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Consumer Rewards

July 25, 2014

Catherine Salfino

In the competitive world of retail, the grand prize is a loyal customer. But with today’s expansive apparel shopping choices — from mass market to department stores, independent boutiques to ecommerce sites — it isn’t likely that consumers will always shop the same venue. Before customers are pulled in too many different directions, experts say stores should give a second look as to how they’re implementing — and what they’re learning from — their loyalty programs.

[quote]James Dion, president of Dionco, a Chicago-based retail consultancy, says a big plus for loyalty programs is the customer information they impart.  The only thing is, retailers have to work at getting it.

“The more you can tie every sale in your store to a specific customer, the better off you are,” Dion says. “Say one vendor is hot with women ages 30-to-45. And say I have 1,500 customers who love that brand.  If I have this information, I can notify those customers first and foremost about new product or exclusive items. If retailers are using that data and mining it properly, it can be very, very powerful.”

Generally, consumers will shop for clothes at a variety of retail levels. Most shop at mass (24%) and chain (23%) stores, followed by department (13%), specialty (12%), off-price stores (9%), and online (8%), according to the Cotton Incorporated Lifestyle Monitor™ Survey.

“Many apparel retailers don’t even offer loyalty programs,” Dion says. “Stores like Forever 21, H&M or Zara say, ‘We have the latest, hottest fashion at the best price,’ and shoppers will go. Other times, people are driven by convenience, and they’ll stop somewhere at lunch or on their way home from work. That’s why I joke, if you want loyalty today, buy a dog.”

Despite the humor, Dion and other experts say when done right, loyalty programs can be beneficial. That’s because more than half of all customers (55%) say they “like/love clothes shopping,” and more than two-thirds (68%) plan their apparel purchases, according to the Monitor. This means tenacious retailers would do well to take advantage and remind customers of their previously successful shopping experiences.

Leandro Perez, director of product marketing for TIBCO, a global firm specializing in infrastructure and business intelligence software, says despite the changes to retailers’ loyalty programs, which historically gave benefits like rewards or discounts to store credit card holders, there is room for improvement.

“There is a huge opportunity for apparel retailers,” Perez says. “TIBCO would recommend extending program reach to any form of payment, not just the store’s credit card; integrating more forms of customer engagement as both a means of better understanding customer behavior, and as part of the loyalty scheme itself; and enabling a far stronger mobile experience — especially when the customer is in or nearing a location, or is online.”

Perez adds that stores should be using information that is gathered analytically to create stronger, more actionable and intuitive marketing, as well as testing the effectiveness of increased communications on areas such as MROI (marketing return on investment).

When asked about one thing an apparel retailer could do to encourage consumers to buy clothes from their stores, the majority of consumers cited competitive pricing strategies like “lower/better prices” (41%) and “sales/promotions/discounts/coupons” (29%), according to the Monitor.  Women are significantly more likely than men to say they would be most encouraged to shop at a retailer that provides more “sales/promotions,” while men are more likely to cite “low prices.”

Dion says all levels of stores can do things like keep track of a customer’s coupons, special offers or loyalty points to reward customers in-store or online.

“There’s nothing worse than being an alleged valuable customer, but they can’t look me up or give me my deal because I don’t have my card or coupon with me,” Dion says. “The technology is there to make customers feel special. Retailers just have to use it.”

Even independent stores can tap into loyalty programs through companies like Belly, he says.

“Belly offers retailers a great mobile app that provides a tremendous amount of tech sophistication,” Dion explains.  “You can geo-fence your customer and send push notifications or emails to people when they’re near your store. A customer has to sign up and give permission for that, but it allows you to reach out to them, send incentives and draw them in.”

Even notifications that new product is in could entice consumers. The Monitor finds 43% of shoppers would like their favorite store to offer new styles once per month or more.

Perez says loyalty programs require operational discipline, and can be costly if not effectively managed between marketing and finance teams.  However, he says, the pros outweigh the cons in that these programs represent an “opportunity to gather really meaningful information about shopping behavior, market through more innovative channels and with far greater relevance of messaging, and develop wonderful, mutually valued relationships with the store’s best and better customers.”