What’s your favorite streaming service for watching the shows you love? The availability to access our preferred service when and where we want is one of the greatest feelings of comfort. We can all resonate with this, whether it’s about streaming services or our neighborhood’s sports club.
Subscriptions: they stand for our habits and preferences for which we are willing to pay a certain amount per month or per year. Are subscription services indeed popular and more rewarding compared to free loyalty programs? What about a subscription for travel - does this resonate with travelers already and what examples do we see?
Let’s go on this trip to find out.
The demand for subscription services exists across all age groups, but the younger consumers among us who have grown up with and have become used to subscription services sign up more readily. This only makes more sense when knowing that Netflix was founded in 1997, Amazon Prime in 2005, and Spotify in 2006.
As for where in the world subscriptions have become more requested, according to a survey, U.S. consumers lead the way, with an average of five retail subscription services per household. As reported by consulting agency Kantar, 85% of U.S. households now have at least one video subscription service. Other countries with active participation in subscription services include Canada, Germany, the U.K., and Austria. [1]
Compared to 2021, the global subscription e-commerce market is forecast by The Business Research Company to grow upwards of 64% by the end of this year. Besides convenience, the reduced reliance on store visits, lowered costs of traveling to stores, the absence of crowds, and a satisfying customer experience also contributed to this growth. [1]
Signing up for a subscription service is making us loyal to a brand. But why pay for something when you can also access a loyalty program for free?
Let’s have a look at both program types in more detail.
Subscription and loyalty programs have one important element in common. Both are some of the most effective marketing strategies used by brands to reward and retain customers. And customer retention has indeed become crucial for brands in recent years, in a world of increased competition and skyrocketing customer acquisition costs.
That said, there is a distinct difference in the approach of the two.
Put simply, loyalty programs require us to earn rewards based on our interactions with the brand. The simplest example of a loyalty program is the model of “buy 9, get the 10th free”. In a more modern loyalty program, we may earn points for every dollar or euro we spend at a store, as well as through other less traditional actions, such as referring friends or leaving reviews. These points can be redeemed for benefits, such as free products, access to unique experiences, rewards from partner brands, and more.
Subscription programs, on the other hand, give us immediate access to perks and rewards. They are designed to make our experience with the brand more convenient, enjoyable, and valuable. Benefits may include some of the same rewards we mentioned above, such as free or discounted shipping, access to exclusive deals and events, personalized recommendations, and other perks.
Back to the popularity of subscription services. The willingness to sign up and pay for immediate access to a brand’s perks and rewards from the start shows customer commitment, to begin with.
And the commitment continues too: Apparently, subscription programs create a sense of customer affinity and commitment. Recent trends have shown that once we have monetarily committed to a brand, we’re significantly more likely to return to that brand more often. A McKinsey survey on loyalty programs found in fact that members of paid programs are 60% more likely to spend more on the brand after subscribing, while free loyalty programs only increase that likelihood by 30%. [2]
Then there’s also the exclusivity factor that makes subscription programs attractive. The brand can offer us exclusive benefits and rewards that differentiate it from its competitors. These benefits are not available to non-members, which can create a boost in demand from others outside the program.
As for the advantages for the brands: Unlike loyalty programs, which may not generate any revenue directly, subscription programs allow the brand to collect a fee from the subscribers and in advance. This – as a steady revenue stream – can help the brand offset the cost of providing rewards and benefits to members, as well as fund other marketing and business activities. Furthermore, the advance payment provides the brand with a favorable cash flow dynamic.
With most customers showing commitment to subscription services, is there an interest to subscribe to travel too?
It appears that many are responding with a ”yes“ to that question. An eDreams ODIGEO and OnePoll survey of more than 10,000 shoppers in eight markets in North America and Europe indicated that among subscription sectors, travel is the most likely to see subscription growth from both existing and new members over the next months.
