For­get air­line miles. Re­tail­ers pile on perks for big spenders

New loy­alty pro­grams go be­yond dis­counts with spe­cial ser­vices and pri­vate events

The Peterborough Examiner - - Business - SUZANNE KAPNER

Elite AmEx cus­tomers carry the Black Card. Soon, Nord­strom Inc.’s top shop­pers will be granted “icon” sta­tus.

Af­ter years of com­pet­ing for shop­pers with dis­counts, re­tail­ers are try­ing a new ap­proach head­ing into the key hol­i­day sea­son: woo­ing their big­gest spenders with spe­cial ser­vices and ac­cess to pri­vate events.

Nord­strom’s re­vamped loy­alty pro­gram, which will launch this fall and in­cludes more than 10 mil­lion ac­tive mem­bers, has a new cat­e­gory to fete top spenders: in­vi­ta­tion-only “icon” sta­tus that in­cludes pri­vate din­ners with de­sign­ers and other ex­clu­sive events.

On Satur­day, J.Crew Group Inc. stores will open an hour early for loy­alty mem­bers, who will be treated to a light break­fast while they shop. Macy’s Inc. plat­inum card­hold­ers will get spe­cial ac­cess to its Thanks­giv­ing Day Pa­rade, in­clud­ing an in­vi­ta­tion to re­hearsals and free grand­stand seats.

And Nike Inc.’s new Man­hat­tan flag­ship, slated to open early next year, will have a mem­ber­sonly floor with ex­clu­sive prod­ucts and ser­vices such as per­sonal shop­pers.

“Re­tail­ers are wak­ing up to the idea that the arms race around mon­e­tary rewards isn’t sus­tain­able,” said Scott Robin­son, vice pres­i­dent of de­sign and strat­egy for Bond Brand Loy­alty, a con­sult­ing firm.

Ho­tel chains, air­lines, credit card com­pa­nies and lux­ury re­tail­ers have for years of­fered their best cus­tomers spe­cial perks that go be­yond points and dis­counts. But the vast ma­jor­ity of re­tail­ers are only just catching up.

That is one rea­son why re­tail loy­alty pro­grams rate so poorly among con­sumers. Ap­parel re­tail­ers ranked sec­ond from the bot­tom out of 15 in­dus­try sec­tors in a re­cent study of more than 800

loy­alty pro­grams by Bond Brand Loy­alty.

Re­tail­ers have spent the past few months re­tool­ing their plans to fend off com­pe­ti­tion from on­line re­tail­ers such as Ama­zon.com Inc., whose Prime mem­ber­ship is one of the more ef­fec­tive loy­alty pro­grams, as well as travel and en­ter­tain­ment venues, which are tak­ing a big­ger slice of con­sumer spend­ing.

There are still plenty of dis­counts—Nord­strom’s new pro­gram al­lows credit card mem­bers to ac­crue points at a 50% faster rate—but now there are also more in­vi­ta­tion-only events and per­son­al­ized ser­vices.

“It’s im­por­tant for con­sumers to feel like the com­pany ’gets’ them,” said Adam Brot­man, J.Crew’s chief ex­pe­ri­ence of­fi­cer. He said the re­tailer is plan­ning to launch more mem­bers-only events this fall, in­clud­ing one tied to Black Fri­day as well as pro­vid­ing them with first looks at

new col­lec­tions and cus­tom­ized out­fit sug­ges­tions.

For the mo­ment, all J.Crew loy­alty mem­bers are treated equally but Mr. Brot­man said the com­pany is plan­ning to in­tro­duce tiers next year to re­ward the high­est spenders.

Macy’s be­gan of­fer­ing its best cus­tomers, those who spend $1,200 a year or more, spe­cial perks ear­lier this year, in­clud­ing a pri­vate tour of its Flower Show, VIP seat­ing at its July 4th fire­works, cook­ing classes with lo­cal chefs and a pre­view of the Broad­way show “Pretty Woman.”

