Offering lifetime discounts to your members is a powerful way to foster loyalty and growth while delivering immediate value to members.
Why offer a member discount?
Retention
Customers who feel valued are more likely to stick with your brand. By offering a lifetime discount, you are incentivizing members to become repeat customers, increasing your customer life time value (CLTV).
Brand Awareness
Lifetime discounts can lead to positive word-of-mouth, enhancing your brand's visibility and reputation. Further, the exclusive nature of the discount insulates you from eroding brand value.
Differentiation
In a market where customers are bombarded with choices, a lifetime discount can serve as a compelling unique selling proposition (USP). It sets your brand apart and gives customers a clear reason to choose you over competitors.
How to price your member discount?
There is no hard and fast rule when deciding what discount to award members. Your goal should be to offer as much value as possible to your members while ensuring profitability and brand integrity (as well as margin for future promotions).
If you price your membership discount too low, members will not see enough value in your membership. If you price it too high, you risk damaging your brand or worse, losing money on member orders.
Some of the most important considerations include:
Average order value (AOV)
Determine the average amount a customer spends in a single transaction.
Customer acquisition costs (CAC)
Calculate the total cost associated with acquiring a new customer. This includes marketing expenses, sales costs, and any other related expenditure.
Customer life time value (CLTV)
Consider analyzing historical data to understand the average duration a customer stays with your brand and their spending patterns.
In combination, these data points will give you a clear picture of the average revenue you can expect from a customer at various points in their relationship with your brand.
Analyze your profit margins to understand how much of a discount can be offered without negatively impacting your bottom line and calculate the break-even point for the discount offer. This is where the increased CLTV from retained customers offsets the reduced revenue per sale.