We are almost to the end of 2019 and it has been another roller coaster year in retail.
Mergers, store openings and accelerated closings, new services, more subscription boxes, and technology all played a major role in shaping the present and future of retail.
So, what happened in the loyalty space?
To be honest, I was a bit underwhelmed with the limited updates. There were high expectations for loyalty after some major changes in 2018.
What we saw were a few major changes and a couple minor ones, but overall, it seemed that with all the talk of loyalty in retail the bar was set well beyond what was delivered.
Back in January I enlisted the help of some of my Clarus colleagues and wrote a blog, “The Loyalty Programs You Should Watch in 2019 .”
So, I thought it would be a good time to look back at those companies who made significant progress this year.
Here are the summaries of our predictions and how these loyalty programs performed.
DSW VIP Rewards
Our Senior Director of Product Management, Kelley Gargano, had a positive outlook on the program going into 2019.
She thought that DSW was a great example of how a retailer positively combines transactional and experiential benefits to create a compelling reason to join and stay in the program.
With messaging that is clear, concise, exciting, and on brand, the program demonstrates that DSW knows and understands its audience well.
So, how did the program play out?
Result: DSW rolled out the new loyalty program in May 2018, featuring faster rewards, free shipping and returns, a three-tiered reward structure, and greater digital integration.
Since then, the company has seen a 6% increase in year-over-year sales — the highest in seven years — and an additional 1.6 million app downloads.
DSW has focused on four main principles:
- Stay focused on the customer
- Set a vision and align the organization
- Keep it simple
- Continuously evolve
Kelley would expect another significant update coming in 2020. DSW is a great example of an evolving loyalty program and how it drives growth.
Uber Rewards
Alyssa Callahan, our Senior Loyalty Product Manager, thought the program would garner universal appeal because of the convenience, ease, and ability to stack savings.
Result: Uber rolled out its rewards program across the U.S. in March to mixed reviews.
With a 2% ride credit, you must spend $250 to get $5 off a future ride. If you qualify for Gold status, the major benefit is a refund of cancellation fees if you cancel within 15 minutes.
In cities like New York this can be a challenge and there is some relief here. With the way tiers are set up, this looks like it will be similar to other travel-related programs. Those that spend the most get the most benefit, but not necessarily the highest velocity users.
Alyssa is encouraged by the initial rollout and is looking forward to the next wave of updates.
Lululemon Practice
Our CEO Tom Caporaso always watches Prime because Amazon sits atop the premium loyalty mountain, but Lululemon really caught his eye last year.
The Canadian athletic apparel retailer charges $128 annually for the program and members receive a pair of pants or shorts.
The program is on the higher end of the premium loyalty spectrum. But it mixes an attractive transactional value proposition with attractive experiential benefits to complete the loyalty loop.
This type of program builds emotional connections and brand loyalty.
Transactional benefits draw your customers in, and experiential benefits make them want to stay.
Result: Amazon, of course, made another big move in 2019 announcing one-day shipping across the board in April.
This is a game-changer for delivery and its competition, but also a defensive move against BOPIS which has really gained steam with major retailers including Target, Kohls, and Home Depot.
Lululemon is still testing its program and expanded into more areas. So far, the program has received very positive response from customers and the financial community on its offering.
Early 2020 should bring clarity and, hopefully, a rollout with enhancements to the program.
Sephora, Macy’s Kohl’s and Other Retailers
My watch list started with Sephora.
This year began with expanded benefits that are very customer-friendly. The program has always been a favorite among shoppers.
Following successful program updates from Macy’s and Kohl’s, I was also interested to see how Belk, Lord & Taylor, Dillard’s, and J.C. Penney would fare.
Result: The Sephora program was received well and has made additional enhancements along the way in 2019.
In 2019, members of all three program tiers – Insider, VIB, and Rouge – receive a gift (of their choosing) during their birthday month.
I’m sure it will have another wave of updates coming in 2020. The department stores remained status quo for the most part.
In a category that is struggling to gain and keep customers, this is an opportunity to engage in a new way and not just focus on discounts.
A Huge Loyalty Opportunity Exists for Retailers
It is harder for retailers to earn customer loyalty.
In a new and evolving marketplace where consumers are demanding more, retailers can’t afford to leave their loyalty programs in a “set it and forget it” mode and think only superficial changes will suffice.
Hopefully updates and refreshes are coming soon.
I hope that six months or a year from now the most common phrase used in boardrooms when discussing loyalty is not: “What if we had done …?”
Retail is at a crossroads with many moving parts.
Keeping the lights on and doors open are the No. 1 priority, but that involves keeping customers without crushing margins and developing a strategic loyalty solution can help achieve some of those needs.
What are you planning to do in 2020 to build real loyalty for your best customers?
Tom Baker
Tom Baker has been Vice President of Strategic Partnerships, at Clarus Commerce since late 2015. He has been partnering with retailers for the last 18 years delivering innovative solutions to impact companies' bottom lines. As part of this process, Tom has spent thousands of hours in retail locations and call centers listening, learning and providing advice on how to maximize every customer touch point. He has worked for leading brands creating new consumer engagement strategies, products & services and revenue generation for such companies as Dun & Bradstreet, Oxford Health, GE & Time Inc. His specific areas of focus have been in business development, brand management, direct & digital marketing, new product development and client services. Tom enjoys volleyball and watching his daughters dance. He's a passionate, lifelong fan of the NY Yankees, Giants & St. John's.
