Loyal members are the lifeblood of any club. Typically, the loyal or regular club member represents about 35% of total membership. They will visit the club around 30 – 40 times a year and will spend $35 – $40 a visit. Regular members set the pace and atmosphere of the club as well as drive referrals and revenues. Loyal members keep coming back because they feel welcomed and have a sense of being part of a group both at a micro level where they connect with other club members and at a macro level where there is pride in contributing to the wider community.
About 40% of a club’s membership visits their club less frequently than the regular member. These occasional visitors spend the same amount of money in the clubhouse per visit as a loyal member but will go to the club not more than 10 – 15 times a year. Occasional members stand outside the social fabric of the club and tend to feel more like visitors than members. The club is less central to their lives than the regular member. Occasional members are far less likely to refer a friend than regular members.
The remaining 25% of a club’s membership base is made up of irregular members who will visit the club a couple of times a year. Again, they will spend roughly the same amount of money per visit as the occasional and regular member but the club is relatively remote from their lives.
A key challenge for clubs is not only to retain the loyal member base but also to convert occasional visitors into regular members. In a typical golf club, marina or private club of 1,100 members, one additional visit a year from occasional members would generate incremental revenues in the order of $15,000 to $20,000. A larger club of 4,000 members would increase income by $60,000 to $80,000. In recent years we have seen progressive clubs use loyalty strategies creatively to underpin regular member loyalty but also to drive occasional member visits.
Club Loyalty
In general, loyalty programs aim to enhance the perceived value of a business and are used as differentiators in competitively intensive markets. For example, food retailers such as Coles and Woolworths both run loyalty schemes. The Coles FlyBuys program has over 10 million subscribers while the Woolworths Everyday Rewards scheme has 5.1 million cardholders. Airlines such as Qantas and Virgin Australia invest significantly in Qantas Frequent Flyer and Velocity programs respectively. Additionally, all Australian banks offer reward programs associated with credit card products.
These programs share in common a direct link between spend and reward. The cardholder or “member” makes purchases which are rewarded with an allocation of points. These points may then be redeemed for goods and services. The more the member buys, the greater the potential rewards. Members then feel that they are getting something extra for their loyalty to the business be it a grocery chain, airline or bank. These rewards must be desirable so many programs foster partnerships with providers to ensure there is a broad range of “valuable” rewards on offer.
Member Discounts
Clubs are not new to loyalty and have been running programs for years. The most basic club loyalty program is the Member Discount. In this case, a price concession is applied on presentation of a membership card. These discounts are usually applied to food and beverage purchases. Although this approach is relatively simple to operate, it does not differentiate between member types. The member who uses and pays for a broad range of club facilities is rewarded in the same way as an irregular member. Additionally, these types of schemes and associated prices tend to become the accepted norm in the club which erode margin and do not foster loyalty.
Rewards
Many clubs operate reward schemes where members are awarded points for purchases. These points accumulate and may be redeemed for rewards such as club merchandise and/or items promoted by the club such as televisions, electrical appliances and holidays. Rewards programs are often used by clubs to differentiate themselves from the competition by offering outstanding prizes.
Rewards schemes are easy for members to understand and suit well if the club has limited offerings. However, they do require administration time to manage the program, particularly if it is manually operated. It’s important to refresh the rewards constantly.
Tiered Loyalty
A tiered loyalty program is designed for clubs that want to reward their most valuable members. Members collect points and at certain thresholds the reward, discount or promotion escalates. Once a member climbs the loyalty ladder their club is firmly on their mind.
Tiered loyalty programs are effective at encouraging repeat visitations and spend, particularly when linked to outbound personalised targeted marketing campaigns. They also reward the most loyal members as well as encouraging spend in the club rather than in the general retail market.
Good tiered loyalty programs require integrated systems to capture transactions which are then assigned to members where points are attributed. There are IT infrastructure costs associated with setting up a tiered loyalty system.
Partnership Reward
Partnership programs extend the tiered loyalty concept to partners which offer goods and services as rewards. This broadens the number and depth of the rewards available which makes the program more appealing, particularly in a retail environment. These programs are attractive to members and promote the club in the community. They are complex to administer requiring sophisticated infrastructure and time-consuming administration. While compelling for members, the major risk for clubs is that redemptions are often made outside the club at other retail outlets. This dilutes the value of the scheme to the club.
Successful Club Loyalty Programs
From our experience in dealing with over 400 membership clubs around the country and drawing from the various types of schemes, the most successful club loyalty programs have the following characteristics, including:
- Targets loyal and occasional members;
- Contains personalised outbound communication triggers;
- Simple for members and staff to understand and operate;
- High perceived value – targeted rewards for club members;
- Reinforces value for the regular member;
- Targets and draws in occasional members ;
- Rewards are within reach; and
- Rewards are frequently refreshed.
Summary of Loyalty Program Types
There are many ways a club can reward a member. In our view, tiered loyalty strikes the right balance between value for members and payback for clubs since redemption occurs in the club. This type of loyalty program incentivises occasional members to return while giving regular members additional value.
To find out more about how Micropower’s integrated systems enable loyalty and reward schemes, please fill out the contact form.