Plat­inum mem­bers get a plat­inum-col­ored store card to dis­tin­guish them from gold and sil­ver mem­bers, whose cards are red.

Shop­per Tracey Mor­ris re­cently sat in the front row at a run­way show of a lo­cal At­lanta de­signer with VIP tick­ets the 46-year-old fi­nan­cial con­sul­tant earned as a plat­inum mem­ber in Macy’s Star

Rewards pro­gram.

“It’s some­thing I wouldn’t nor­mally do,” Mr. Mor­ris said. “The perks make me feel spe­cial.”

A Nord­strom spokes­woman de­clined to spec­ify the spend­ing thresh­old for “icon” sta­tus since the pro­gram hasn’t launched yet, but said other fac­tors be­yond straight dol­lar amounts might ap­ply. To qual­ify for the next high­est tier, “am­bas­sador,” shop­pers must spend at least $5,000 a year. Ben­e­fits range from ac­cess to beauty and style work­shops to in-home stylists.

Com­pa­nies on av­er­age spend be­tween 1% to 3% of their rev­enue on loy­alty pro­grams, ac­cord­ing to Caro­line Pa­padatos, who over­sees the con­sult­ing prac­tice of Loy­al­tyOne Co., which man­ages loy­alty pro­grams for re­tail­ers. But she said the over­all in­vest­ment can be much higher when ex­pe­ri­ences are lay­ered on top of tra­di­tional mon­e­tary rewards.

Re­tail­ers say it is worth the ex­tra ex­pense since loy­alty mem­bers tend to spend more. Macy’s gets half its $24.8 bil­lion in an­nual rev­enue from 10% of its cus­tomers. And Nord­strom says loy­alty mem­bers spend four times more than non­mem­bers.

Amer­i­can con­sumers got their first taste of rewards pro­grams in the late 1800s with S&H Green Stamps, ac­cord­ing to Mark John­son, the chief ex­ec­u­tive of Loy­alty360, an in­dus­try trade group. Shop­pers re­ceived stamps when they made pur­chases at par­tic­i­pat­ing re­tail­ers, glued them into book­lets and traded them for goods.

By the 1930s, they were clip­ping Betty Crocker box tops and by the 1980s they were rack­ing up fre­quent flier miles. A few years later, credit card com­pa­nies got into the act, of­fer­ing cash back on pur­chases.

It wasn’t long be­fore card com­pa­nies started seg­ment­ing their cus­tomers and of­fer­ing the high­est spenders spe­cial perks. Amer­i­can Ex­press Co. in­tro­duced its ul­tra­ex­clu­sive Cen­tu­rion Card, known as the Black Card, in 1999. For a $7,500 ini­ti­a­tion fee plus a $2,500 an­nual fee, card­hold­ers are el­i­gi­ble for perks in­clud­ing free nights at lux­ury ho­tels and per­sonal shop­ping ser­vices.

Neiman Mar­cus Group Inc. was one of the first re­tail­ers to launch a loy­alty pro­gram in

1984. These days, shop­pers who spend more than $600,000 a year can choose a com­pli­men­tary travel ex­cur­sion and get an ar­ray of other ser­vices rang­ing from free in-store din­ing to fur stor­age.

The new pro­grams re­tail­ers are rolling out now aren’t as ex­clu­sive. For ex­am­ple, hand­bag seller Michael Kors Hold­ings Ltd. launched a VIP loy­alty pro­gram in Jan­uary, of­fer­ing those who shell out at least $1,500 a year early ac­cess to new prod­ucts and pri­vate in-store events plus a ded­i­cated cus­tomer ser­vice hot­line.

DAVE COLE THE WALL STREET JOUR­NAL

Ap­parel re­tail­ers ranked sec­ond from the bot­tom out of 15 in­dus­try sec­tors in a re­cent Bond Brand Loy­alty study of more than 800 loy­alty pro­grams.

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