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Pinching Perks and Talking About It: Loyalty Programs That Scaled Back

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By: Jenn McMillen |

Posted on March 6, 2024

How Sephora, Best Buy, and more talk about Reward Changes

A number of retailers have recently scaled back the offerings of their loyalty programs, indicating they were “too rich” to sustain. How they tell members could cost them more.

By Jenn McMillen

Let’s see a show of hands. How many people in the past year received at least one email from a loyalty program notifying them of benefit changes? And how many of you thought, “Oh, this won’t be good”?

Occasional adjustments to a retailer’s merchandising and prices are expected. Changes to its loyalty program, however, can be tricky, because membership is based on an agreement: You remain loyal to us, we will reward you.

Changing those rules, even for good reason, is a risky move that hinges on when and how well the retailer communicates the changes.

When Points Begin To Pinch: The Causes For The Cutbacks

Reward programs can be pricey for retailers. In addition to the value of the rewards, operators must pay for the technology and talent to collect, analyze and protect member data. Add to that the cost of marketing, customer service and day-to-day management.

Ideally, perk-encouraged spending offsets these costs. But in recent years sticker-shocked consumers have been limiting purchases to essentials, and – in some cases – even the essentials can generate more points each due to their higher prices, enabling members to get to rewards faster. (Unless points thresholds are raised to reflect higher prices.)

This formula threatens profits. Bean-counters had to find places to cut back, and reward programs are one of those places.

Case Studies In Communications From Sephora, Able And Others

Profit and prose are very tightly related, as any public relations expert will tell you. Here are a few examples of how some cost-cutting program changes were communicated and received.

Sephora Birthday Gifts Are Earned: Members Gets Ugly

Sephora in 2023 changed the terms of its popular birthday rewards gift, which had been a no-strings-attached freebie. Now online members have to earn it. Sephora did not sugar-coat the change: “Because we value you as a customer, we want to let you know that we are making some changes to the Beauty Insider program: Starting June 1, 2023, clients will need to make a minimum merchandise purchase of $25 to redeem their Beauty Insider birthday gift at sephora.com or sephora.ca.”

Members can still select a birthday gift at a store without a required purchase, however (Sephora is likely just trying to avoid the expense of packaging, fulfilling and shipping freebies that do not accompany a purchase). Still, the difference is causing evident confusion. One member, upon receiving the notice, wrote on X: “Now we gotta essentially pay for the typically free bday samples they give?! They’re gonna have to go to h*ll.”

Sephora prepared for potential mix-ups with an online “Birthday Gift FAQs” page of nine detailed questions and answers. It then announced its 2024 birthday gift options in a press release that was covered, positively, by several news outlets including Bustle, PopSugar and WWD.

Able Reduces Discount And Gets Code Red

In December, online apparel retailer Able alerted members of its paid 360 rewards program that its key perk, a twice-a-year “360 Code” for purchase discounts, would change. While it now has a longer shelf life, the code covers up to just 75% of a cart’s price tag – not the 100% members signed on for.

In its nearly 700-word email to members, Able explained the dollars-and-cents rational behind the changes in plain English: a difficult year of restructuring, a new leadership team and a challenging economy. The 360 perks put the company at financial risk. “As we relaunch the program, we’re thinking about both the value to you and what our business can afford.”

Following feedback, Able sent another email to underscore its predicament: “After one year of the program, it became apparent that Able 360 did not have the intended positive impact, and in fact, it was actually challenging the future of Able in the midst of a tough economy.” In a separate member newsletter, Able illustrated 360’s ongoing value with images of shopper hauls that saved $225 or more.

My Best Buy Might Need An Instruction Packet 

Does the Best Buy Geek Squad troubleshoot rewards programs? Based on reactions to the “My Best Buy” relaunch in June 2023, it might need to. The platform replaces Best Buy’s two-tier plan with three. The basic tier offers free shipping. The second tier (new), costs $50 a year and includes exclusive prices and sales access and extended returns. A third tier (replacing the BBY TotalTech plan), is $180 with Geek Squad services, priority access to team experts and 20% off repairs. Note: TotalTech had cost more, $200, but offered installation perks that aren’t evident in the new tier.

In its announcement, Best Buy stated that different members value different benefits, and the price points offer “the ability to choose an option that best fits the convenience, value, support and protection they’re looking for.”

Those benefit options include seven disclaimers, however, making for a plan The Street described as “really, really complicated.” Complication breeds confusion. As one member put it on Reddit in fall 2023: “They got rid of elite point status … Basically converte(d) it into paid memberships. They’re going downhill bro.”

Best Buy’s third-quarter sales were down 8.2%.

When GameStop Upped Its Rewards Fee, Members Evened The Score

In June 2023, GameStop rebranded its popular PowerUp Rewards program as GameStop Pro, and increased membership to $25 a year from $15. Of the rebrand pros: Members get an additional 5% off of a range of purchases including digital games, collectibles and GameStop-branded products (the monthly $5 credit for in-store purchases remains). Also, current enrollees aren’t charged the higher fee until their membership renews, but they do get the additional benefits.

Among the cons: Rewards points now expire after 12 months and new members do not get the print version of GameStop’s Game Informer magazine (they do get the digital cut).

News of the changes caused GameStop’s stock to surge, MarketWatch reported. But GameStop did not spread that news, nor did it respond to a request for comment. The information came from screenshots of internal corporate training materials, shared with the gaming site Kotaku.

Without GameStop in the conversation, members had to interpret the revisions among themselves on r/Gamestop Reddit – sometimes inaccurately. Members also used the string to remind others that GameStop years ago gave 10% discounts with its $15 program, diminishing the value of the “new” 5% discount.

Words Matter: Tips For Communicating Reward Program Changes

There are many other examples of rolled-back or harder-to-earn rewards – Dunkin’ Donuts, Starbucks and Chipotle come to mind. The reality is that rewards programs cost money, and sometimes those costs have to be justified.

Organizations should be realistic about this possibility and prepare.

  • Now’s the time for a crisis team. Timing can determine how well a program change is accepted, and that takes planning. Organizations should include the crisis management team (yes, there should be one) to advise on every step of the change so a communications plan is in place before potential blowback, and can be executed with cool heads.
  • Make good with the most active members. Those who use a rewards program most can be more influential, and definitely more valuable to a company. Program operators can pull a master list of premier members and communicate changes directly with them first, inviting feedback. These members will gain a sense of ownership that can pay off on social media.
  • Acknowledge the company’s role in the change. But do so clearly. Members don’t personally relate to vague terms regarding customer values of behavior – that describes someone else. Able wins the chicken dinner for apologizing to its members for the changes it implemented, and for saying in clear terms that the program’s former model threatened the company’s future.

The effectiveness of these communication tips relies on one central source: the member data that informs them. Every consumer’s story with a brand is personal, so it’s crucial that the rewards experience tells the story right.

This article originally appeared in Forbes.

Forbes.com retail contributor Jenn McMillen is nationally renowned as the architect of GameStop’s PowerUp Rewards, and is Founder and Chief Accelerant of Incendio, a firm that builds and fixes marketing, consumer engagement, loyalty and CRM programs. Incendio provides a nimble, flexible and technology-agnostic approach without the big-agency cost structure and is a trusted partner of some of the biggest brands in the U.S.