Subscription vs. Loyalty... Which One Should You Launch First?
- The Treue Team
- Jan 14
- 4 min read
Updated: 6 days ago
Subscription vs. Loyalty... Which One Should You Launch First?
You know you need retention. You know that keeping a customer is cheaper than finding a new one. But when you look at the software options, the terminology gets confusing.
Do you need a "Loyalty App"? Or do you need a "Subscription App"?
Many business owners think these are the same thing. They aren't. They are two completely different financial models that solve different problems. The choice comes down to one simple question about cash flow: Do you want to be paid after the customer buys, or before?
Loyalty Programs pay you after. (Reactive).
Subscription Programs pay you before. (Proactive).
If you are debating subscription vs loyalty program for your small business, this guide provides a simple decision matrix to help you pick the right one for your specific industry.
What is the difference between Loyalty and Subscription?
The difference isn't just features; it's the "Direction of Money."
1. Loyalty (The "Thank You" Model)
This is a reactive model. The customer walks in, buys a coffee, and you give them a stamp or points as a "thank you." You are rewarding past behaviour to encourage a future visit.
Goal: Increase Visit Frequency (nudge them to come back).
Cash Flow: Variable. You only make money when they decide to visit.
2. Subscription (The "Club" Model)
This is a proactive model. The customer pays you a flat fee upfront (e.g., $20/month) for access to perks or products. You are securing future revenue today.
Goal: Secure Recurring Revenue (lock them in).
Cash Flow: Predictable. You make money on the 1st of the month, whether they visit or not.
Comparison Table: Membership vs Loyalty Program Difference
Feature | Loyalty Program | Subscription / Membership |
Cost to Join | Free | Paid |
Revenue Type | Variable (Transactional) | Recurring (MRR) |
Psychology | "Earn" (Gamification) | "Access" (Status/Convenience) |
Best For... | High Frequency, Low Ticket | High Service, High Ticket |
I run a [Cafe/Salon/Retail Store]. Which one is for me?
To decide, use the Frequency/Value Matrix.
Scenario A: The Cafe (Low Ticket + High Frequency)
Verdict: Launch Loyalty First.
Why: Asking a customer to sign a contract for a $5 coffee is a high barrier to entry. A "Buy 10, Get 1 Free" model lowers friction and gamifies a habit they already have. Unless you have high volume, managing a coffee subscription can be operationally complex.
Scenario B: The Salon / Auto Shop (High Ticket + Maintenance)
Verdict: Launch Subscription First.
Why: Customers hate paying $80 for a haircut or $150 for a service. It hurts. They love paying $25 a week for "Unlimited Maintenance." It flattens the cost and removes the "payment pain," making it the best retention strategy for salons.
Which one makes more money? (The LTV Calculation)
Both increase revenue, but they do it in different ways.
Loyalty Programs: The "Nudge"
A good loyalty program typically increases revenue by 12-18%. It works by "nudging" a customer who visits 3 times a month to visit 4 times a month to unlock a reward. It prevents churn, but it doesn't guarantee revenue.
Subscription Programs: The "Lock"
A subscription model can increase Customer Lifetime Value (LTV) by 5-7x.
Why? Because a subscriber is contractually obligated to buy from you.
The "Breakage" Benefit: A loyalty member might skip a month because they are on holiday. You earn $0. A subscriber pays you $50 on the 1st of the month whether they visit or not. This "breakage" (revenue without service cost) is pure profit margin.
Can I transition from Loyalty to Subscription later?
Yes. In fact, this is the "Golden Path" for most businesses. Launching a paid subscription to cold customers is hard. They don't know if you are worth it yet. Instead, use the "Net & Spear" Strategy:
The Net (Loyalty): Launch a free digital loyalty program first. Use it to build a database of 1,000 regulars and track their spending habits.
The Spear (Subscription): Use your data to identify the top 10% of customers (your "Whales"). Send only them an invite to upgrade to a paid VIP Membership.
You use the loyalty program to find the customers who are ready for a subscription. This minimises your risk and maximises your uptake.
Conclusion: Cash Flow vs. Frequency
If you need to get more feet through the door today, launch a Loyalty Program. It removes friction and gamifies the experience.
If you have regulars but need to fix your cash flow roller coaster, launch a Subscription. It guarantees your income on the 1st of the month.
Can't decide? You don't have to. Treue is the only NZ platform that lets you run both a Loyalty Program AND a Subscription Club from the same dashboard. Start your free trial today.
Want to read more?
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