JIO
A
Choosing a membership model for AJIO, an e-commerce brand dealing in fashion and lifestyle products
Overview
Ajio wants to implement a membership model, like that of its piers -Amazon, Flipkart, Myntra, etc. But which type of model will be best suited for it in order to achieve minimum drop off rates and maximum customer retention, and also upscaling the business metrics simultaneously.
Duration
48 hours Quick research
Competitor Analysis
Amazon -Paid membership
Flipkart -Loyalty based membership
Myntra -Loyalty based membership
User Interviews
To understand what the public is expecting, I conducted primary research via user interviews. Through the interviews I want to know
online shopping habits of users.
their awareness as well as perspective about membership
programs.
willingness to engage with membership programs as well as their take on brand loyalty and trust
users’ expectations as well as feedback
General Questions (To understand interviewee’s online shopping habits & preferences)
How often do you shop online
What types of products do you usually buy online
What are the most important factors for you when deciding where to shop online?
Have you ever been a member of an e-commerce membership program? If yes, how was your experience
What are the most important benefits that you would look for in an e-commerce membership program?
Specific Questions for the Paid Membership Model (To understand if there is a sufficient market for a paid program)
Would you be willing to pay a monthly subscription fee for an e-commerce membership program? If yes, how much
What benefits would convince you to pay a monthly subscription for a membership?
Specific Questions for the Loyalty-Based Membership Model
Would you buy more from an online store to achieve membership status? If so, how many more purchases would you be willing
to make
What benefits would motivate you to make additional purchases for a loyalty program?
Conducting the Interviews
Given the time constraint, I could not interview a lot of people. So in order to gain maximum insights, I decided to choose two people from diverse backgrounds.
37 y/o Female aunty
Age:
Occupation:
Location:
Any other relevant information
Shweta has been shopping online for 6 years, starting after her marriage. She shops online once every month or
two. Her main purchases include jewellery and kitchen appliances.
She primarily uses three shopping platforms: Amazon, Meesho, and occasionally Flipkart. She has a strong trust in
Amazon due to the quality of their products. While she has used Flipkart and Meesho, she stopped due to quality
issues with some items.
She pays delivery charges every time and is okay with it. She mentioned, "I have no issue with the extra charge;
I'm happy to receive items at home." Her priorities are the quality of items and doorstep delivery.
She was initially unaware of membership programs. After an explanation, she seemed to like the idea of a paid
membership but appeared confused at times.
Upon learning about the loyalty-based model, she showed interest & said, "In this model, I don't need to pay
extra, and anyway I don't require faster delivery so this is more suitable for me".
37 y/o Female aunty
Age:
Occupation:
Location:
Any other relevant information
Vipin shops online quite frequently, almost on a daily basis, especially for everyday essentials.
He usually buy everyday groceries, food, clothes, and accessories online.
Trust is crucial for him. If he doesn't trust the platform or the authenticity of its items, he won't buy from there
He has been a member of a few e-commerce membership programs like Amazon Prime, Swiggy One, etc. & liked them as they made his life easier.
He values convenience over everything. Also appreciates exclusive offers and early access to sales or new products.
He's cool with paying for a membership if it's worth it. It's all about the value and making things convenient. Some of perks he is looking for in paid model are: quick, free deliveries, special discounts, early access to sales, and premium customer support
He'd shop more to get into a loyalty program. But again, it's got to be worth it. It should atleast provide some member only perks (like stylist in Myntra) along with quick & free deliveries.
Above all, he's big on genuine products.
Interview Insights
Both users were interested in e-commerce membership programs, but they had different preferences in terms of the benefits that they would look for and the price that they were willing to pay.
User 1 was more price-sensitive and was looking for a program that offered good value for money and benefits that were relevant to her needs. This suggests that Ajio may want to consider offering a free membership option with limited benefits, or a paid membership option with a lower price point.
User 2 was more willing to pay for a monthly subscription and was looking for benefits such as exclusive discounts, free & quick shipping. This suggests that Ajio may want to consider offering a paid membership option.
Both users valued exclusive discounts & genuineness of product.
