March 26, 2009
Luxury Retailers Told to Focus on Loyalty Programs
Lori Holliday Banks, senior
fashion editor at the fashion retail consulting firm the Tobe Report,
said luxury retailers such as Neiman Marcus, Nordstrom and Saks have taken
major hits in the economic downturn and the surest way out is to focus
on loyalty programs.
Ms. Banks said specialty
and department stores need to offer something other than just
discounts to be successful in the current environment.
"Loyalty
stores need to bring about more unusual perks or benefits for their shoppers.
Perks that appeal to people who are so busy. The more you can offer to
customers who are looking to save and spend, the more they are likely to
visit your store and bring you business," she told FOXBusiness.
Ms.
Banks pointed to an event that teamed American Express with the designer
Diane von Furstenberg as an example. Card members had a chance to attend
a runway show during Fashion Week in New York.
"The
only people that could buy it are AmEx holders,
so that gave them something special that no one could have," she told FOX.
"It was an exclusive experience and a novel form of status."
Discussion Questions: What do you think are
the best ways for luxury retailers to achieve success now? What do you
see as the do’s and don’ts when it comes to creating successful loyalty
programs for retailers catering to affluent consumers?
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Huh? Did they just say that high-end retailers need loyalty programs? I have to disagree. The brand is what develops loyalty in the high-end market. Let’s not forget what loyalty programs are all about.
High velocity retailers are dependent on the data that loyalty programs provide. I don’t know how high-end retailers would benefit from that kind of program. How many times does a shopper buy a Tiffany ring or a Coach bag? I don’t even think a Bentley has a place to put points cards.
Instead of loyalty, think exclusivity. High end retailers could get together to create an exclusive club that offers information and non-cheesy promotions to their customer base. The monthly communication could have all the latest trends and news about fashion and accessories and a different retailer spotlight. Throw in some luxury car ads and other perks for good measure and I would say you have something that your customer would read. I just can’t see someone buying a Bang and Olufsen stereo and then pulling out a card to collect points on it.
Couldn’t agree more with using loyalty programs to generate shopper interest during the recession. The best practice here is the same for a mid-tier merchant or an upscale chain: Create a program/rewards that resonate with the target consumer’s lifestyle needs inside the shopping experience and/or outside the experience. Inside the experience needs/rewards might include things like a personal shopper, an exclusive 800 number for phone service or access to exclusive product. Outside the experience needs should tee off of the consumer’s personal lifestyle needs/desires/rewards, like a spa vacation, personal chef for a day, or use of a home organization expert for a day.
Unfortunately, what too often happens is the merchant launches a program that offers a set of mediocre rewards meant to appeal to a vast number of consumers, regardless of lifestyle. In doing so, the rewards become generic, the consumer loses interest and they become inactive. And in other cases, the retailer follows the well-worn supermarket path by launching a frequent shopper discount card that’s based solely on nabbing the discount, not generating loyalty.
Every time I read discussion on loyalty it fascinates me–this one included. It’s not a whole lot different than any discussion in the past, even considering the market sector of ‘luxury’ intended to be discussed. Further, it’s spurred by discussion from a ‘consultant’ aimed at selling a ‘loyalty program’ or ‘loyalty consulting’.
As in every discussion in the past, I’ll repeat my broken record comments. Consumers own their loyalty–retailers cannot offer it to them. Retailers that think a ‘program’ of any kind creates loyalty are simply misguided. Consumers own their loyalty. Their loyalty is given to a retailer of any kind when they continue to choose you when they have other choices. In many cases, the choices they could make if they don’t choose you could even be better. Yet, they choose you because they perceive they are making the best choice as a result of their own ‘value equation’, not yours.
