[More and more brands are adopting premium loyalty, with stunningly positive results. With the rising tide of companies rethinking loyalty, we are posting a significant amount of content related to the loyalty space and want to note that we don’t run every program that we write about.]
In 2009 officials at GameStop, the world’s largest specialty retailer of primarily new and used video games, realized they needed to improve their use of customer data and decided to build a best-in-class loyalty program.
Not just any loyalty program.
With this goal in mind, GameStop officials hired Jenn McMillen, who not only became Division Vice President Loyalty and Customer Relationship Management, but also the Architect of the PowerUp Rewards premium loyalty program.
The PowerUp Rewards program is a critical piece of GameStop’s overall customer-centric focus and helps create an “instant culture” for the company’s best and most loyal customers.
We caught up with McMillen, who has since started her own company called Incendio, and talked to her about the creation of PowerUp Rewards, which currently has more than 50 million global members.
Here is our intriguing Q&A with McMillen:
Can you talk about the thought process behind GameStop launching its PowerUp Rewards loyalty program, when it launched, and including a premium loyalty aspect in it?
McMillen: GameStop started working on creating a loyalty program in early 2009. Many executives felt it wasn’t needed up to that point because the company had grown very successfully through acquisition and through sheer volume of sales. But with the video game space becoming more fragmented, the senior team felt that the time for a loyalty program had arrived. Hence, I was hired.
Pre-loyalty program, GameStop had a pre-owned game discount card that was offered which also included a subscription to Game Informer magazine, so essentially a GWP (Gift With Purchase).
When I started working on program concepts, I knew that we’d need to incorporate the pre-owned GWP into the final design since pre-owned product was the biggest source of margin. Our marketing goal was to start collecting data on our customers that we could use to create personal and relevant communications, so we knew we wanted to get as many folks into our program as possible.
To go that big, we knew we’d want a free version, but we also knew a premium option with more benefits would have good reception too.
When we launched PowerUp Rewards nationally in 2010, we had both a free version and a paid version called PowerUp Rewards Pro—a nod to the gaming world—which was $14.99 annually.
The paid version had significantly more benefits in it, naturally, including point bonuses, trade-in bonuses, a standing 10% discount on pre-owned games and accessories, and a subscription to the print version of Game Informer. Additionally, we offered a welcome gift that could well cover the cost of the $14.99 fee—a buy 2, get 1 free coupon for pre-owned games that was worth up to $55.
What was attractive about offering the option for a premium loyalty program membership?
McMillen: A paid version was attractive because it meant a constant revenue stream. Our first year we had 10+ million customers say yes to the Pro version. With $150+mm in subscription revenue, I was not only funding my own program, but also offsetting the points liability as well. Depending on who you talk to internally, some days I was a hero. Others I was the anti-Christ.
How did the PowerUp Rewards program impact customer behavior and help transform some customers into brand advocates?
McMillen: The impact of PowerUp Rewards on our customer base and our employees, many of whom were some of our best customers, was felt immediately. We finally had something to offer both the gamer community and the moms who bought games for their kids, a value proposition that was very evident.
We also quickly started using the data to personalize communications and make them highly relevant. In the gaming world, Nintendo and PlayStation/Xbox are like the Sharks and the Jets … they shouldn’t cross paths.
So we started down the 1:1 path within 60 days. Many programs go through a crawl/walk/run phase. We came out of the gate sprinting! From a metrics perspective, we saw a jump in average ticket with more items in a single transaction, quicker return visits which we attributed to smart marketing, and a consolidation of share.
Why do you think the PRO program has resonated so well, and how has it complemented GameStop’s non-premium loyalty offering?
McMillen: The great thing about Pro is that there was inherent value from the moment you signed up. It wasn’t like other paid programs in the space where, essentially, you’re funding your own discounts.
When we built the Pro tier on paper, we looked at the most profitable behaviors we wanted to reward and built the program to capitalize on that. It was very easy to see how you, the customer, would make your investment back very quickly and that it would almost surely pay for itself over the year. If you maxed out your welcome gift, you essentially received a $55 free game for a $15 investment. That’s not hard math for a consumer to understand, nor an associate to communicate.
The free program was the catch-all for customers who weren’t as invested in the gaming space, but it still allowed us to use the data to market to them more sensibly. As for both programs resonating, we had such huge advocates for PowerUp Rewards that we had pictures of members getting their PUR barcodes tattooed on themselves and the PUR logo. That’s definitely some strong brand advocacy.
Can you talk about how the program works and what the benefits are?
McMillen: PowerUp Rewards launched as a two-tier program which featured points as its currency. Since launch a Pro Elite level has been added, which is $29.99 annually. Points start at $1 = 10 points for the free tier and escalate. You earn more points the higher your tier.
Amazon Prime is the gold standard among premium loyalty programs. Traditional points-based loyalty programs are still around, but often fail to forge true differentiation, whereas premium loyalty programs do, and are also on the rise. Can you talk about the overall appeal of a premium loyalty program in today’s marketplace and how it can impact a brand?
McMillen: There’s always a lot of chatter in the loyalty space that points programs are dead. Not true. Or that paid programs are dead. Also not true.
One of the problems with a free program is that the level of benefits you can offer to truly differentiate yourself from the competition isn’t that great, since the question you get from Finance is, “How are you paying for this?”
Having a paid program is a great way to self-fund, but you will also know right off the bat who your true brand advocates are, since they raised their hands to join AND paid you to do it!
I think paid programs are a fabulous way to provide elevated experiences to the customers who matter, offer premium benefits to your best customers which encourages consolidation of spend or trial or a quick return visit—whatever matters most to you.
Just make sure to spend a good portion of that fee revenue on the customers who gave it to you in the first place. Don’t get greedy and remember the 80/20 rule.
There are some great fee-based programs and some not so great fee-based programs out there, such as the bookseller program which asks you to spend $25/year to get a 10% discount. You have to spend $250 just to break even! Now that feels like a bum deal to me.
Contrast that with the REI $20 lifetime membership or the paid tier of AMC Stubs Premier level, which gives you free size upgrades for popcorn and fountain drinks. There’s a perfect customer out there for each of these programs.
What are your biggest takeaways from a customer insight perspective since PowerUp Rewards launched?
McMillen: I left GameStop four years ago, so I can’t speak to current results, but I can say that in the five years I was at GameStop, the PowerUp Rewards program touched and revolutionized many parts of the overall business.
The data from PowerUp changed the way we did marketing. My last year there, we only did one mass communication. The hundreds of others that went out were customized, personalized, and relevant based on a customer’s data.
The data impacted our merchandising strategy, allowing us to customize assortments in stores to better match the demographics of the customer base—even within the same shopping center where we had multiple stores.
PowerUp Rewards changed the real estate approach to new stores, as we had gotten to the point where we could say with certainty, “There’s X customers in this market, and if we open up a store that’s Y square feet, that might be just perfect.”
We also got very good at moving customers from store to store when we had to close one. The biggest coup of all, though, was using the PowerUp data to forge better relationships with our customers and our partners inside and outside the gaming space. I’m still very proud of what I built, and it’s great to see the program continue to be very healthy and growing with 50+mm customers enrolled.