Nurturing customer relationships to keep users coming back for more is essential for longevity. Otherwise, you just end up on the acquisition hamster wheel, constantly chasing new customers to outpace churn.
There are two simple ways you can increase customer lifetime value (LTV): a membership vs loyalty program. We see so many Shopify brands get these two approaches confused and make the mistake of thinking they’re interchangeable. However, they’re distinct types of programs.
A loyalty program encourages customers to continue shopping on a regular basis by letting them earn points or reach a certain VIP tier, in turn gaining access to perks like free shipping, product discounts, or exclusive access.
On the other hand, a membership program is something customers often have to pay to be a part of. They get some of the same benefits by being a member, but the difference between a loyalty program vs membership program comes down to how perks are earned.
We’ll help you choose the right method for improving retention below, showing you where each program has an edge and the types of brands they work best for.
While Rivo is better known for helping brands set up their own Shopify loyalty program, our platform supports membership as well. So no matter which side of the fence you fall on, set yourself up for success with the platform built for personalization and retention today!
Overview of Loyalty Programs
Loyalty programs reward customers for engaging with your brand. Not just for purchases, although that’s definitely the top priority. Loyalty programs also encourage social engagement, referrals, or other repeat behaviors that move the needle for your brand in some way or another.
Most loyalty programs are free for customers to join. There are two main types of customer loyalty programs: points-based or VIP-tiered. Either way, the principle is the same - the more someone interacts with your brand, the more they get in return.
Common loyalty benefits include discounts, free gifts, early access to sales, birthday rewards, or exclusive product offers. The best programs feel frictionless and rewarding, and the most successful ones involve careful consideration of what rewards customers actually want.
From the brand’s perspective, this is one of the most cost-effective ways to increase purchase frequency, reduce churn, and collect zero-party data that you can use across your brand later on.
The right program also provides a clear framework for recognizing and segmenting your best customers, as we talk about in our guide to loyalty status segmentation.
Any eCommerce brand should have a loyalty program in place, but especially those with high purchase frequency - think beauty, supplements, apparel, food, etc. They’re low-lift to implement and offer incredible upside when done right.
Overview of Membership Programs
Membership programs are technically a form of loyalty program. They’re often called paid loyalty or premium loyalty programs.
At any rate, there’s a distinction between this style and all the other types of loyalty programs: customers typically have to pay to gain access to membership. In exchange, those customers get perks that aren’t available to other customers.
That could include free shipping, exclusive content, VIP-only products, or members-only events. Customers like this because they don’t have to work towards anything - they can pay upfront and immediately get the value the program has to offer.
Membership models can also strengthen retention by creating a sense of belonging or exclusivity, which is harder to replicate with points alone. Many brands also pair memberships with traditional points-based loyalty programs for the best of both worlds.
The challenge is, membership programs are a bit more complex. You need to be more thoughtful in planning and executing yours. The biggest hurdle is providing enough value to get users to pay for membership while still ensuring the program is profitable on your end.
Still, membership programs are a great option for brands with strong community appeal, deeper product catalogs, or customers who already have a high level of brand trust. That said, let’s take a closer look at the membership vs loyalty program side by side below.
Is Loyalty Program the Same as Membership?
We want to clear the air before comparing and contrasting the loyalty program vs membership program - these are NOT the same thing, though you might see them used interchangeably. We get the confusion. The two programs are related, and one falls under the umbrella of the other.
A loyalty program rewards customers for behaviors like purchases or referrals for “free.” We put free in quotation marks because customers still have to spend money to benefit from the program, but they can do so at their own pace.
In contrast, a membership program requires payment or an opt-in to access perks like exclusive products, free shipping, or early access. In this sense you can think of membership as a subset of loyalty - one that offers deeper benefits in exchange for upfront commitment.
Both share the common goal of strengthening long-term relationships with customers and creating higher LTV, but they go about it a bit differently. So which is right for you?
Loyalty Program vs Membership Program: Key Differences to Consider
Eventually you might find that your brand has both a free loyalty program (in the traditional sense) AND a paid membership program. There is some overlap, but they actually appeal to very different types of customers.
Let’s see where they differ below to help you get a better sense of whether you should get started with a membership vs loyalty program.
Cost and Barrier to Entry
The biggest difference between a loyalty program vs membership program is the barrier to entry. ANY customer can start earning rewards by engaging with your brand when you have a loyalty program in place. They earn points with every purchase.