Like the line with real estate where we say it’s location, location, location; in retailing it’s the experience, the experience, the experience. No program, free ticket, perk, points, bonus, etc, overrules experience. None. Good economic times, bad economic times–the same–it’s the experience. Even further, larger ticket, luxury item retailers need to be looking beyond the sale to enhancing the ‘experience of ownership’ of the product. In today’s market, we need to look beyond the sale to what creates the next. A program won’t do that–people will–a consultant’s silver bullet will not.
Loyalty is not a program, it is a feeling. Yes, the feeling of loyalty is earned and can be enhanced by consistently providing an experience that transcends the product itself with the total experience of product, service, and store environment.
Slapping the “Loyalty” label on a set of features and calling them a program does not create loyalty in and of itself. Faith Popcorn is known to have said that women don’t buy brands, they join them. The same is true of men who join Harley-Davidson, BMW, etc. We buy into brands not because of a program but because of the lifestyle image enhanced by the retail environment, inherent qualities of the product, and the level of service provided by the brands ambassadors.
If a loyalty program is a vehicle to communicate with the customer then just communicate in the first place and skip the added expenses and phony disguises.
I think the idea of loyalty programs is inherently silly in this space BUT I also think there are things luxury goods manufacturers can do to enhance their market position. Most of these revolve around enhancing the experience part of the offering–special events, previews, etc.
Loyalty programs that begin now defeat the purpose: they have to buy new stuff to be part of the loyalty program. Basing special offerings, special events, or special services based upon consumers’ past purchases (by using data already in hand) would be more successful. If you don’t have data in hand to offer special services to special consumers, then offering special services or events to all consumers to draw them into the store at this time would help.
Luxury retailers have focused upon exemplary service levels for years. The execution is very spotty, however, some infuse this into their culture better than others, also. To get a consumer to come to one store versus another, there have to be emotional drivers that compel the shopper to return, time after time.
So, loyalty programs of any type, are one way, but only one way to get shoppers to return. Luxury retailers need that exclusivity/good old fashioned snob appeal to have success. Especially in these challenging times, there are ways to do this, without necessarily costing the retail a ton of investment.
Look to other industries. BMW has done a great job with branding. What can retailers do to heighten their branding value? In these tough times, BMW has also lost far less than other car makers because they limit their product availability. They have never offered rebates. What can retailers do to give the perception of limited availability? The shopper can still be one of millions in the program or offer, they just have to think it is special for them.
The problem right now for high end retailers is simple–no customers!!!
I was in Vegas for the NGA show, and the shops at the Ceasars Forum Mall were all empty. Even folks with money are losing half their IRAs, and the last thing anyone needs is a $10,000.00 watch to match the other 6 they already own.
It will take several years to come back, and several famous stores will go under, but eventually the remaining stores will start to see some people coming in again.
Fascinating discussion because I think we’re all reacting negatively to the word “program” and all agreeing that differentiated experience is the way to go.
Luxury brands cater to making people feel special and exclusive so clearly providing access, special events and insider knowledge makes a lot of sense. The comment about velocity of goods, though, is really interesting. How you define ‘best customers’ is going to be a critical part of this exercise.
Luxury retailers and manufacturers have a problem: they extended their businesses from core luxury customers to a lot of customers for whom luxury is aspirational. In the current market there are fewer aspirational buyers which is requiring luxury goods sellers to rethink everything from their merchandise, to their marketing to their top-line goals. They have an opportunity to move away from “mass luxury” back to true exclusivity and everything we’re discussing here will help create that aura–but it’s going to mean facing some tough realities about the size and sales of their brands.
I think a more interesting challenge for luxury is this whole “culture of austerity”–no one wants to be seen walking around with a Nordstrom bag because it somehow looks like conspicuous consumption. A slick loyalty program isn’t going to help people overcome that. Time may heal the problem, but I would think that luxury retailers would do better to take a more eco/charity approach to luring shoppers. So that the Nordstrom bag proclaims “I’m helping the environment” or “I’m helping the local charity”, rather than “I have money that you don’t and I’m spending it.”
