There has been a ton of quality material written in the past year about the Retail Apocalypse. Whether myth or reality, the trials and tribulations of the specialty retail sector, especially the fashion retailer, have been at the forefront of these discussions and loyalty marketing chatter frequently seeps into the dialogue.
By Mike Capizzi, CLMP
A piece caught my eye this week from leading UK fashion publication BofF. Author Doug Stephens argues that most retail loyalty programs don’t work, and marketing funds are being wasted. He sites many research stats to prove his point and concludes that fee-based programs are something to reckon with. While I don’t agree with Doug’s blast of “loyalty programs,” I understand it’s a matter of definitions and firmly believe the underlying premise of Doug’s argument is one that all retailers should pay attention to.
First, the unwarranted blast. Calling all this the “loyalty lie” does not do justice to a marketing discipline that has helped retailers for the past 25 years identify best customers, build a database, retain top spenders and use value added, interactive mechanisms to increase the yield on a per customer basis. Going back to a single 2012 study doesn’t cut it for me. I have personally worked on over 30 retail loyalty programs in my career – many in the specialty retail or fashion sectors – and I can say without hesitation that programs work. These are smart merchants, if the programs universally were lame they wouldn’t spend their marketing funds on launching, operating and enhancing their loyalty efforts. He who knows the most about customers and can take relevant, intervening action, wins. So let’s be careful here, we don’t want to throw out the baby with the bath water.
Programs that don’t work have inherent design flaws – flat funding rates, single tender value propositions, poor (or no) communications, lousy rewards, no soft benefits, inability to bonus or to tier according to value, inadequate social platform or e-commerce integration – the list goes on. Of course, these programs feed all the negative publicity and “failure” stats. They are bad programs. This doesn’t mean that that loyalty doesn’t work. It means that bad loyalty programs don’t work. Plain and simple.
Regarding the lack of engagement and runaway membership stats, I agree whole-heartedly. It is not about how many members a retailer can enroll – only to have them leave or suffer boredom later. It is about best customers that will keep the brand afloat during apocalyptic times and growing during good times. This is the real story behind the stats. Never underestimate retention benefits.
Now to the good stuff. Veteran loyalty marketers have always understood that the transactional and emotional sides of the value proposition were of equal importance. Many fashion retailers have long avoided soft benefits in favor of discount only schemes. This is a mistake and I share Doug’s belief - although we use different semantics to argue our point.
As for fee-based programs, I am a major fan and believe they are making a comeback. All the arguments and brand cases put forth in the BoF article are sound and certainly not new. Does anyone remember Sheraton Club International in the late 1990’s? Or how about the original Reward Zone from Best Buy in the early 2000’s? To ignore fee-based components as part of a potential loyalty marketing program, or to consider them something other than a loyalty marketing program, is fundamentally flawed. It goes beyond semantics. Any program which can holistically use all its channels, assets and creativity to recognize and reward best customers in return for a membership fee is a loyalty marketing program.
It has been this way for a long time.
Mike Capizzi is a Certified Loyalty Marketing Professional™ (CLMP) and Dean of the Loyalty Academy.
