Subscriptions and packages are multiplying to increase spending
Value and savings dominate consumer sentiment in a down year, prompting a belt-tightening response that leads more retailers and brands to lean into memberships and bundles as a defense against sales anemic.
Memberships not only provide the added benefit of recurring revenue streams, but also have the effect of creating a deeper affinity with customers – at least when done right. Additionally, these repeat customers typically have a higher average order value and volume, which is critical in a time when inflation is squeezing budgets.
According to the PYMNTS report “The Benefits Of Membership: Mass Retailers And Subscription Services,” which surveyed more than 2,100 U.S. consumers, general retail membership is a strong indicator that a consumer will spend more with the brand at to which he is subscribed.
For example, Amazon Prime members spent 113% more than nonmembers each month, while Costco and Sam’s Club members spent 101% and 109% more in-store, respectively, than nonmembers. according to the study.
Get the study: The Benefits of Membership: Mass Retailers and Subscription Services
Interestingly, rumors swirled this summer that Costco might raise the price of its membership as it last did in 2017. But on its fiscal third quarter earnings call, the senior vice president of Costco, Bob Nelson, said: With historically high inflation and the burden it places on our members and all consumers in general, we believe that raising our membership fees today ahead of the usual is not the right time.
On Wednesday August 31, widespread reports indicated that Sam’s Club would increase membership fees from $5 per month to $50 per year starting October 17, which would be the first such measure in nine years.
Read more: Sam’s Club raises membership fees for the first time in 9 years
On Monday, August 29, T-Mobile CEO Mike Sievert announced that T-Mobile is bundling Apple TV+ with its popular Magenta MAX plan. A standalone Apple TV subscription costs $4.99 per month, but T-Mobile clearly thinks consumers will see it as more valuable when it’s bundled.
See also: Costco keeps hot dog deal going, but membership fees could go up
A recent example is news that the Walt Disney Co. is considering a membership program. As The Wall Street Journal reported on Wednesday (Aug. 31), “By creating a membership program, Disney would be betting that it could deliver more value to customers, enticing them to spend more on Disney’s products and services. company, while providing Disney with a wealth of information about their preferences.
When it comes to the majors, we’ve seen some key differences in how Amazon Prime and Walmart+ members spend and what they buy, and unsurprisingly play to their respective strengths.
In “Walmart+ Weekend: Prime Day Rival Or Trip To The Grocery Store,” a summer survey of over 1,000 Walmart+ subscribers and over 2,000 Amazon Prime subscribers, we found that Walmart+ members were loyal to themselves, sticking to the basics at this sales event.
“Walmart+ members are more focused than their Prime counterparts on grocery shopping and gas tank necessities,” according to the study, finding that 43% of Walmart+ members have signed up to take advantage of same-day grocery delivery, while only 13% of Prime members did the same. “Another 20% of Walmart+ members cited gas discounts as a motivator — a benefit not offered by Prime.”
Subscribers who attended Prime Day this summer showed an appreciation for finer merchandise, as they have for a long time. The “Prime Day 2022: Inflation Hits, But Amazon Still Wins” study surveyed nearly 2,200 Amazon and Walmart subscribers, finding for example that “only 23% of Prime Day shoppers bought groceries – about half the 45% rate of their Walmart+ Weekend counterparts. Conversely, electronics shoppers were more likely to do so on Prime Day (31%) than Walmart+ Weekend (24%).”
See the report: Prime Day 2022: Inflation hits, but Amazon still wins
Spend where you belong
The power of membership rests in part on the lure of business relationships where consumers feel a sense of belonging that results in “members only” offers – a marketing tactic that rarely fails to trigger the reflex to purchase.
Examining this effect in the “Relationship Commerce: Building Long-Term Brand Engagement” study, a PYMNTS and Ordergroove collaboration, we surveyed over 2,800 consumers with a mix of memberships and subscriptions, uncovering the superpowers of these programs.
According to this report, “Subscription, membership and loyalty programs at the heart of merchants’ relationship commerce strategies increase the frequency of customer purchases and the amount of money consumers spend on these products and services. On average, 75% of consumers with business connections will buy more products from companies they associate with, and 90% who believe these companies understand their shopping preferences are likely to buy more products from them.”
Get the study: Relational commerce: creating a long-term commitment with the brand
Additionally, the relationship commerce study found that the top three forms that business relationships take – retail memberships, subscriptions and loyalty programs – are popular with consumers, as 79% of respondents have these at minus one, and 17% have all three.
Merchants are also enamored, we’ve found, for example, that “nearly eight in 10 consumers with subscriptions buy more products from brands they have a relationship with than those they don’t.”
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