What makes a shopper more loyal? It may be less commitment.
This is one of the takeaways from the revamping of Nordstrom’s loyalty program, The Nordy Club, which doesn’t require members use a Nordstrom credit card to participate. The loosening of rules recognizes that if a retailer wants to keep its shoppers engaged through its loyalty program, then the program has to change.
Nordstrom is not alone in recognizing the reality that if a retailer is to be serious about its loyalty initiative, then it must evolve that proposition along with all other core operations, from merchandising to advertising. Several retailers are updating their programs, in part or in whole, to regain relevance with shoppers. Among them:
Victoria’s Secret upgraded its Pink Nation program aimed for college students to be more community minded. Central to its effort is the launch of a redesigned app that, in addition to offering games and access to exclusive events, is a platform for members to connect with on-campus brand ambassadors. Included will be a tab called “Campus” that serves as a media hub of college life, from dorm-room transitions to cramming for midterms and job searches.
PetSmart’s new app-based loyalty program, cleverly called Treats, rewards members eight points for each dollar spent, plus issues points for using its grooming and other services as well as for donating to PetSmart Charities. Members earn bonus points for activities such as updating their profiles, and get free surprises on their pets’ birthdays (encouraging pet-accompanied in-store visits). Points can be redeemed directly at the register. This layering of benefits is an enrichment that could translate to bigger dividends than points.
Young adult apparel chain Abercrombie & Fitch is making its year-old loyalty program, the A&F Club, a key component of its plan to regain sales and market share. Specifically, it is using the program as a tool to get closer to its shoppers. In July, the chain partnered with the global hospitality firm SBE, operator of 22 lifestyle hotels including the Mondrian Los Angeles and Redbury New York, to provide Club members access to special benefits at SBE’s properties. For example, Abercrombie & Finch launched its new denim collection at the Mondrian, inviting club members to get a first look at, and try on pieces of, the line. These specialized perks are attracting shoppers — A&F Club counts about 5 million members, and Abercrombie’s loyalty members spend 1.5 to two times more than a non-loyalty member, the company has said.
Nordstrom’s The Nordy Club allows members to pay however they want, which opens up the benefits to those shoppers, many of whom are young, who do not want to apply for a Nordstrom credit card. Members gain higher status the more they spend, and with higher status comes greater rewards, including entry to invitation-only shopping events, exclusive services such as free alterations and access to beauty and style workshops.
None of these changes will resonate with members, however, if they do not respond to (or anticipate) the factors that are altering shopper behaviors in the first place.
80% Want It Now
Key among these behavior-altering factors is the disintegration of the physical advantages that once caused consumers to choose one retailer over another, thanks to the ease of digital shopping. Eight in 10 shoppers are prone to buy whatever it is they need at the moment they see it, regardless of where they are, according to research by WSL Strategic Retail.
This buy-on-the-fly mentality, and freedom, has put rewards programs to the test. Once seen as a distinguishing factor among brands, rewards programs are now as prevalent as shopping websites. They can, however, become tools that attract shoppers from buying “wherever they are” to buying where they feel they get the best value and experience.
Here are three factors retailers have to consider when revamping their loyalty programs — if they want their programs to matter among shoppers.
1. The odds of engagement are against the current loyalty model.
The number of U.S. loyalty program memberships has climbed to 3.8 billion, according to the 2017 COLLOQUY Loyalty Census. Of them, 1.6 billion are in retail. Yet less than half of all programs, 46%, are active. Worse, 28% of reward members dropped a program before redeeming a single point or mile. Members said the programs that keep them engaged are:
- easy to use
- easy to understand
- deliver great, personalized discounts
More than half of those surveyed said they left programs that did not offer rewards of interest, or that required too much time to earn rewards.
2. Loyalty programs that are treated like bolted-on brand features will fail.
Like store planning and merchandising, loyalty programs should be treated as fluid organisms that evolve with shopper needs and preferences. This means operating them like other core components of the overall brand experience. If the merchant launches a shopping app, then the rewards program should be a high-profile assistant in that app. If it introduces new store concepts, perhaps with special services such as cooking classes or styling workshops, the rewards program should include some of those benefits with its perks. And the merchant should keep an eye out for co-brand opportunities its shoppers would love, as Abercrombie has with SBE. Each year the retailer should answer this question: Is our program fresh and compelling enough?
3. "Location, location, location" is no longer a thing.
As that 80% “buy anywhere” figure from WSL Strategic Retail drives home, shopper choices are no longer limited to physical space. Even if the drug store is two doors away from her office, a shopper may still opt to buy lipstick online (and even get it the same day). The elements that will cause her to leave the office, or choose one online brand over another, can be quite small, but they resonate. A rewards perk that is time-sensitive, such as the weekly happy hours Starbucks Rewards offers its members, not only triggers a sense of urgency, it tells the member she is special.
Lastly, if retailers want their loyalty programs to matter to shoppers then they have to commit to them fully and operate them like they are central parts of their overall brand propositions. If a retailer is not that committed, then it should reconsider why it has a loyalty program at all. It’s just likely to become one of 54% that shoppers forget about.