Value and savings are dominating consumer sentiment in a down year, causing a belt-tightening response that is leading more retailers and brands to lean into memberships and bundling as defense against anemic sales.
Memberships not only provide the added benefit of recurring revenue streams, but also enjoy the effect of creating deeper affinity with customers — at least when they are done well. In addition, these repeat customers typically have higher average order value and volume, which is critical at a time when inflation is squeezing budgets.
According to the PYMNTS report “The Benefits Of Membership: Mass Retailers And Subscription Services,” which surveyed over 2,100 U.S. consumers, retail membership in general is a strong indicator that a consumer will spend more with the brand to which they are subscribed.
For example, Amazon Prime members spent 113% more than nonmembers each month, while Costco and Sam’s Club members respectively spent 101% and 109% more in-store than nonmembers, the study found.
Get the study: The Benefits Of Membership: Mass Retailers And Subscription Services
Interestingly, rumors swirled this summer that Costco might be raising the price of its membership as it last did in 2017. But during its fiscal third-quarter earnings call, Costco Senior Vice President Bob Nelson said “… given the current macro environment, the historically high inflation, and the burden it’s having on our members and all consumers in general, we think increasing our membership fee today ahead of our typical timing is not the right time.”
On Wednesday (Aug. 31), widespread reports said Sam’s Club is raising memberships fees $5 a month to $50 per year beginning October 17, in what would be the first such move in nine years.
Read more: Sam’s Club Hikes Membership Fees for 1st Time in 9 Years
On Monday (Aug. 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 is $4.99 per month, but T-Mobile clearly believes consumers will see it as more valuable when bundled.
See also: Costco Keeps Hot Dog Bargain, but Membership Fee Could Rise
A recent example is news that 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 it could offer customers more value, prompting them to spend more on the company’s products and services, while providing Disney with a trove of information about their preferences.”
Looking to the majors, we’ve observed 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 true to form, sticking with essentials during that sales event.
“Walmart+ members focus more heavily than their Prime counterparts on the necessities of grocery shopping and filling up the gas tank,” per the study, finding that 43% of Walmart+ members signed up to take advantage of same-day grocery delivery, while just 13% of Prime members did the same. “Another 20% of Walmart+ members cited gasoline discounts as a motivator — a perk not offered by Prime.”
Subscribers who participated in Prime Day this summer showed they value slicker merchandise, as they long have. The study “Prime Day 2022: Inflation Hits, But Amazon Still Wins” surveyed nearly 2,200 Amazon and Walmart subscribers, finding for example that “only 23% of Prime Day shoppers bought groceries — roughly half the 45% rate of their Walmart+ Weekend counterparts. Conversely, shoppers buying electronics were more apt to do so on Prime Day (31%) over Walmart+ Weekend (24%).”
See the report: Prime Day 2022: Inflation Hits, But Amazon Still Wins
Spending Where You Belong
The power of membership rests partly on the appeal of commercial relationships where consumers feel a sense of belonging that translates into deals reserved for “members only” — a marketing tactic that rarely fails to trigger the buying reflex.
Examining this effect in the study “Relationship Commerce: Building Long-Term Brand Engagement,” a PYMNTS and Ordergroove collaboration, we surveyed over 2,800 consumers with a mix of memberships and subscriptions, uncovering superpowers of these programs.
Per that report, “subscription, membership and loyalty programs at the core of merchants’ relationship commerce strategies increase the frequency of customers’ purchases and the amount of money consumers spend on those products and services. On average, 75% of consumers with commerce relationships will buy more products from the companies they partner with, and a striking 90% who believe these companies understand their buying preferences are likely to purchase more products from them.”
Get the study: Relationship Commerce: Building Long-Term Brand Engagement
Additionally, the Relationship Commerce study found that the three primary forms that commercial relationships take — retail memberships, subscriptions and loyalty programs — are popular with consumers as 79% of respondents have at least one of these, and 17% have all three.
Merchants are equally enamored we found, for example, that “nearly eight out of 10 consumers with subscriptions buying more products from brands they have relationships with than those they do not.”
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