What is Paid Loyalty (and what isn’t…)?

Peter Gerstle, Head of Travel Products, Collinson
Peter Gerstle, Head of Travel Products
22 Nov 2021

Paid Loyalty is a hot topic! I’ve recently been to a few loyalty conferences such as the Loyalty Summit and Leadership From Chaos, and am having lots of conversations on LinkedIn and more specialist channels, with loyalty executives, partnership managers and customer experience directors, who are curious and interested, with many others also weighing in with opinions.

What I am seeing, however, is confusion as to what paid loyalty really looks like as a customer proposition. So, I thought I’d clear it up here.

The hallmarks of a successful, impactful paid loyalty concept are:

  • Accessibility: Attractive joining cost with an obvious, powerful and motivating perceived value proposition
  • Conditionality: The value of the program is only activated with future use of the core brand product (i.e. just buying the program does not make sense if you don’t remain loyal to the brand)
  • Rewarding: The program design clearly and openly rewards loyalty and the demonstration of a selection bias towards the core brand
  • Opaqueness: The program benefits do not allow a direct cost-benefit calculation, i.e. there have to be benefits of an emotional/subjective/intangible value)

A paid loyalty strategy makes most sense where there is an earn-based loyalty ecosystem that only rewards the few highest-value members with perks. By definition (and even more so in a post-pandemic world) such a program is unlikely to be relevant to the majority of members. Attaining elite status has become much, much harder in recent years even for people with the same flight frequency albeit on cheaper tickets, as programs have moved to pure revenue-based thresholds. Paid loyalty done well can fill that gap and drive program acquisition, retention, as well as share of wallet and recognition. Getting the program design right is not easy, but it’s so worth the effort to drive emotional and transactional loyalty!

Paid loyalty also makes sense where it is the only loyalty tool (e.g. easyJet Plus or Amazon Prime).

It’s often been suggested to me that fee-based credit cards with a generous package of benefits are an example of paid loyalty. This is true, but only to the extent that many of these benefits require you to pay with the card. In other words, it keeps the card top of wallet, which is a credit card’s measure of loyalty. Any other stand-alone package is just that: unconditional access to a bunch of benefits - no loyalty in that!

In short, what paid loyalty is not:

  • It’s not a set of benefits that can be accessed without additional real (and transactional) brand engagement
  • It’s not simply another product that a brand sells alongside its other offerings
  • It’s not a subscription or membership service (like flowers, the gym, or food boxes): that’s just a payment plan in other words

I hope this helps to convey the form, objectives and the role paid loyalty has in the loyalty managers’ toolkit. Done well, it’s a must-have in a balanced portfolio of engagement for any loyalty program. If you’d like to learn more about paid loyalty and how it can benefit your business please do get in touch.

Peter Gerstle, Head of Travel Products
Peter is Collinson’s Head of Travel Products, shaping and delivering the strategy and management of Collinson’s suite of travel products and driving innovation of its travel inventory globally, with a focus on the business of loyalty.
Peter joined Collinson in 2013 to add his expertise from a 25-year international career in eCommerce, product, and innovation management across a wide range of travel companies, including InterContinental Hotels Group and easyJet, for which he launched several significant ancillary revenue streams such as Speedy Boarding and the first-ever airline paid loyalty program, easyJet Plus!.

Peter is an alumnus of Lausanne Hotel Management School as well as the London School of Economics and holds an MBA from Henley Management College. He is a respected speaker on loyalty strategy and product innovation and provides regular commentary for and on the travel sector.

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