Retailers Battling Goliath Adopt Loyalty Programs

Black Friday marked the start of the holiday retail season and shoppers are hawk-eyed for upcoming bargains as retailers open the floodgates with blockbuster deals and coupons. But for retailers, can coupon redemption become too much of a good thing?

Woman Reading Shopping List From Mobile Phone In Supermarket

For Bed Bath & Beyond, that turned out to be just the case. “Coupon redemptions have squeezed the retailer’s margins for the past 15 quarters, according to UBS analysts. The company’s shares have fallen about 25% during the past year,” reports The Wall Street Journal.

Bed Bath & Beyond is known for frequently distributing coupons good for 20% off almost any item allowed. But this has led to a downside, with consumers likely to hold off on purchases until receiving their next coupon, reports Business Insider.

Driving more profitable growth

Does this mean the home-goods retailer is ready to ditch its coupons? While Bed Bath & Beyond isn’t abandoning coupons altogether, it has recently released Beyond+, a beta membership model offering customers a $29 a year subscription that includes a 20% discount on all purchases and free shipping. “The paid subscription aims to generate other streams of revenue, increase customer loyalty, improve margins and better compete with Amazon.com Inc.’s Prime membership program,” reports The Wall Street Journal.

Amazon, the goliath of online shopping, has had enviable success with Amazon Prime. “Roughly 49 million American households, or 44% of households in the US, have Prime memberships, according to Cowen & Co. data.  That’s nearly triple the number that had subscribed in 2012,” reports Business Insider, noting that traditional brick-and-mortar stores are seeking to emulate its success model.

And for good reason. “Once a customer is enrolled in a great loyalty program, such as Amazon Prime, they become far more likely to first turn to that retailer to meet their shopping needs,” Jared Wiesel, a partner at consulting firm Revenue Analytics, told Business Insider.

There’s also that not-so-little matter of data. “When a customer signs onto a retailer’s app, the retailer is able to garner a wealth of customer-specific information—everything from when a customer shops, to what they click on, to what they ultimately purchase,” Wiesel added. “Outside of the cash in the register, data is perhaps the most valuable currency for retailers today. The best retailers are tracking customers’ shopping behaviors and purchase trends at a very detailed level and using this information to inform business decisions that drive profitable growth.”

Testing the loyalty waters

Target, Kohl’s and CVS are also getting in on the act and have come out with “revamped, app-centric loyalty programs in the last year,” reports Business Insider, adding that Kohl’s has recently “launched Kohl’s Pay, a mobile payment option in the retailer’s mobile app that is linked to customers’ Kohl’s Charge card. The app is also home to Kohl’s electronic coupons program, Kohl’s Cash, and the Yes2You Rewards loyalty program.”

Additionally, “With programs like Beyond+ and Kohl’s Pay, retailers are aiming for all-encompassing convenience that bridges online and in-store purchases. From free shipping to speeding up check-out with in-app payment, these adjustments aim to draw in customers by doing away with roadblocks that were once simply part of shopping,” adds Business Insider .

‘Shape-shifting’ loyalty programs

“Programs are shape-shifting,” according to an article in Forbes. “Walmart’s Savings Catcher app does not issue cards or memberships, but make no mistake—it is a loyalty program in all but name. First, the app enables Walmart to personally identify its customers in much the same way as a rewards program, and second, it provides Walmart with the data and a mechanism (the app) to deliver personalized offers to its shoppers, improving its chances of earning their loyalty for features that extend beyond price.”

Optimizing loyalty programs

It’s no secret that loyalty programs can offer retailers many advantages. But even if a retailer already has one, how does it know if it’s truly delivering? Is the program driving incremental revenue? Is social media being effectively used to create deeper customer relationships? Does the program uncover significant and attainable growth opportunities that can improve the customer experience? And, is it innovating faster than its competition?

Periodically assessing and benchmarking an existing loyalty program will help retailers maintain a competitive advantage, determine if objectives are being supported, and ensure their program is providing enhanced value to members and contributing to the bottom line.

That’s why at east|west marketing group we’re committed to helping loyalty marketers stay focused in their approach as they need to constantly evolve their programs to meet the new demands of today’s consumers.

e|wmg experts on loyalty strategy and program development utilize a proprietary Loyalty Program Optimizer (LPO) that provides comprehensive analysis of an existing loyalty program by reviewing the program’s strategy, technology effectiveness, core economics and metrics, partnerships and the competitive environment.

e|wmg’s CEO Lou Ramery, who helms our LPO, has also designed, enhanced, implemented and managed many of the largest and most successful loyalty programs in the world, including: AT&T True Rewards, Barnes & Noble Readers Advantage, Charles Schwab Signature Services, Delta SkyMiles, FedEx Business Advantage, GM Lease Loyalty, Hertz #1 Club Gold, Intercontinental Hotel Group Priority Club Rewards, Microsoft Small Business Solutions, Neiman Marcus InCircle, Sears and Kmart ShopYourWay Rewards and United Airlines MileagePlus.

Are you ready for a concise check-up on the critical elements of your loyalty program’s performance? If you would like learn how to best optimize your loyalty program, contact Lou Ramery at 212-951-7220 ext. 126 and get started today.

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