Competitive pressure has pushed large retailers into doing everything they can to entice customers to shop with them again and again, which has led to many area department stores adopting some form of “preferred customer” or “frequent customer” program.
These programs identify heavy spenders and frequent shoppers by their store charge account activity and then reward them for their patronage with perks ranging from free gift wrap to luxury cruises.
The whole concept of rewarding loyal customers is an idea that the airlines invented years ago.
“The airlines have frequent-flier miles; we think of our program as wardrobe miles,” explains Bette Chabot, director of marketing for Saks Fifth Avenue, which has a Saksfirst program that gives customers gift certificates based on specified percentages of their total annual spending.
Neiman Marcus was one of the first retailers to craft a frequent customer program, known as InCircle, about a decade ago, says Richard Barlow, a consultant and president of Cincinnati-based Frequency Marketing Inc. “But in the last three years, there has been a lot of activity with other stores launching their own programs.”
Barlow notes that customers respond more enthusiastically to “hard benefits,” such as gift certificates, rather than “soft benefits” such as the ability to shop during special hours reserved for preferred customers.
“Hard benefits are those items or services for which the customer would otherwise have to pay,” Barlow explains. Because hard benefits carry more punch, Barlow says stores are moving to provide more of these palpable perks.
Whether the perk is pricey or modest, customers value tokens of appreciation.
“At Christmas time,” relates Jan Drummond, spokeserson for Sears Merchandise Group in Hoffman Estates, “our Sears Best customers were invited to come in the store early, meet management and receive a free box of gourmet chocolates. We had lines out the door.”
Adds Linda Swanson, manager of Marshall Field’s in Oakbrook Center: “Our Regards customers can show their gold credit card at the coffee bar and get a free cup of coffee. It may not sound like much, but we give out thousands of free cups of coffee.”
At Saks, customers who spend between $5,000 and $10,000 a year get a gift certificate worth 4 percent of their purchase amounts, while customers spending more than $10,000 receive 6 percent in certificates.
And at Neiman Marcus, InCircle customers who spend $75,000 can choose among several events, including the Masters golf tournament and the Super Bowl, and receive admission for two, as well as first-class airfare and accommodations.
Relatively young customer appreciation programs are in an evolutionary process at most stores, with marketing executives experimenting with perks. Indeed, in many instances stores don’t provide their frequent customer group with a list of an exact array of benefits they can expect, but instead shower them with unexpected gifts.
“We like to surprise our customers,” notes Ed Carroll, executive vice president of marketing for Carson Pirie Scott.
Christine Miller, executive vice president of marketing for Bloomingdale’s, says the store’s Premiere customers receive periodic perks in the mail, such as discounts on merchandise or an invitation to private previews.
In nearly all stores, preferred customers are given specially marked charge cards. For example, Sears Best members receive a sticker to affix to their plastic.
So how does one rate special status? The formula varies from store to store.
At Neiman Marcus, customers are automatically enrolled in the InCircle program with their first charge purchase, earning one point for every dollar spent. At the 3,000-point level, they receive a special charge card and benefits.
At Saks, customers need to spend $2,000 on their charge during the year to qualify for Saksfirst membership. Recently, though, the retailer introduced Saksfirst By Choice, notes Chabot, in which customers falling just below the $2,000 threshold could elect to spend $50 for membership.
Sometimes membership in a program involves a formula that also looks at the frequency of a customer’s visits and the number of different departments the customer shops in.
Sometimes, though, stores are upfront about who is eligible for membership. At Saks, for instance, pamphlets touting the Saksfirst program are available on many counters.
Swanson of Field’s notes: “To be eligible for our Regards program, you need to spend $1,600 during one year. That’s no secret. We will tell customers when they ask.”
Recently, at least two Chicago-area retailers-Bloomingdale’s and Nordstrom’s-have introduced co-branded Visa cards for preferred customers. Customers can use this Visa, which carries the store name on the plastic, in the store or at any other location that accepts Visa. Both cards offer customers rebates on purchases, wherever they shop with the card, that can be applied to future store purchases.
Consultant Barlow notes that co-branded Visa cards also allow the stores to study transaction histories of their preferred customers both inside and outside the store. There’s nothing illegal about this, he maintains, but he also says that the stores do not make it clear to customers that they will study such transaction data.
Mary J. Culnan, a Georgetown University business professor who is an expert on consumer privacy, agrees. “Harm is not going to come to the consumer unless the information is used irresponsibly,” she says, “and that is not going to happen. But the issue is that the customer should know it is happening, and if it bothers them, they can choose not to get the card.”
But Vickie Woo, a spokesperson for Nordstrom’s, says her company “absolutely does not look at transaction history. We just want to see how often customers are shopping at Nordstrom’s.”
Miller notes: “We don’t look at where customers are shopping outside of Bloomingdale’s. We are only interested in Bloomingdale’s shopping patterns.”
