailers think only of the contribution margin. This kills the business before you’re even getting started.
- Create a membership feeling – humans want to feel connected and recognized.
Let’s wrap up where we started. With Jeff Bezos and Amazon Prime. Analyses indicate that the revenue from a Prime subscriber is up to 2,5 times larger than for non-members and, in the US, Prime members place around 55% of their total online shopping with Amazon.
The Green Fee model has the potential to create true loyalty, which can be transferred to real cash for the offering company. My guess is that more and more retailers will let the Green Fee model replace the traditional, free loyalty club.
Even though I recommend it, this will mean increased competition around the consumer’s limited subscription budget. Those who meet the market first or create the strongest concepts will presumably be the ones who are successful.