It’s not about the ‘points’ it’s about the people. People do business with people. Always have; always will. In my view, the comments above that focus on relationships (I don’t warm up to the idea of “managing” relationships) are spot on. At the heart of ‘loyalty’ is the simple idea that when you shop there everyone knows your name. Cheers!
Luxury brands have a tremendous opportunity, just like other brands, when it comes to loyalty programs.
The right program starts with the fundamentals. Programs must be specifically tied to the brand, customers (i.e. who they are and how they shop/behave) and especially how the business operates and make money. It is also important to factor in the competition and not simply replicate what they do–a very common mistake.
Ms. Banks is right that programs should be less about discounting and more focused on customer differentiation, including soft benefits.
Finally, loyalty programs are vital but it is just important to use them for relationship marketing. The data and insights are the key to driving business, it is not just the programs themselves.
People that buy luxury are the people that want to be noticed, or treated differently. So it only makes sense that a loyalty program would appeal to that group. But it can’t be the same loyalty program at the grocery store. Luxury loyalty is less about discounts and more about pampering. But I’m not sure anything will rescue luxury retailers other than a recovered economy, which will take time.
When we think of loyalty programs we immediately think of frequent shopper programs. Clearly and rightly, this is not what Ms. Banks is talking about. And, Ms. Banks is exactly on target.
Luxury retailers should start with extraordinary customer service (no they don’t always have that.) Then they should go a mile beyond that. They should connect their salespeople with their customers via email and internet. Better yet, send a handwritten note every month. All communication should be personal, not advertising blasts. Let customers know when new items are in that they may like. “We just got in a beautiful Chanel suit. When I saw it I thought of you. You should come in and see it.”
As Ms. Banks referred, there should be exclusive events. Make the customer feel special. The events should be high end, i.e. meet Diane von Furstenberg as well as collegial, i.e. Thursday afternoon wine tastings or afternoon tea.
Every activity should be uniquely and individually customer-centric. The objective should be to get the customer in the store, even if it is not to buy. Make the store a desirable destination. A place to be.
The one thing with loyalty programs offered by non-luxury brands in good times and bad, whether it’s a common specialty retailer or grocer, is that at least they are open and honest with what their loyalty programs are: An attempt at making you feel at least marginally special while offering you suspect BOGO or 10 for 1 deals.
TRUE Luxury brands (not the pseudo-luxury brands who try to position as luxury) that are getting into the loyalty program business due to their dwindling revenue and bad economy only brings to mind adjectives such as desperation, last resort, gratuitous, groveling, next step-Chap 11….
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Huh? Did they just say that high-end retailers need loyalty programs? I have to disagree. The brand is what develops loyalty in the high-end market. Let’s not forget what loyalty programs are all about.
High velocity retailers are dependent on the data that loyalty programs provide. I don’t know how high-end retailers would benefit from that kind of program. How many times does a shopper buy a Tiffany ring or a Coach bag? I don’t even think a Bentley has a place to put points cards.
Instead of loyalty, think exclusivity. High end retailers could get together to create an exclusive club that offers information and non-cheesy promotions to their customer base. The monthly communication could have all the latest trends and news about fashion and accessories and a different retailer spotlight. Throw in some luxury car ads and other perks for good measure and I would say you have something that your customer would read. I just can’t see someone buying a Bang and Olufsen stereo and then pulling out a card to collect points on it.
Couldn’t agree more with using loyalty programs to generate shopper interest during the recession. The best practice here is the same for a mid-tier merchant or an upscale chain: Create a program/rewards that resonate with the target consumer’s lifestyle needs inside the shopping experience and/or outside the experience. Inside the experience needs/rewards might include things like a personal shopper, an exclusive 800 number for phone service or access to exclusive product. Outside the experience needs should tee off of the consumer’s personal lifestyle needs/desires/rewards, like a spa vacation, personal chef for a day, or use of a home organization expert for a day.
