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People love subscription-based loyalty programs. One need only look to the two most famous and successful examples—Amazon Prime and Netflix—for proof. Technical athletic apparel company Lululemon Athletica has decided to capitalize on this love with its first loyalty program.
Company CEO Calvin McDonald says of the program pilot test, “The response was very strong, and exceeded our expectations.” The pilot was conducted in Edmonton, Alberta, over 700 miles away from Vancouver, British Columbia, where Lululemon was founded.
The company’s program costs $128 (about $170 Canadian) to join, and members receive either a pair of pants or shorts designed for the program and expedited shipping on e-commerce purchases. Members also gain access to monthly sweat classes and curated events. The company will continue to pilot the test program through the first half of 2019, with some expansions outside of Edmonton.
“We have a few additional markets that we’re going to be launching in,” says McDonald. “We’re very excited as we look forward to the ability to have a membership-based program where it’s driving loyalty, but guests are seeing value in this curation of services and content beyond just our product.”
The pilot comes on the heels of the opening of 38 new locations since the third quarter of 2017. Locations include 14 in the United States, 11 in Asia, seven in Europe, four in Canada, and two in Australia and New Zealand. The added stores have helped boost net revenue by 21 percent to $747.7 million in the third quarter. The net revenue was partially offset by a $9.3 million loss on the foreign exchange rate and the closure of 48 of the company’s Ivivva brand stores.
Net income rose 60 percent to $94.4 million, up from $58.9 million the year before. The company reported that earnings per diluted share amounted to 71 cents per share, compared to 43 cents per share in the third quarter of 2017. According to analysts polled by Thomson Reuters Eikon, Lululemon was expected to earn $92.5 million profit or 69 cents per share. Meanwhile, the company’s e-commerce efforts netted $476.9 million in sales, compared to $425.1 million the year before.
Tom Caporaso, CEO of Clarus Commerce, says of these results, “It makes sense that Lululemon’s premium loyalty program test has been such a success. Transactional benefits like free shipping and discounts are still important to consumers, but there’s more to it than that. To build loyalty with modern consumers, brands need to balance transactional and experiential benefits to differentiate themselves and this program does that. If the benefits are valuable enough, customers are more than willing to pay for membership.”
As Loyalty360 has seen from its own research, over 92 percent of brands understand that loyalty programs drive measurable results. In addition, we have seen that over 90 percent of brands feel they need to enhance their programs with a variety of reward options as they proceed forward. Lululemon’s decision to implement its loyalty program squares with our data and should prove to be a strategically correct move in the coming months.
Erin Raese, Senior Vice President of Global Marketing and Business Development at Aimia, adds, “We are seeing a trend toward strategic use of subscriptions, paid programs, and tiering. Lululemon has a strong following and knows its customer well, and they are using their data effectively by identifying their customer segments and matching experiences and products to interests. Building on this known and expected value exchange will further enhance the emotional bond customers have with the brand. With a clear value proposition that shows the value of the program, we anticipate Lululemon’s cult following will be flooding the stores with their loyalty acquisition.”
Phil Hussey, President of 89 Degrees, also says, “We have seen more and more brands moving away from formulaic points and discount programs towards a loyalty proposition that is more embedded in the brand experience. Lululemon provides a great example of a thoughtful approach to developing customer engagement. They are offering a nicely balanced combination of unique merchandise, an ongoing forum to meet others, and exercise with complimentary classes and curated events.”
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