A membership program seems like the perfect move for your cigar lounge. You’re looking forward to recurring revenue, delighted customers, and a thriving community of cigar lovers who visit weekly.
But sometimes, membership programs cost more than they bring in.
That’s why your cigar lounge membership model needs to strike the perfect balance. It has to be appealing enough to customers that they’re willing to pay — but it can’t come with so many perks that you lose money when members redeem them.
In this blog, we’ll explore how to walk this delicate line. We’ll also highlight four cigar lounge membership models, along with why they work and what to consider before launching yours.
Let’s get started!
What Type of Cigar Lounge Membership Model Is Most Profitable?
Let’s start with the most basic question: Which type of cigar lounge membership model is best?
The answer is that it depends.
All cigar lounges (and all customers) are different. If you own an upscale lounge in an affluent neighborhood, you’ll have no trouble selling premium-tier memberships — but your members might use the perks more than you’d expect.
If you offer a value-focused cigar lounge experience, you might struggle to get customers to invest in a membership at all.
That’s why we recommend tracking these key performance indicators (KPIs) as you experiment with membership models:
- Average revenue per member (ARPM): This is how much money you make from each member of your program. Keep in mind that this includes their membership fees and cigar purchases.
- Redemption rate/engagement frequency: This is how often members actually use their perks. For example, how often do humidor renters stop by your lounge? Members who visit weekly will spend much more than members who visit monthly.
- Retention rate: This represents the amount of churn in your membership program. Do members stay with you for multiple years, or do they cancel after the first billing cycle?
- Cost to serve: What does each membership tier actually cost you in perks, discounts, and operational overhead? If members get 20% off their cigar lounge purchases and their average annual spend is $4,000, your cost to serve is $800.
- Breakage rate: This represents membership perks that go unused. For example, if your cigar lounge membership comes with a $500 credit toward cigars but customers typically only redeem $50, your breakage rate is 10%.
Understanding and tracking these metrics will help you start a profitable cigar lounge membership program from day one.
Pro tip: Your cigar lounge point of sale (POS) system is your best bet for tracking your overall profitability. This powerful tool tracks your sales, inventory, and customer purchase histories in real time — giving you the data you need to make informed decisions.
4 Cigar Lounge Membership Programs To Consider
Now, let’s explore four of the most popular cigar lounge membership models. Your lounge’s program might look like a mix of these — but it’s still important to understand the pros and cons of each approach.
1. Simple Loyalty Program
Let’s start with what you and your customers are probably most familiar with: a standard retail customer loyalty program. Loyalty programs are typically free to join, making them an unintimidating option for new cigar lounges and smoke shops.
Generally, loyalty program members earn points on every purchase, and they can use these points to unlock discounts, perks like lounge event invites, or access to limited-availability cigars.
Why It Works:
- Low barrier to entry: Customers are usually open to joining loyalty programs if they understand the perks.
- Increased average basket size: A loyalty program encourages customers to purchase more cigars, especially if they’re close to the next perk.
- Simplicity: Loyalty programs are straightforward and uncomplicated, making it easy for your employees to explain and manage.
What To Consider:
- Minimal revenue boost: Unlike paid memberships with monthly or annual fees, loyalty programs don’t lock in guaranteed revenue.
- Lower stakes: Since customers didn’t pay to join your loyalty program, they’re less motivated to make purchases and chase perks.
- Technology needs: You need a cigar lounge point of sale (POS) system with built-in customer relationship management (CRM) features to enroll new members, track points, and redeem perks.
2. Tiered Access Memberships
Tiered memberships are also popular among cigar lounges. These membership models offer various perks, like discounts, premium seating access, event invitations, and first dibs on limited-availability cigars.
The more members pay, the more perks they’ll unlock. For example, a lounge’s basic tier might cost $50/year for a 10% discount on all cigars, access to premium seating, and invitations to member-only events — and the premium tier ($100/year) might include a 15% discount on all cigars plus private locker rentals.
Why It Works:
- High perceived value: The endowment effect means that customers value something more once they’ve invested in it. In other words, your cigar lounge members will visit more often to get the perks they’ve paid for.
- Steady revenue: You can count on members’ monthly or annual fees to hit your lounge’s bank account regularly, providing a constant stream of revenue.
- Motivation to upgrade: When basic-tier members see premium-tier members enjoying special perks, they’ll be more willing to pay the higher annual fee.
What To Consider:
- High operational demand: If your highest tiers include exclusive access to special seating or a coffee bar, it can be tough for your lounge’s employees to ensure the right members use the right perks.
- Stagnant basic-tier members: You have to strike the perfect balance of perks at each tier. If your basic-tier membership isn’t appealing, customers won’t sign up at all — but if you include too many perks for too little money, they’ll never upgrade.
3. Locker Rentals
Locker rentals can be an add-on perk or your cigar lounge’s main membership model. These lockers give members a dedicated, climate-controlled space to store their personal cigar collection.
Lounges generally charge a monthly or annual fee for locker rental — with added perks like a 10% discount on cigars or access to exclusive SKUs.
Why It Works:
- More frequent visits: Renters will stop by more frequently to access their locker — giving you more sales opportunities.
- Increased cigar purchases: When customers have space to store several cigars, they’re likely to spend more at your lounge.
- Predictable revenue: Customers who rent locker space provide you with guaranteed revenue.
What To Consider:
- High upfront cost: Renovating your lounge and installing humidor lockers can be expensive, so be prepared for a high upfront cost.
- Limited inventory: Since you don’t have unlimited locker space, your revenue potential is capped.
- Difficulty selling to casual smokers: Since casual smokers are unlikely to rent a locker, this model is only profitable if you have a thriving base of regular customers.
4. Credit-Based Memberships
Credit-based programs are a more unique cigar lounge membership model. Members prepay for their cigars in exchange for a steep discount — like $50 of free product or 20% off sticker price.
Credit-based memberships are great options for frequent, dedicated customers.
Why It Works:
- Improved customer experience: Credit-based memberships ensure a smooth, relaxed checkout process in your lounge — no fumbling around for their wallets.
- Guaranteed spend: Customers have already paid you, whether they use the credit on their account or not.
- Improved inventory turnover: Worried about inventory going stale? You can encourage your customers to use their credits on your slowest movers for an even better discount.
What To Consider:
- High barrier to entry: Casual smokers aren’t willing to pay upfront for their cigars, so you’ll have to focus on cigar aficionados with disposable income.
- High operational demand: While credit-based memberships can simplify the checkout process, they leave room for mistakes. Your employees have to ensure each cigar is actually charged to the right account.
- Financial instability: Breakage rate can be unpredictable, and customers might get frustrated if their credits expire or are non-refundable.
Enjoy Smoother Cigar Lounge Operations With Cigars POS
Looking for more ways to boost customer satisfaction and profitability in your cigar lounge? You need Cigars POS.
Our all-in-one tobacco POS solution is specifically designed for smoke shops and cigar lounges like yours, and it includes powerful features like:
- Secure age verification
- A built-in customer loyalty program
- Carton-pack inventory tracking
- AI-powered reporting and analytics
…and more! See how Cigars POS can take your lounge to the next level by scheduling your live, personalized demo.