Insight: Can loyalty avert the retail apocalypse?

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By: RickFerguson |

Posted on May 4, 2017

Over at MediaPost, contributor Jeff Sopko provides a compelling argument that loyalty programs remain a key weapon in retailers' battle to survive the retail apocalypse. As Sopko highlights, loyalty programs provide a proven method of identifying, understanding, and influencing best customers to retain them and increase their spending. Not every retail needs a loyalty program - but every retailer needs a loyalty strategy. Failure to design and execute the latter may mean that your retail brand joins the growing list of remaindered retailers on the battlefield.
By Rick Ferguson
Sopko highlights the struggles of apparel retailer Abercrombie & Fitch Co. (A&F), once the hottest fashion retailer in the country but now fallen on hard times:  The company said comparable sales have plunged, forcing the company's share price to fall by 60 percent over the past year. Their have been many reasons for the company's fall, including the usual e-commerce competition as well as a controversial and recently-fired CEO and a brand that has become increasingly out of touch with its Gen-Z audience.
Turnaround efforts - the success of which remain very much in question - include a complete brand refreshment and an investment in digital, multi-channel consumer engagement. Also on the docket - a loyalty program. While the program certainly doesn't break the mold in terms of design, the company does believe it can replicate the successful rollout of a similar program at its Hollister Co.-branded stores.
A&F can also point to success stories elsewhere in the specialty retail industry. Sopko highlights two examples:
Sephora: "Sephora is another great example of a stalwart brand that has harnessed its loyalty program to stabilize and improve its customer experience. The brand represents one of the few bright spots in an industry plagued by stagnant sales. In fact, its quarterly profits show record growth in the U.S. and even in China. Sephora is eating up market share quicker than competitors can keep up. It's no coincidence that Sephora's profits are rising while the company focuses on engaging and retaining its core customers."
American Girl: "American Girl's AG Rewards program has also seen success among a passionate fan-base of moms and daughters. The company has engaged its best customers with a massive enrollment that focuses on hard benefits and unique experiences. American Girl focuses heavily on content, not just product, to enhance the member experience and provide education to young girls."
Those are indeed great success stories. And because Sopko is on the money in his analysis, here's another money quote:
"It's not an accident that American Girl and Sephora, while in different industries, are succeeding by harnessing their passionate customer bases. They’ve built brands around those individuals and they’re reaping the benefits. It’s the baseline of any great brand. Brands that understand their customers and their relationships tend to succeed where others fail, regardless of the loyalty offerings that they have in place."
Sopko speaks the gospel truth. Marketers reading these types of analysis may be tempted to dismiss these case studies on the grounds of "we're focused on building customer engagement through experience delivery so we don't need no stinkin' points program." Those who make this judgement are missing the proverbial forest for the trees. Sopko's analysis shouldn't be taken as an argument that classical loyalty programs are the silver bullet that will save retailers. 
Rather, his case studies should illustrate that those retailers who do survive the retailer apocalypse will do so because they have devised and executed a customer strategy that rewards and recognizes their best customers. The tactical execution may involve launching a bespoke loyalty program, as these retailers have done; or it may involve rewarding and recognizing customers through engagement tools, content, experiences, or other levers. The most important first step is to have a strategy that ties customer-centric KPIs to business performance; the most important prerequisite to success is a top-down vision, driven by the C-Suite, to become a customer-centric retailer.
Or as Sopko puts it: "Retail brands will only survive if they grow with their consumers and build loyalty over time."
We couldn't agree more.
Rick Ferguson is CEO and Editor in Chief of the Wise Marketer Group.