They don’t even have to buy anything in some cases, either. You might structure your program to incentivize social media engagement, new customer referrals, or even leaving a review on your storefront. A well-structured loyalty program is frictionless in this regard.
On the other hand, membership programs often come with a cost (monthly or annual). Or, you might require customers to take specific actions to unlock access. Whatever the case, the membership program is seen as more exclusive in the customers’ eyes. That can be powerful.
However, the extra hoops that a customer has to jump through, or the financial commitment, can limit participation compared to a traditional loyalty program.
Perceived Value by the Customer
Loyalty programs build value gradually. The longer a customer participates the more value they earn as points start stacking up.
But the best loyalty programs do a good job of providing ways for customers to earn value right away, like simply signing up, liking an Instagram post, or leaving a review. The real value comes when a customer can get X percentage off an order or perhaps even a free product, though.
Memberships flip that script. Value is immediate and tangible, be it free shipping or VIP access to customer service, first dips on new products, etc. The key, like we said earlier, is making sure your membership perks feel “worth it” to justify the buy-in.
Retention and LTV Impact
Both programs are going to move the needle on retention and LTV, and in turn, revenue and profits. They go about it differently, though. Loyalty programs incentivize frequency and deeper engagement over time. Think about it like this:
A customer might have been worth $100 to you before setting up your loyalty program. But what if that customer was encouraged to keep coming back for more, and spent $250 over their life cycle instead? This would make it far easier to acquire customers profitably, knowing you’re going to make up the cost of customer acquisition on the backend.
Meanwhile, membership programs are more or less their own stream of revenue. The best part is it’s recurring revenue you can rely on as a predictable stream of income, sort of like a subscription-based loyalty program.
That’s not the case with one-time membership fees, but many brands will charge monthly or annual fees for ongoing access to membership perks. Think Amazon Prime, or in a non-eCommerce example, a gym membership.
Memberships drive commitment upfront, which can create stickier customer relationships if the ongoing value stays clear. That’s one of the biggest differences between a membership vs loyalty program.
Scalability and Operational Considerations
From an operational perspective, you’ll see an obvious edge for the loyalty program vs membership program. There are fewer moving parts to get the program off the ground and it’s easier to scale, too.
This is especially true when you set yourself up for success with the right platform for loyalty, like Rivo. Our solution integrates seamlessly with your Shopify storefront to pull in customer data so you can segment with ease.
Then, build a customized loyalty landing page. Set up actions and subsequent rewards, and you’ve got your program up and running. It’s that simple!
Memberships require more deliberate planning, including content delivery, community management, or exclusive offers. That’s not to say they’re not worth the work - just that they demand more upkeep to stay valuable.
Which Should You Start With?
The key takeaway from this guide is that there’s no right or wrong answer as to which is better between a membership vs loyalty program. Each has its place, and eventually, you might want both to appeal to all customers.
But, you should choose one or the other to get started so you don’t end up spreading resources too thin. Most brands would be best suited with a traditional loyalty program. It’s simple to launch and gives you valuable insights, some of which you could use to build a membership program down the line!
However, a membership layer can deepen relationships if you already have loyal customers and strong brand affinity - but you need to be prepared to consistently deliver on the promise, or you’ll deal with a bunch of churn.
Our blog has more tips on getting started, like how to reward customer loyalty and the various customer loyalty strategies you can implement. We also have resources on customer loyalty ladder, loyalty program management, and customer loyalty analytics.
At this point, though, it’s time to leave you with a few parting thoughts on the differences between a loyalty program vs membership program as we wrap this guide up.
Bringing Our Membership vs Loyalty Program Comparison to a Close
Loyalty and membership programs share the goal of keeping customers engaged and coming back for more. They can both be a powerful way to boost retention, revenue, and profits, helping you achieve a higher and more sustainable LTV.
The difference is in how they accomplish these goals. Loyalty programs reward behavior over time, while memberships offer instant value for deeper buy-in. One isn't better than the other, they're just built for different brand stages and strategies.
We hope you feel confident in your next steps after reading our breakdown of the membership vs loyalty program. If you’re not sure where to start, look no further than Rivo - the platform built for retention. We can show you what our solution is all about and help you tap into the full potential of customer loyalty!
