The latest innovation in c-store loyalty

Loyalty expert Paula Thomas explains how subscriptions, when executed well, can benefit both consumers and retailers alike.

Driving customer loyalty in fuel & convenience retail has never been more important. While many of the world’s top convenience brands have invested in powerful loyalty programmes for many years, ironically it has been the global pandemic of 2020/2021 that has really showcased the potential of loyalty programmes to connect with customers and help these brands capture the greatest share of customers in the current distressed market.

Historically, retailers relied on simple stamps, points, games and rewards to connect and engage with their customers – originally in physical form as plastic loyalty cards and paper catalogues, but increasingly, retail loyalty programmes are proudly delivered in digital form only, saving time and cost for retailers while delighting environmentally-conscious customers too.

With this challenging context, it has been incredibly exciting to watch an entirely new model emerge for loyalty programmes worldwide in the fuel and c-store industry. Subscriptions.

Already a popular business model for digital brands such as Amazon Prime and Netflix, the subscription model has proven an unexpected success driving loyalty for convenience retailers, particularly coffee retailers and car wash operators, providing certainty for both retailers and consumers in these exceptionally uncertain times.

In this article, we’ll share some compelling case studies as well as some of the powerful results that we’re seeing in the fuel and convenience retail sector, who are enjoying the impact of the subscription model to drive “extreme loyalty” in these uniquely challenging times.

So firstly, why subscription?

There are a number of powerful reasons that “subscription” programmes have emerged in our industry. In these unprecedented times, when executed well, the model benefits both consumers and retailers alike. Here are the benefits for each:

From a consumer’s perspective:

Customers want to buy their coffee or wash their car as quickly and as easily as possible. By subscribing to a coffee or car wash package, they don’t need to queue in store to pay for their coffee or collect their car wash code. The subscription approach makes their store visit so much faster, and brings true convenience.
Customers love the idea of "unlimited" benefits from their subscriptions with Amazon and Netflix, so unlimited coffee or car washing for one fixed monthly payment is hugely re-assuring.

From the retailer’s perspective:

As well as the monthly fee which ensures monthly recurring revenue, subscribers are known to spend on impulse when pick up their coffee in a convenience store or wash their car, so there are significant cross-sell and up-sell benefits from subscribers.
More importantly, a subscription program allows retailers to set targets for 100% share of their customers “wallet" when it comes to their monthly coffee or car wash spend, as no subscriber will ever go to competing store once they've subscribed to one. This measurably increases the lifetime value of each customer, resulting in "extreme loyalty".
While retailers in the past had no reason to expect that customers would want 100% contactless solutions so soon, given Covid19 concerns, subscription products have now become an important way that retailers are helping customers to enjoy their coffee or car wash service safely and easily by simply scanning a QR code, so no touch is needed.

Case Studies of Innovation

Subscription Driving Loyalty in Coffee

Retail coffee brands all over the world are adopting the subscription model, so here are our favourite examples of this innovative model from around the world that you can be inspired by. Subscription loyalty programmes (or tiers) are now available across the USA, UK and Scandinavia, with South Africa and Australia also seeing examples emerging.

Panera Bread is a bakery and café chain with over 2,000 locations in the United States and Canada. In February 2020, the chain announced the launch of an unlimited coffee offer for $8.99. The chain was previously best known for its soups, salads and sandwiches but like many other brands, it wanted to grow its breakfast business and loyalty programme membership.

Panera did comprehensive customer research before launching its subscription model, including a trial with 150 cafes over three months and the results they published were sensational. Here are some of them:

During their tests, the frequency of visits by subscribers increased by more than 200 percent.
Almost 70 percent of coffee orders also included food.
The subscription renewal rate was between 90% to 95%.

Panera also disclosed that about 25% of coffee subscriptions in their tests were for NEW rewards programmme members and that the majority of them were also new to dining at Panera, meaning the programme pulled in brand new customers as well as new members.

Our second favourite example comes from a company called Pret-a-Manger that operates mainly in the UK as well as other intensely competitive markets. It’s interesting to note that this brand is owned by the same parent company as Panera Bread, so we can safely assume that there was plenty of operational data and insights shared between them before “Pret a Manger” launched its subscription loyalty programme.

Pret in the UK does not have a traditional loyalty programme, so it said it was using the new subscription model to help it survive the coronavirus crisis, as it, like many café chains, was badly affected by the pandemic.

Pret was the first UK high street café to offer a subscription option, with a package of up to five barista-crafted coffees per day for just £20 a month. In Pret’s UK stores, a latte typically costs about £2.40, so the subscription package makes sense for anyone expecting to enjoy more than two espresso-based drinks a week - just a fraction of many people's previous daily consumption.

Our third favourite example is a Scandinavian brand called “Espresso House” which operates across five countries, and it has launched its subscription package in all five. In fact, we also loved learning that Scandinavia is the region of the world that drinks the MOST coffee per person – someone in Finland typically drinks three times more coffee every year than someone in the United States!

Espresso House is also owned by Jab Holdings – the same holding company as Panera Bread and Pret a Manger. It has priced its subscription package at €14.90, with unlimited drinks every month and just one condition that a time gap of one hour is needed between each drink to ensure subscribers are not sharing their drinks with others. Their subscription model was launched in December 2020 so we will look forward to watching its performance over time.

Case Studies of Innovation and Subscription in Car Wash

Finally, this is our favourite case study as it demonstrates the power of the subscription model to drive loyalty in the competitive car wash market.

It’s based on our own work with Circle K, the Canadian company that is best known for its extraordinary scale across the US and international markets.

With more than $54 billion in sales in its 2020 fiscal year, as well as its global network of fuel and convenience stores; it is also widely respected as the world's largest car wash network with 2,750 locations across Europe and North America.

In recent years, Circle K conducted a thorough evaluation of the subscription model, with plenty of internal debate and business modelling, and now the brand leads the global car wash industry with a subscription car wash concept in Denmark, Canada and North America.

Given the differing needs of loyal customers in each market, Circle K launched different subscription models products. For example, in Canada, customers can choose from three different packages of unlimited washing. Their app gives customers the ability to upgrade or downgrade their subscription at any time, and behind the scenes, the Circle K team enjoys the automatic monthly billing and manages the pricing and promotions.

With the consumer subscription product selling well and enjoying high retention rates, the Circle K global team is now also testing new multi-user loyalty concepts such as family plans and business plans. Once again, Circle K is the first car wash retailer in the world to launch these innovative loyalty products.

So, what are the learnings from these exciting case studies?

Despite the challenges of the current market, retailers are delighted with the results of their subscription programmes. While the fuel category suffered double digit decline for many brands during the Covid19 lockdown in certain markets, subscription-based businesses did not suffer nearly as much, with subscribers proving considerably more loyal to the brand throughout.

While plenty of analysis and modelling is required to package and promote your products in a way that provides value to both your business and your customer, in our view, this extra-ordinary model offers a highly innovative way to enjoy “extreme loyalty” and increase the lifetime value of your customers – at a time it’s needed more than ever.

Paula Thomas has her own podcast for loyalty marketing professionals ‘Let’s talk loyalty’, and is the Chief Content Officer of Liquid Barcodes. They recently published an entire book on “subscription” as the most innovative approach to loyalty. Access here.