Membership vs subscription vs loyalty program: which grows revenue?

What is the difference between a membership, a subscription and a loyalty program?

A membership sells belonging: customers pay a recurring fee for perks across your whole store. (Because of that fee, it is sometimes called a subscription membership.) A subscription sells a product again and again on a schedule. A loyalty program gives points for purchases that customers redeem later. They sound alike, but they earn money in different ways.

	Paid membership	Product subscription	Loyalty points program
The customer pays	A recurring fee to belong	For a product, on a schedule	Nothing
The customer gets	Perks on everything: member prices, free shipping, access	The same product, delivered again	Points to redeem later
You earn	A fee up front, plus more frequent orders	A repeat order	Nothing directly
It costs you	The perks you choose	Usually a subscriber discount	Every reward redeemed
Best for	Stores people could buy from often	Products used up on a schedule	Reaching every customer lightly

Which one grows revenue fastest?

A paid membership usually grows revenue fastest, because it adds new income and changes behavior together. The fee is revenue from the first member. The perks then give that member a reason to choose you for the next purchase, because they’ve already paid for the better price.

The other two do one job each. A subscription locks in repeat sales of a single product, which is valuable when the product is used up on a schedule. A loyalty program nudges every customer to return, but it only pays back if the points actually change how often people buy.

Consumers are open to paying. In Bond Brand Loyalty’s 2018 survey of more than 50,000 consumers, 37% said they were willing to pay a fee for enhanced loyalty benefits, up from 30% a year earlier.

When is a subscription the better choice?

Choose a subscription when customers want the same product at a steady pace and would rather not think about it: coffee every two weeks, pet food every month, razor blades every quarter. The value to the customer is convenience, and the value to you is a predictable order.

Subscriptions fit less well when customers like to choose. A wine drinker who wants to pick their own bottles, or a coffee drinker who likes to try a new roast each time, will cancel a fixed box. Those customers are better served by a membership that gives them better prices on whatever they pick. See the playbooks for coffee and wine and specialty food.

If subscriptions are what you need, apps such as Recharge and Seal Subscriptions are built for them. We’ve compared both with InCircle for the membership use case: InCircle vs Recharge and InCircle vs Seal Subscriptions.

When is a loyalty points program the better choice?

Choose a points program when customers buy too rarely for a recurring fee to make sense, or when you want something every customer joins without thinking. Points are free to join, so take-up is wide. The trade-off is that the rewards come out of your margin and the program earns nothing directly.

Points and memberships also work together: points for everyone, and a paid tier on top for the customers who want more. There’s a fuller breakdown in paid memberships vs loyalty points apps.

When is a paid membership the better choice?

Choose a paid membership when customers could buy from you several times a year and you can offer a perk worth paying for. It suits stores with a range rather than one hero product, brands with limited releases, and anyone who wants income that doesn’t depend on the next campaign.

A membership is a good fit if you can say yes to two of these:

• Customers could reasonably order from you every month or two.
• You sell more than one thing they’d want.
• You have, or could create, products worth keeping for members: limited runs, early releases, special editions.
• Shipping cost is a common reason customers hesitate.
• You’d like recurring revenue alongside product sales.

Apparel and streetwear brands are a clear example: early access to drops is a perk fans will pay for, and the fee brings in income between releases.

How do you get started?

Start with one plan, three or four perks and your existing regulars. InCircle Memberships has a free plan, which is enough to prove the idea before you pay anything. Follow the step-by-step guide: how to start a paid membership program on Shopify, or see pricing.