In addition to these specific insights, I also gained a general understanding of the users' motivations for using e-
commerce membership programs. Both users were looking for a way to save money on their online purchases and
get access to exclusive benefits.
Desk Research
A paid membership model works well if the business has a strong reputation and operates on a large scale, similar to Amazon. Amazon offers a variety of products, ensuring that customers make regular purchases and benefit from their membership model. People use Amazon's membership not only because of its product variety but also because it offers additional services under the same membership like Amazon Primes, Amazon Music, Kindle, etc. If Ajio can provide unique benefits similar to what Amazon offers, then a paid membership would be suitable.
https://blog.smile.io/loyalty-case-study-amazon-prime/
The most popular benefits offered by e-commerce membership programs include exclusive discounts, early
access to sales, and free shipping. Consumers are generally willing to pay for e-commerce membership
programs, but they are more likely to join a program that offers good value for money and benefits that are
relevant to their needs.
https://medium.com/@jumperai/11-best-loyalty-programs-for-ecommerce-brands-1844da0b44af
Although some consumers are willing to pay for premium memberships, as seen with services like Amazon
Prime, a significant majority, over 83%, indicate that being part of a loyalty program influences their
repurchase decisions. This suggests that while there's a market for paid memberships, the appeal and
potential reach of loyalty-based programs are considerably broader, catering to a wider audience who value
brand relationships without the upfront cost.
https://queue-it.com/blog/loyalty-program-statistics/#how-effective-are-loyalty-programs
A survey by KPMG found that loyalty programs can increase customer spending by up to 15% in India. This is
because customers are more likely to shop with a brand that offers them rewards and discounts It will also
lead to increase in customer engagement.
https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2019/11/customer-loyalty-report.pdf
In emerging economies like China (Percentage of consumers who make purchases that earn rewards/benefits at least several times a week is 54%), Mexico (50%), and India (49%), points and rewards programs are
more popular. The percentage of consumers in India who make purchases that earn rewards/benefits at least
several times a week stands at 47%.
https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2019/11/customer-loyalty-report.pdf
Option 1: Paid Membership
Users pay ₹299 per year to receive membership benefits.
Membership Benefits: Users of Ajio could enjoy benefits such as/
? Exclusive access to new collection7
? Special discounts on selected item7
? Express DeliverE
? Early bird access to sales and event7
? Members-only fashion and style content
Pros
Cons
More valuable than non-paying members
https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/coping-with-the-big-switch-how-paid-loyalty-programs-can-help-bring-consumers-back-to-your-brand
Members of paid loyalty programs are 60% more likely to spend more on the brand.
https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/coping-with-the-big-switch-how-paid-loyalty-programs-can-help-bring-consumers-back-to-your-brand
https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/coping-with-the-big-switch-how-paid-loyalty-programs-can-help-bring-consumers-back-to-your-brand
Businesses can collect valuable data about their members, such as their purchase history, product preferences, and demographics. This data can be used to improve the shopping experience for members and to develop targeted marketing campaigns.
https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/the-big-reset-data-driven-marketing-in-the-next-normal
Paid members are more likely to engage due to their investment.
https://loyaltylion.com/blog/the-pros-and-cons-of-paid-loyalty-programs
Memberships are paid and offer immediate exclusive rewards.
https://rechargepayments.com/resources/the-ecommerce-membership-advantage/#::text=Memberships%20are%20paid%20programs%20that,the%20cost%20to%20sign%20up.
Some users may be hesitant to sign up for a paid membership program, even if the benefits are attractive. This is because they may not be sure if they will use the benefits enough to justify the cost.
https://medium.com/@jumperai/11-best-loyalty-programs-for-ecommerce-brands-1844da0b44af
If members do not feel that they are getting value from their membership, they may cancel their subscription.
https://medium.com/@jumperai/11-best-loyalty-programs-for-ecommerce-brands-1844da0b44af
A paid membership model may be less effective for certain products, such as low-cost items or items that consumers do not purchase frequently.
https://www.themediacaptain.com/ecommerce-loyalty-statistics/
Implementing a paid membership program can require a significant investment of time and resources. This is because the business needs to develop and implement the program, as well as market it to potential members.
https://medium.com/@jumperai/11-best-loyalty-programs-for-ecommerce-brands-1844da0b44af
Managing a paid membership program can be complex and time-consuming. The business needs to track member subscriptions, manage billing, and provide customer support
https://medium.com/@jumperai/11-best-loyalty-programs-for-ecommerce-brands-1844da0b44af
Option 2: Loyalty-based Membership
Users attain membership after making at least 4 orders within a year. Direct membership purchase isn't
available.