Unfortunately, what too often happens is the merchant launches a program that offers a set of mediocre rewards meant to appeal to a vast number of consumers, regardless of lifestyle. In doing so, the rewards become generic, the consumer loses interest and they become inactive. And in other cases, the retailer follows the well-worn supermarket path by launching a frequent shopper discount card that’s based solely on nabbing the discount, not generating loyalty.
Every time I read discussion on loyalty it fascinates me–this one included. It’s not a whole lot different than any discussion in the past, even considering the market sector of ‘luxury’ intended to be discussed. Further, it’s spurred by discussion from a ‘consultant’ aimed at selling a ‘loyalty program’ or ‘loyalty consulting’.
As in every discussion in the past, I’ll repeat my broken record comments. Consumers own their loyalty–retailers cannot offer it to them. Retailers that think a ‘program’ of any kind creates loyalty are simply misguided. Consumers own their loyalty. Their loyalty is given to a retailer of any kind when they continue to choose you when they have other choices. In many cases, the choices they could make if they don’t choose you could even be better. Yet, they choose you because they perceive they are making the best choice as a result of their own ‘value equation’, not yours.
Like the line with real estate where we say it’s location, location, location; in retailing it’s the experience, the experience, the experience. No program, free ticket, perk, points, bonus, etc, overrules experience. None. Good economic times, bad economic times–the same–it’s the experience. Even further, larger ticket, luxury item retailers need to be looking beyond the sale to enhancing the ‘experience of ownership’ of the product. In today’s market, we need to look beyond the sale to what creates the next. A program won’t do that–people will–a consultant’s silver bullet will not.
Loyalty is not a program, it is a feeling. Yes, the feeling of loyalty is earned and can be enhanced by consistently providing an experience that transcends the product itself with the total experience of product, service, and store environment.
Slapping the “Loyalty” label on a set of features and calling them a program does not create loyalty in and of itself. Faith Popcorn is known to have said that women don’t buy brands, they join them. The same is true of men who join Harley-Davidson, BMW, etc. We buy into brands not because of a program but because of the lifestyle image enhanced by the retail environment, inherent qualities of the product, and the level of service provided by the brands ambassadors.
If a loyalty program is a vehicle to communicate with the customer then just communicate in the first place and skip the added expenses and phony disguises.
I think the idea of loyalty programs is inherently silly in this space BUT I also think there are things luxury goods manufacturers can do to enhance their market position. Most of these revolve around enhancing the experience part of the offering–special events, previews, etc.
Loyalty programs that begin now defeat the purpose: they have to buy new stuff to be part of the loyalty program. Basing special offerings, special events, or special services based upon consumers’ past purchases (by using data already in hand) would be more successful. If you don’t have data in hand to offer special services to special consumers, then offering special services or events to all consumers to draw them into the store at this time would help.
Luxury retailers have focused upon exemplary service levels for years. The execution is very spotty, however, some infuse this into their culture better than others, also. To get a consumer to come to one store versus another, there have to be emotional drivers that compel the shopper to return, time after time.
So, loyalty programs of any type, are one way, but only one way to get shoppers to return. Luxury retailers need that exclusivity/good old fashioned snob appeal to have success. Especially in these challenging times, there are ways to do this, without necessarily costing the retail a ton of investment.
Look to other industries. BMW has done a great job with branding. What can retailers do to heighten their branding value? In these tough times, BMW has also lost far less than other car makers because they limit their product availability. They have never offered rebates. What can retailers do to give the perception of limited availability? The shopper can still be one of millions in the program or offer, they just have to think it is special for them.
The problem right now for high end retailers is simple–no customers!!!
I was in Vegas for the NGA show, and the shops at the Ceasars Forum Mall were all empty. Even folks with money are losing half their IRAs, and the last thing anyone needs is a $10,000.00 watch to match the other 6 they already own.
