Charged! How Nike, Gap and GameStop Use Loyalty to Revolutionize the Customer Experience
Merchants may not have figured out how to bottle the formula for a good customer experience, but several are learning how to fold it into a shopping bag.
More specialty retailers are entering the loyalty-marketing sphere, and they are doing so with an eye specifically toward recreating the customer experience. Unexpected rewards and communications have become pretty much a key ingredient of accomplishing this, but some merchants are taking it further.
“Discounts will always play a role in any marketing program including a loyalty one, but I do think the experiences, and providing the surprise-and-delight, are gaining much more popularity,” said Geoff Smith, senior vice president of marketing, CrowdTwist, a loyalty and analytics services provider. “Not only because of economics but because consumers like to feel like they are getting the inside track. They are getting something no one else can get.”
The need to stand apart is particularly urgent in the specialty retail segment, as indicated by the growth of reward programs over the past two years: membership among specialty stores rose 20% from 2012 to 2014, to 433.5 million memberships, according to the 2015 COLLOQUY Loyalty Census. Unfortunately, consumers are active in fewer than half of the programs in which they enroll.
This may be because consumers have higher expectations. Fifty-five percent of Americans surveyed in August 2014 said they expect improved customer service in exchange for providing personal information, according to research by LoyaltyOne, the Toronto-based loyalty operator and consultant. That compares with 45% in 2013.
The efforts specialty retailers are making underscore the need to for relevant but cost-effective personalization, and their strategies can be applied across the board. Following are some examples:
At GameStop’s Technology Institute in Austin, Texas, visitors learn about new releases in information hot spots and play games through augmented reality. The result of such initiatives: 71% of sales are tracked to the GameStop PowerUp Rewards program. “These members spend three times the amount in sales in our stores as the non-members do, and they are five times more profitable,” Tony Bartel, president of GameStop Corp., said at the National Retail Federation’s Big Show in January.
Gap, Nordstrom Rewards
Gap offers members an additional 10% off all purchases every Tuesday, traditionally a slow shopping day. Members receive advanced notice of trends and events, and silver members earn free alterations and triple-point days at Banana Republic. At Nordstrom, all members get free alterations (values vary based on tier), triple-point days and invitations to special holiday events.
Though not a formalized loyalty program, membership with the athletic shoemaker comes with access to complimentary shoe trials, exclusive releases and Nike+ services, including personal trainers and activity trackers that do not require sensors.
Toms Passport rewards
The philanthropic maker of shoes gives its members chances to meet its CEO, to get special prices on goods, and to travel with the Toms’ team on a One for One giving trip – ventures that address needs such as food security, health or gender equality.
Putting experience to practice
Companies in any industry can apply these retail efforts, though some basic principles should apply. Following are four key suggestions from industry experts:
Extend beyond spend: “Spend-and-get” loyalty programs are so pervasive they risk losing value. Instead of focusing on the transaction, Smith at CrowdTwist suggests the program should recognize, motivate and reward consumers for their engagement across all channels in the buying cycle. “I think that will be the No. 1 determinant or factor in what will mean a highly successful loyalty program versus a somewhat-successful loyalty program,” he said.
Be relevant: To resonate, the experience should answer to particular customer needs, which can be narrowed down through loyalty and other purchase data, said Howard Brodsky, author of the new book “The Unexpected” and co-CEO of CCA Global Partners, which provides business services including loyalty programs. “I think companies confuse giving rewards with being relevant. Unless they’re relevant in building a relationship, they’re just dollars,” he said. “Success is (when) you connect with the customers where they want to be connected, with things that are meaningful to them.”
Suite emotions: To be relevant, the customer experience must connect emotionally, said Dennis Armbruster, editor-at-large of COLLOQUY. “Many programs attempt this through common soft benefits, such as free shipping or a birthday thank you. These efforts fall short of reinforcing a brand's distinctive qualities,” he said. A rewards program can produce the data to recognize what makes the brand special to its best customers, then develop a touch-map to gauge all customer interactions from which it can build a suite of services to elevate the good and remedy the bad.
But be practical: While relevance and emotion are essential, the customer experience also should make practical sense, for the brand and the customer. This requires a level of personalization that can be achieved by mining marketing data, said Steven Keith Platt, research director at the Retail Analytics Council at Northwestern University. “Think of shopping at Nordstrom; when you walk in they know you and what you bought. A $5 gift card is great but it isn’t going to lock me into that level of personalization,” he said. Nordstrom’s free alterations, for example, are low-cost for the merchant and of high-value to the customer.
The bonus: The alterations session introduces an opportunity for the associate to better engage the customer with the brand.