Membership Benefits: Users of Ajio could enjoy benefits such as
D Exclusive access to new collection5
D Special discounts on selected item5
D Express Deliver/
D Early bird access to sales and event5
D Members-only fashion and style content
Pros
Cons
Loyalty points programs are free and reward customers for specific actions.
https://rechargepayments.com/resources/the-ecommerce- membership-advantage/ #:~:text=Memberships%20are%20paid%20programs%20that,the%20cost%20to%20sign%20up.
Can lead to increased conversions and customer retention. 81% of shoppers stay loyal to businesses with loyalty programs.
https://redstagfulfillment.com/ecommerce-loyalty-programs/
Is more inclusive than paid membership programs because it will be open to all customers, regardless of their income level. This can help businesses to attract a wider range of customers.
https://queue-it.com/blog/loyalty-program-statistics/#how-effective-are-loyalty-programs
Less expensive to implement and manage than paid membership programs. This is because businesses do not need to charge their members a subscription fee.
https://medium.com/@jumperai/11-best-loyalty-programs-for-ecommerce-brands-1844da0b44af
Can help attract new customers with points or discounts.
https://www.loyaltyxpert.com/blog/the-impact-of-loyalty-programs-pros-and-cons/
A frequent buyer might just be purchasing for convenience or for the rewards.
https://www.loyaltyxpert.com/blog/the-impact-of-loyalty-programs-pros-and-cons/
Customers' needs and lifestyles can change, affecting their buyingpatterns.
https://www.loyaltyxpert.com/blog/the-impact-of-loyalty-programs-pros-and-cons/
May not be as effective at increasing revenue as paid membership programs because businesses do not charge their members a subscription fee
https://loyaltylion.com/blog/the-pros-and-cons-of-paid-loyalty-programs
Can be more difficult to manage than paid membership programs because businesses need to develop and implement a rewards program, as well as track member activity and redeem rewards.
https://medium.com/@jumperai/11-best-loyalty-programs-for-ecommerce-brands-1844da0b44af
May be less effective for certain products, such as low-cost items or items that consumers do not purchase frequently
https://medium.com/@jumperai/11-best-loyalty-programs-for-ecommerce-brands-1844da0b44af
Final Conclusion
I finally conclude by saying that
Option 2: Loyalty-Based Membership
is the most viable option for Ajio.
Reason 1
Loyalty-based membership programs are more inclusive. As mentioned earlier, loyalty-based membership programs are open to all customers, regardless of their income level. This is important because it allows the company to attract a wider range of customers, including the
growing middle class in India
Validation
Although some consumers are willing to pay for premium memberships, as seen with services like Amazon Prime, a significant majority, over 83%, indicate that being part of a loyalty program
influences their repurchase decisions.
https://queue-it.com/blog/loyalty-program-statistics/#how-effective-are-loyalty-programs
Reason 2
Loyalty-based membership programs are easier to promote. Ajio does not need to convince potential members to pay a subscription fee with a loyalty-based program. Instead, they can simply focus on the benefits of the program, such as exclusive discounts and free shipping. It will Ajio to get more customers to sign up for the program.
Validation
In emerging economies like China (54%), Mexico (50%), and India (49%), points and rewards
programs are more popular. The percentage of consumers in India who make purchases that earn rewards/benefits at least several times a week stands at 47%
https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2019/11/customer-loyalty-report.pdf
Reason 3
It can lead to increased customer spending. They make customers more likely to shop with the merchant that offers the program because they want to earn rewards and redeem them for
products and services.
Validation
This survey found that loyalty programs can increase customer spending by up to 15% in India. This is because customers are more likely to shop with a brand that offers them rewards and
discounts.
https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2019/11/customer-loyalty-report.pdf