It will take several years to come back, and several famous stores will go under, but eventually the remaining stores will start to see some people coming in again.
Fascinating discussion because I think we’re all reacting negatively to the word “program” and all agreeing that differentiated experience is the way to go.
Luxury brands cater to making people feel special and exclusive so clearly providing access, special events and insider knowledge makes a lot of sense. The comment about velocity of goods, though, is really interesting. How you define ‘best customers’ is going to be a critical part of this exercise.
Luxury retailers and manufacturers have a problem: they extended their businesses from core luxury customers to a lot of customers for whom luxury is aspirational. In the current market there are fewer aspirational buyers which is requiring luxury goods sellers to rethink everything from their merchandise, to their marketing to their top-line goals. They have an opportunity to move away from “mass luxury” back to true exclusivity and everything we’re discussing here will help create that aura–but it’s going to mean facing some tough realities about the size and sales of their brands.
I think a more interesting challenge for luxury is this whole “culture of austerity”–no one wants to be seen walking around with a Nordstrom bag because it somehow looks like conspicuous consumption. A slick loyalty program isn’t going to help people overcome that. Time may heal the problem, but I would think that luxury retailers would do better to take a more eco/charity approach to luring shoppers. So that the Nordstrom bag proclaims “I’m helping the environment” or “I’m helping the local charity”, rather than “I have money that you don’t and I’m spending it.”
It’s not about the ‘points’ it’s about the people. People do business with people. Always have; always will. In my view, the comments above that focus on relationships (I don’t warm up to the idea of “managing” relationships) are spot on. At the heart of ‘loyalty’ is the simple idea that when you shop there everyone knows your name. Cheers!
Luxury brands have a tremendous opportunity, just like other brands, when it comes to loyalty programs.
The right program starts with the fundamentals. Programs must be specifically tied to the brand, customers (i.e. who they are and how they shop/behave) and especially how the business operates and make money. It is also important to factor in the competition and not simply replicate what they do–a very common mistake.
Ms. Banks is right that programs should be less about discounting and more focused on customer differentiation, including soft benefits.
Finally, loyalty programs are vital but it is just important to use them for relationship marketing. The data and insights are the key to driving business, it is not just the programs themselves.
People that buy luxury are the people that want to be noticed, or treated differently. So it only makes sense that a loyalty program would appeal to that group. But it can’t be the same loyalty program at the grocery store. Luxury loyalty is less about discounts and more about pampering. But I’m not sure anything will rescue luxury retailers other than a recovered economy, which will take time.
When we think of loyalty programs we immediately think of frequent shopper programs. Clearly and rightly, this is not what Ms. Banks is talking about. And, Ms. Banks is exactly on target.
Luxury retailers should start with extraordinary customer service (no they don’t always have that.) Then they should go a mile beyond that. They should connect their salespeople with their customers via email and internet. Better yet, send a handwritten note every month. All communication should be personal, not advertising blasts. Let customers know when new items are in that they may like. “We just got in a beautiful Chanel suit. When I saw it I thought of you. You should come in and see it.”
As Ms. Banks referred, there should be exclusive events. Make the customer feel special. The events should be high end, i.e. meet Diane von Furstenberg as well as collegial, i.e. Thursday afternoon wine tastings or afternoon tea.
Every activity should be uniquely and individually customer-centric. The objective should be to get the customer in the store, even if it is not to buy. Make the store a desirable destination. A place to be.
The one thing with loyalty programs offered by non-luxury brands in good times and bad, whether it’s a common specialty retailer or grocer, is that at least they are open and honest with what their loyalty programs are: An attempt at making you feel at least marginally special while offering you suspect BOGO or 10 for 1 deals.
TRUE Luxury brands (not the pseudo-luxury brands who try to position as luxury) that are getting into the loyalty program business due to their dwindling revenue and bad economy only brings to mind adjectives such as desperation, last resort, gratuitous, groveling, next step-Chap 11….