The numbers say it all: An impressive 90% of current travel subscribers say they would maintain or increase spending on those services over the next months. Of existing subscribers, 47% say they would increase spending on travel subscriptions, despite current economic challenges, while just 9% say they might consider decreasing their spending.
Overall, while the most popular subscription product category for consumers is entertainment, with 75% of shoppers holding subscriptions to streaming services like Netflix and Amazon Prime, only 29% plan to increase their subscription levels for entertainment compared to 47% that plan to do the same for travel.
Meanwhile, of consumers who don’t currently subscribe to travel services, 24% say they would consider a travel subscription this year – a higher percentage than consumers considering subscriptions in other sectors such as food and beverage and health, beauty, and fitness.
The study found that, worldwide, only 1% of consumers say they would not consider themselves to be a subscriber, while on average, consumers have four subscription services each, signaling the potential for more subscription travel services to enter the market. [3]
Which specific examples of subscription services do we currently see in the travel industry?
Subscription programs debuted in travel with the large European online travel group, eDreams ODIGEO, which has offered its Prime subscription service since 2017. The purpose? Starting with a (first) booking, they offer personalized service and cost savings, as well as the convenience to the subscribers of having products delivered directly to their front door or inbox automatically. All of these characteristics are unique benefits of subscription services designed to provide individual experiences that save members time and money.
Another example is Flight Pass by Alaska Airlines, which aired as a flight subscription in February. Travelers can subscribe, starting at $49 per month, to fly up to 24 roundtrip flights a year between 13 Californian airports and from California to Reno, Phoenix, and Las Vegas.
Flight Pass offers two plans for subscribers – one requiring booking at least 14 days before travel starting at $49 per month for six roundtrips per year, and one that allows booking up to two hours before departure starting at $199 per month for six roundtrips per year. Subscribers can also pay more for either 12 or 24 roundtrip flights per year within each plan. [4]
There’s one hotel brand looking to “disrupt” the loyalty space: this is Amsterdam-based CitizenM, which is introducing mycitizenM+, described as “the ultimate hotel membership”. There are no points to collect, no levels to achieve.
MycitizenM+ is a membership to sign up for once after which we can start enjoying discounts and perks: As members, we receive a guaranteed 10% off, free late checkout, a first-in-line spot with chat service, and a guaranteed room if we book at least 48 hours in advance. The service costs a monthly fee and is good for an entire year.
Through testing, market research, and validation, CitizenM discovered that “peace of mind” in terms of price and room availability is the highest criterion for frequent travelers and that loyalty programs and hunting for points are a thing of the past.
In 2020, CitizenM already launched a corporate subscription service in a bid to attract loyalty from companies and employees looking for a place to work and stay.
However, its loyalty ambitions extend far beyond individual experiences and group retreats. Specifically, CitizenM wants to cultivate loyalty in the online world, recently announcing it will build a hotel in the metaverse.[5]
With subscriptions being in the day-to-day life of all of us and with travel taking its place more and more again in there as well, it is a trend to stay.
For free loyalty programs, more patience is required, as well as less effort to access rewards – and with that, it’s less compelling for commitment to begin with. After all, it does not require an active decision about payment from our side as the customer.
There’s a readiness among consumers globally to invest and commit to a brand in any sector as well as for travel, sending a signal to the brands that subscription programs are in growing demand.
It’s up to the brands to make such a subscription program attractive, exclusive, and overall worthwhile for the subscribers, providing the ultimate customer experience while benefitting with the advanced fee payments from an improved cash flow to fund those business activities that enhance the customer value even more.
Any free loyalty program could then potentially turn into a profitable subscription program for rewarding experiences for all on many levels from the start.
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Banner photo by Kati Hoehl on Unsplash
[1] How is travel adapting to the subscription economy? | PhocusWire
[2] Loyalty vs. Membership — What’s the Difference? | Medium
[3] Travel sector most likely to see subscription growth | PhocusWire
[4] Alaska Airlines launches flight subscription program | PhocusWire
[5] Tech is powering the new look of hotel loyalty programs | PhocusWire