Want to feel special? Stores and restaurants with paid memberships are betting on it
NEW YORK — How much does it cost to feel special?
At Chuck E-Cheese, the family entertainment and pizza chain, the price is $7.99, $11.99 or $29.99 per month. At the other end of the spectrum, the founder of a shopping app called Long Story Short wants to charge members $1,000 a month for anonymous access to hard-to-find goods like a rare Keith Haring work of art.
Paid loyalty programs are all the rage in the restaurant and retail world. Seeking reliable sales in an unpredictable spending environment, more and more companies have expanded their points-based loyalty tiers to make their most trusted customers feel valued for an upfront fee.
Consumers bombarded with membership offers are promised perks such as free delivery and first dibs on new launches, but in some cases also the right to jump ahead of non-members on reservation lists and in customer service queues.
It’s a method rooted in both the business case for treating big spenders well (it’s cheaper for companies to keep an existing customer than find a new one) and in the basic human need to belong, says Valerie Folkes, consumer psychologist and marketing professor. emerita from the Marshall School of Business at the University of Southern California.
“If they sit before other people or there is a special line for them at the checkout, they feel special,” says Folkes. “It makes them feel like there is a stronger bond or connection between themselves and the company.”
In retail, Target Corp. is taking on the Amazon Prime juggernaut with a paid loyalty program that will cost $49 per year between April 7 and May 18, and $99 per year thereafter. Members of Target Circle 360 can enjoy free two-day shipping within an hour and free delivery on orders over $35, the company announced last week.
Target executives said the more than 100 million customers enrolled in the company’s free Target Circle loyalty plan already spend five times more than non-members. CEO Brian Cornell told The Associated Press that he hopes the new paid membership will “build more relevance and more stickiness.”
Chuck E. Cheese piloted a paid program with bronze, silver and gold levels in Santee, California, in December and launched it in the rest of the San Diego area in February. The program offers discounts on food and drinks and free items such as cotton candy. Members also receive free “play points,” which allow customers to play arcade games and get snacks, and e-tickets, which are typically earned by playing arcade games and redeemed for prizes. The tickets and points are automatically loaded onto the customer’s card. .
For example, Gold members pay $29.99 per month, receive 50% off their meals and earn 1,000 tickets. Bronze members, who pay $7.99 per month, get 20% off food and drinks and receive 200 tickets. The higher the level, the better discounts and the more e-tickets and gaming points customers receive.
Mark Kupferman, the company’s chief insights and marketing officer, said the program offers good value for repeat customers at a time when families paying higher costs for basic needs may feel financially squeezed.
“So this gives them the opportunity that they can come more often,” Kupferman said. “We want our members to feel special.”
For companies concerned about churn rates, creating a fee-based loyalty program can seem like a win-win in terms of revenue. A 2020 McKinsey study found that members of paid loyalty programs were 60% more likely to spend more with the brand after signing up, while free loyalty programs only increased that likelihood by 30%.
E-commerce site Hive Brands, a startup launched in 2020, aims to be the online marketplace for eco-friendly cleaning products, toiletries and pantry items, from soup to nuts. But after discovering that customers weren’t returning as often as hoped, the company launched a loyalty program in January that costs $60 a year.
Members get faster shipping and a $120 credit for recurring deliveries. Hive also plans to tag them for priority treatment to ensure their queries or orders are handled first.
“Customer care across the board is very important to us. And so we make that quite democratic,” said Katie Tyson, co-founder and Chief Commercial Officer of Hive. “However, there are many additional opportunities that members will get at Hive in a way that non-members cannot.”
Tech entrepreneur Joseph Einhorn, the founder of Fancy, a shopping and scrapbooking site, wants to take VIP rewards to a new level with Long Story Short. The $1,000-a-month app is still in a testing phase, but hundreds of potential power shoppers have created accounts to apply for membership, Einhorn said.
Once admitted, they can view approximately 50,000 hand-selected luxury items, including rare watches and a private island. Members can also request items be purchased for them anonymously, and Einhorn’s team will serve as an intermediary to get the best price, he said.
“We are a kind of concierge,” he says. “We can get you anything and will be a buffer between you and wherever it needs to come from.”
However, as the number of loyalty programs with mass-market entry fees increases, some experts believe companies risk making customers who can’t afford them feel left out and inferior.
Alexander Chernev, a marketing professor at Northwestern University’s Kellogg School of Management, said shoppers who were previously satisfied with the customer service they received may become dissatisfied when they see others getting more.
“It’s about whether the extra benefits (…) come at the expense of someone else,” Chernev said.
Walmart has been the recent subject of social media complaints from customers who noticed a number of self-checkout kiosks reserved for Walmart+ members, who pay $98 a year for free next-day and two-day shipping on many online orders.
Walmart spokeswoman Kelsey Bohl said that during times of limited access to self-checkout, some stores have designated select self-service checkouts for Walmart+ members using the retailer’s Scan and Go app and for independent contractors who handle deliveries and returns for the chain and other stores.
“The decision is intended to better manage cash register availability,” she noted in an emailed statement to The Associated Press.
Some skeptics think paid memberships could be a way for companies to disguise cost increases or cheat their subscribers by changing program benefits later.
Anna McDonald, a senior technical writer who lives in Valparaiso, Indiana, said she’s not happy that video streaming services will start charging for ad-free viewing. She has noticed that hotels are increasingly charging extra fees for flexible reservation cancellations or skimping on providing new sheets and towels every day.
“If you provide a service, it should be full customer service,” says McDonald, 40. “There are a number of basic principles that go with that. And companies are just trying to improve the basics.”
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AP Airlines writer David Koenig in Dallas contributed to this report.