Retailers have long relied on the private-label store card to drive share-of-customer, with loyalty rewards playing a key role in encouraging tender shift away from general-purpose credit cards and toward the store card. With retailers now searching for a weapon to battle against Amazon, Forbes contributor Bryan Pearson points out one potential weapon – the multi-tender loyalty program.
Pearson’s evidence: Nordstrom, which one year ago changed its Nordstrom Rewards program from a single-tender to a multi-tender program model. The results: 3.7 million new memberships, bring the total of Rewards members to nearly 8 million active users. Meanwhile, program costs have declined from $164 million to $163 million, while company revenues increased from $14.1 billion to $15.5 billion.
More program members, lower costs, and higher revenues? Sign us up, please. Pearson also reminds us that both Bloomingdales and Kohl’s have moved to multi-tender loyalty – and as we all know, three examples of anything makes it a trend – and are using the multi-tender entry-point as a mechanism to drive best customers to the retailers’ more lucrative co-branded credit cards.
What’s driving the shift? Two points in Pearson’s article stand out. First, multi-tender programs drive more data collection, and therefore potentially drive more insight.
Money quote #1: “Multi-tender rewards programs extend the value proposition for retailers because they capture more customer data. It’s also more accurate data since shoppers want to ensure their information is up to date in order to receive rewards and other benefits. Retailers can use these insights to provide higher levels of service and improved communications in return.”
Second, multi-tender programs appeal to younger consumers, who are far less likely to take up store cards than the olds.
Money quote #2: “Just 33% of consumers between the ages of 18 and 29 have a credit card, according to Bankrate’s Money Pulse Survey, conducted in 2016. That compares with 55% credit card ownership among those between the ages of 30 and 49. Retailers that rely strictly on credit loyalty programs may not be fully engaging their younger customers, something that they should consider given the decades of shopping they have ahead of them and the ability to influence those purchases (and later credit applications).”
As a final point, Pearson reminds us that multi-tender retail programs can drive 70% to 90% of retailer revenue. With Nordstrom as a bellwether, we may predict that more retailers will continue to leverage loyalty to build a walled garden around their best customers. After all, a strong, reciprocal relationship with a good customer is the hardest thing for a competitor – even one as formidable as Amazon – to take away from you.