By Morten Suhr Hansen
“Are you a member of our customer club?” This is a question we almost all encounter when we shop at the major Danish retail chains. However, more and more of us actually say no. This is shown by a new study from CBS titled ‘Loyalty in Turbulent Times.’ The study is conducted by Per Østergaard Jacobsen, who also conducted a similar study in 2015.
In 2015, 75 percent of Danes were members of a loyalty club. This number has declined to 63 percent in 2023, and this figure stands in stark contrast to the fact that more and more companies indicate that the loyalty club is a lifeline in times of crisis. The trend of declining members is also observed in similar studies in the other Nordic countries and the UK, as noted by Per Østergaard Jacobsen.
Free loyalty programs don’t really create loyalty
If you delve deeper into the study, the numbers also show that the members who remain in the loyalty clubs are less loyal than before. At least when measuring by the Net Promoter Score (NPS). It has actually dropped by 12 percentage points from 2015 to 2023. More specifically, it’s the proportion of ‘promoters’ that has decreased, clearly indicating that as members of the loyalty clubs, we have become more neutral and thus indifferent towards the clubs. Consequently, they do not effectively foster loyalty to any significant extent.
So, traditional loyalty clubs are under pressure. Clubs that are free to join but offer small rewards to members are increasingly struggling to create value for the companies behind them.
Loyalty concepts and subscriptions are blending
But what is the solution for traditional loyalty clubs, and where should they move towards? We got an answer to that recently when Stefan Kirkedal, Head of Loyalty at Matas and the manager of Club Matas, appeared on our podcast “Subscription Talks,” where the topic was loyalty clubs and programs.
According to Stefan Kirkedal, traditional loyalty concepts are facing challenges, and subscriptions are gaining ground. Therefore, these two elements are merging. A good example of this is Matas’ own loyalty concept, Club Matas, which was launched 13 years ago as a classic loyalty program and has been very successful in terms of its expansion. Club Matas now boasts 1.9 million members.
Club Matas is excellent at providing Matas with knowledge about their customers and access to market products directly to its members. In other words, it excels at securing first-party data and insights into members’ purchases and behavior. However, the free loyalty concept performs less effectively when it comes to fostering loyalty and increasing purchases. The exchange ratio is too poor; members receive too little in return for their efforts.
Therefore, Matas chose, in collaboration with Subscrybe, to develop and implement a paid add-on in the form of a subscription, Club Matas Plus, about three years ago. For 29 kroner per month, Club Matas Plus offers members access to more points, free shipping, and a range of special offers exclusively for paying members.
Share-of-Wallet is the important key to business success
Because Club Matas Plus is a paid subscription, it has significantly raised the bar in terms of what members receive in the form of more points and many other benefits.
The business mindset behind the concept revolves around ‘share-of-wallet’ – in other words, winning a larger share of members’ spending within the categories that Matas sells. As Stefan Kirkedal puts it: “When you instill that subscription feeling of paying 29 kroner per month, you think of Matas first the next time you have a need within our categories.”
And it works!
In fact, members who join Club Matas Plus increase their purchases at Matas by between 30 and 40 percent. Just take a moment to read those numbers again! Between thirty and forty percent! Matas has, therefore, succeeded in creating genuine loyalty in the form of higher revenue per customer by using a subscription as a crucial loyalty tool.
Matas is far from alone in doing this. We see the paid benefits club emerging in many places: the hair salon chain Park, the car dealership chain Ejner Hessel, the e-commerce company Saxo.com, the nightlife app NightPay, and the burger chain Sunset Boulevard.
So if you also want a larger share of your customers’ wallets, consider dropping the traditional loyalty club or at the very least, combining it with a paid subscription concept.
For more inspiration, feel free to listen to our latest podcast, where loyalty evangelist Rasmus Houlind also participates. Also, be sure to read Per Østergaard Jacobsen’s article “Loyalitet ved en skillevej – udvikling eller afvikling” in “Retail Mega Mag,” published by PEJ Gruppen.