Department Stores: Still Loyal to Loyalty Programs
By L2 | 23 July 2013
Loyalty programs have long been part of the Department Store experience. While these programs are still marketed as an incentive for the shopper, they are also very valuable to the stores themselves–much more valuable today than they were before the digital age. In our new Digital IQ Index®: Department Stores report, we looked quantitatively and qualitatively at the state of loyalty programs for the top 40 global retailers in the industry. The consumer data collected through loyalty channels, which in many cases touches on browsing and buying behavior both online and in-store, not only provides enormous profiling insights but can also help stores better develop tailored CRM strategies.
Despite a steady drop-off in department store sales over the past decade (due to factors we’ve discussed at length in other posts), 30 percent of shoppers still participate in at least one Department Store loyalty program. Among the 40 we analyzed, 38 percent offer a non-credit card transactional option and 60 percent offer a branded credit card. Of the non-credit card programs, 60 percent host the program on the store’s primary site, while 40 percent send users to a separate microsite. Two-thirds promote program sign-up
during the online checkout process, and some, like British retailer House of Fraser, hit shoppers from above as well with a large banner ad. Others like Bloomingdale’s, take a more subtle approach, simply prompting Loyallist program members to enter their membership information just prior to purchase confirmation. Once logged in to Holland retailer de Bijenkorf’s site, Bijenkorf Card members can see on-screen throughout the entire shopping process how many membership points they have accrued. To incentivize sign-up, most stores go beyond just advertising: sign-up bonuses range from free points (e.g., 5,000 InCircle points for Neiman Marcus and Bergdorf Goodman card members) to free gifts to single item discounts.
For the majority of stores and brands, across all industries, loyalty programs provide the richest data available on who their consumers are, how they shop, and what they like and don’t like. One thing we do know with certainty is that people still like to shop in-store. They like browsing online with their various devices and they may even prefer buying online, but they also want access to the physical store. Marketing loyalty programs as an omnichannel experience–in an omnichannel fashion–using both brick and mortar and the various web properties to sell program membership and integrate on- and offline membership benefits is the most effective way for department stores to leverage their strengths and best serve their shoppers. Perhaps the best role model for this kind of approach is Sephora, the lone digital Genius that topped the ranks in our recently released 2013 Digital IQ Index: Specialty Retail report.