Every time a customer checks out at Barnes & Noble, they are asked if they are a member of the B&N membership program.

If they are, they automatically receive 10 per cent off their purchase. If not, staff will offer them a membership and ask if they would like to join to receive the discount along with other benefits.

To prevent any hesitation, staff will quickly explain to customers that the membership is only $25 a year and that the 10 per cent benefit can be applied straight away.

Customers at this point start to calculate their immediate savings to evaluate whether they feel it is worth joining the program or not.

Staff will explain that the membership fee is actually quite easily recoverable. They will articulate that the program offers customers a 40 per cent discount on hardcover bestsellers and that the initial 10 per cent also applies to magazines as well as café items, plus free shipping online.

As the staff member begins to unveil all the program details, the offer starts to demonstrate more value, and the merit of the membership increases along with the likelihood of the customer signing up.

Since the rise of Amazon, book sales have become an extremely tough business. Every bookstore has seen its own struggle to keep up with the online giant undercutting prices.

No different to other book retailers, Barnes & Noble, the largest bookseller in the United States, has seen its fair share of business transformations in order to survive.

Despite that, the Barnes & Noble membership program continues to be a key driver of engagement and sales, and staff continues to enthusiastically pitch the program to customers.

The company spends a good amount of time training new staff on the membership spiel and how they introduce the program to customers. Employees are critical to loyalty program success.

According to a company’s investor presentation, there are 6 million B&N members, who also spend twice as much per visit as regular customers and show a retention rate of over 70 per cent.

Barnes & Noble membership

Book lovers who become B&N members can immediately start to enjoy exclusive in-store and online offers including:

• 10% off on every item in-store, including magazines and cafe items
• 40% discount on hardcover bestselling books in store
• Online free shipping
• 20% discount coupons are often available online
• Early access to sales and events such as book releases and author presentations
• Birthday offers
• 10% discount on nook, B&N’s brand of tablets and e-readers
• And each bookstore often launches special promotions for their local members

How do paid memberships work?

A premium or paid loyalty program is where brands offer customers access to exclusive benefits or discounts for a one-time or recurring membership fee. Customers join because they want to enjoy those benefits. If they see the value, it helps them justify the fee whilst assessing if they can somehow earn it back.

For book lovers, spending $25 a year at Barnes & Noble would only take two to three visits, if not one. So, it is not that difficult to say yes to the membership.

Members will enjoy discounts and other benefits, but when done right, a paid loyalty program will elevate their overall experience with the brand by delivering individual high-value rewards as well as by drawing members into an exclusive community of like-minded people.

The benefit for the brand is that it generates additional revenue from membership sales. Brands gain access to member details when they sign up and open a direct channel for communications with their member base. This also facilitates engagement and a better brand experience whilst driving additional sales.

A recent survey from McKinsey found that members of paid loyalty programs are 60 per cent more likely to spend more on a brand after subscribing, while free loyalty programs only increase that likelihood by 30 per cent.

The psychology behind paid membership loyalty programs

The Barnes & Noble process to enrol new members illustrates some behavioural theories that can help explain how customers choose to act in certain ways; in this case, signing up.

When staff announces that the 10 per cent member benefit can be applied immediately to their purchase, customers see a potential win. The benefit is right there, and they can also start to see how they can “neutralise the cost” –the membership fee.

A ten per cent on $120, for instance, is a $12 win, which customers will also see going towards making up for the $25 fee. Knowing they can neutralise their $25 helps them justify the expense whilst considering signing up.

It may seem odd to allocate the savings towards recovering the $25, but when the staff said that the membership is easily recovered, the benefit was reframed. Customers don’t perceive the fee as a loss anymore. This is known as “attribute framing bias”^[1], which reflects people’s tendency to evaluate positively framed objects more favourably than the same objects framed negatively.

It is also common to see posters and danglers with member discounts throughout Barnes & Noble stores, which “primes” customers^[2]. So, by the time the staff have laid out all the benefits, customers are familiar with benefits they may have already wished to access.

Priming is a psychological technique whereby exposure to a certain stimulus may influence the response to a subsequent stimulus. That is, the first stimulus affects a person’s response to the second –it ‘primes’ them. This increases the likelihood of taking up the membership.

On the other hand, members are also likely to experience the “sunk cost effect bias”, where they will feel compelled to engage more with the bookstore to make the most of their $25.

The sunk cost effect is the tendency to continue an endeavour once an investment in money, effort or time has been made^[3]. Whilst the Barnes & Noble membership is a small investment, the sunk cost effect could result in someone visiting the store a second or third time.

One last word

Arguably, paid loyalty programs can keep members engaged and active. When compared to free loyalty programs, where no-cost means no risk to join, paid memberships are of much higher quality in the sense that members often spend more because they are more invested and committed than those not paying.

Something to keep in mind, however, is that membership programs are not for every brand and every industry. Consider the purchase cycle of customers and how often they will engage with the brand to justify paying a membership.

Most importantly, to drive a paid loyalty program such as the Barnes & Noble membership, it must have the right fee whilst making sure that members receive real value in return for their investment and commitment.

For example, looking at the pitch Barnes & Noble staff members relay day-in and day-out at the bookstore … would it work if the $25 membership fee was monthly instead of annual?

^[1] Levin, I. & Gaeth, G., 1988’, ‘How Consumers Are Affected by the Framing of Attribute Information Before and After Consuming the Product’, Journal of Consumer Research, Vol 15, pp 374-78.

^[2] Brečić, R., Ćorić, D.S., Lučić, A., Gorton, M., Filipović, J., 2021, ‘Local food sales and point of sale priming: evidence from a supermarket field experiment’, European Journal of Marketing Vol. 55 No. 13, 2021 pp 41-62.

^[3] Arkes, H. R. & Blumer, C., 1985, ‘The psychology of sunk cost’, Organizational Behavior and Human Decision Processes, Vol 35, pp 124-140.