Loyalty360 CEO and CMO Mark Johnson weighed in on this week’s news about Macy’s new Star Rewards loyalty program.
The venerable retailer has endured sinking sales and profits and plunging net income and same-store sales in recent years.
During an interview with WCPO television, the ABC affiliate in Cincinnati, Johnson said that, at the end of the day, loyalty programs work.
Can this new one from Macy’s work?
Johnson said that Macy’s officials say between 83 percent and 87 percent of their revenue comes from their most loyal customers.
“If they know this 87 percent and they can target them with more personalized offerings and gain an increased share of wallet, if that’s the case, there is a great opportunity to create a unique loyalty program,” Johnson said.
Customer loyalty, though, is much bigger than just a program, Johnson noted.
“A program can drive incremental results,” he explained. “But customer loyalty is much bigger than the program itself.”
Two years ago, Macy’s became a member of the Plenti loyalty program. Plenti marked the first U.S. loyalty coalition involving major U.S. brands. It offers consumers everyday opportunity to earn and redeem points with many choices.
Plenti is unique to American brands in that it marks the first-time consumers in this country will be able to earn points through a variety of purchases across numerous industries. Unparalleled in its ease and convenience, Plenti will, for example, allow consumers that earn points on fuel purchases at Exxon Mobile, to use those points for discounts on food or cosmetic items at Rite Aid.
Johnson is skeptical about Macy’s success with Plenti, given the launch of the Star Rewards loyalty program.
“The Plenti coalition loyalty program hasn’t really taken off in the U.S.,” Johnson said. “I don’t think Macy’s would be rolling out a new program if Plenti was that successful. The big challenge with coalition programs is the earn and burn piece. Do you have short-term, mid-term, or long-term redemption options, aspirational value? The biggest problem with coalition loyalty programs is the sharing of access to data. Is it advantageous to Plenti or truly to Macy’s and other entities in it? It may not be going as well as they hoped it would.”
Macy’s CEO Jeff Gennette wants to create simplicity with the new loyalty program.
“That is the biggest challenge we’re seeing,” Johnson said. “Creating simplicity is something we talk about consistently with brands. Some of these loyalty programs are complex and arcane. Creating the simplicity is very, very important.”
Johnson said that, if 87 percent of Macy’s revenue comes from its most loyal customers, chances are they are most likely credit card customers.
“You’ve got to be careful about pricing because it gets down to behavior,” Johnson explained. “Customer loyalty is about behavior.”
Macy’s new Star Rewards makes it simple for customers to receive benefits with every Macy’s purchase. Based on annual spend, customers with a Macy’s credit card will be automatically enrolled into one of three levels: Silver, Gold or Platinum. Rewards are tiered by level, with Macy’s best customers receiving benefits that include free shipping, additional savings and earned points on every purchase.
What’s more, cardholders are automatically upgraded to the next tier when annual spend reaches the new level. The program was developed with the customer in mind, based on a careful analysis of evolving shopping behaviors and consumer preferences.
“The program can be very successful, but Macy’s has to address that in-store shopping experience as well,” Johnson added. “All this technology is supposed to create that simplicity and personalization. But it’s done the exact opposite. It’s almost caused that deer in the headlights mentality where CIOs and CFOs won’t make these investments. The successful programs are creating simplification and personalization. There is alignment internally between the product offering and what the customers want. If they’re moving away from Plenti, there’s something there that Plenti is not offering them.”