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IRUK Top500 The Customer Report: 2018

IRUK Top500 The Customer Report: 2018

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Customers who will pay for the privilege of loyalty

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Just how do retailers keep customers loyal in a fickle digital world? One answer seems to be to open a paid-for membership scheme. It may seem counterintuitive but there’s no denying that increasing numbers of internet purchasers are now signing up to subscription models of ecommerce – and paying for the privilege.

This is a trend first spotted on Amazon , with its Amazon Prime delivery scheme, offering free next day delivery, the loan of a Kindle e-book each month, and which has recently been upgraded both in scope – Amazon Instant Video is now included for free – and price: it now costs £79.

Ocado’s (pictured) launch of paid-for delivery pass and savings pass schemes was soon followed by similar schemes from rival Tesco. In the fashion sector, Asos offers its customers VIP status through a Premier membership scheme costing £9.95 a month that, it announced earlier this month, has recently been extended to the US, French and German markets.

But does charging customers to join such schemes make financial sense? Nick Robertson, chief executive of Asos says yes – because it means customers stay loyal. “I’d give it to them for free because those who use Premier,” he said, “order more frequently, return slightly less. They are more valuable customers.”

He added: “The reason you charge for it is that by paying for something they feel they’ve entered into something and will use the value of the £9.95.” The Premier scheme started life at the price of £29 a year. But as the price has lowered more people have signed up for it, and those people order more often, he said.

So although it might seem counterintuitive, it seems that the payment itself is what gives such schemes the value in the eyes of the consumer. We'll be watching with interest to see how ecommerce by subscription develops further in the future.

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