How to Create a Best-in-Class Retail Loyalty Rewards Program: A Look at Talbots’ Classic Awards

January 26, 2017CCG Retail Marketing Blog

Four Factors of a Best in Class Loyalty Program

See how this national fashion retailer used four loyalty best practices to push its customer engagement — and profits — to new heights.

By Sandra Gudat, President/CEO

Nearly 100 major retailers have taken our Loyalty Marketing Assessment since its introduction in mid-2016. The Assessment grades customer loyalty programs to help retailers understand where their program stands in relation to other retailers. Levels include Challenged and Middle of the Pack, with the highest rating reserved only for outstanding loyalty programs: Best in Class.

Of those retailers who have taken the assessment thus far, only 22 percent received a Best in Class rating. Women’s fashion retailer Talbots represents the top of the scale with their customer loyalty program, Classic Awards.

There are some key characteristics that make Classic Awards one of the best retail rewards programs in the industry, and Talbots has graciously agreed to allow me to share some of them with you.

Improve your loyalty program by being inclusive.

Simply put, being inclusive is good for your customers and your data.

Talbots launched Classic Awards in 2001, and it was an integral part of the retailer’s customer retention and growth strategy specifically targeting Talbots credit card customers. Over the years, as consumers have become more reluctant to use store credit in general and as competition from Visa and MasterCard has increased, Talbots has changed and expanded its loyalty program to include customers using all forms of payment.

  • Case Study: Read about Talbots’ journey to updating — and improving — its Classic Awards loyalty program. [Read Now]

Talbots expanded its strategy earlier than many other retailers. The move not only drove more brand loyalty, but just as importantly, expanded the profile of customer data collected. This gives Talbots a better chance of garnering a 360-degree view of their customers’ buying patterns, as well as capturing data from those customers who do not carry a Talbots card.

Additionally, the loyalty program is well-integrated with Talbots’ ecommerce efforts. As a result, Talbots tracks an extremely high percentage of overall transactions at the customer level, and this data and insight is shared and used throughout the organization, not just in the marketing department.

I’ve seen many retailers get “stuck” with program constructs that limit customer engagement, thereby limiting the quality of data collected. By expanding its program early on, Talbots got a huge head-start on collecting customer data that has become a rich source of organizational customer insight.

Increase customer engagement by incorporating reward program tiers.

The Classic Awards program has a tiered membership structure: Loyalty Card, Talbots credit card and Premier credit card. The more commitment the customer makes in terms of taking out a Talbots credit card or spending more of her wardrobe budget at Talbots, the more rewards she earns. The very best customers earn the best rewards, and Talbots utilizes the program to identify and recognize best customers in store. The Loyalty Card tier provides non-cardholder customers with a membership option that does not require a Talbots credit card.

Over time, Talbots has been very intentional about which benefits are offered at different levels of their program, so that customers are motivated to engage and spend more to achieve them. This is what we call “aspirational momentum,” a very important customer loyalty program design strategy to consider incorporating into your loyalty program design if you haven’t already.

  • Case Study: See how we helped one national fashion retailer boost incremental sales and profits by optimizing their tiers and benefits mix. [Read Now]

Improve your loyalty program by offering a balanced mix of benefits.

The Classic Awards program incorporates both financial, or “hard,” benefits and non-financial, or “soft,” benefits. Members earn points for purchases, and when they hit a threshold they earn a $25 “Appreciation Dividend.” Talbots has carefully constructed Classic Awards in a way that balances the percentage of members who earn this reward. Soft benefits to broaden the appeal of the program, including exclusive shopping hours, fashion content, member-only experiences and free shipping.

There is a science to constructing financial benefits that motivate customers to consolidate their category purchases with a single retailer while at the same time promoting incremental spend. In other words, you need to offer enticing benefits that customers want to earn, that also get them to spend a bit more.

It is imperative that retailers carefully create financial models for hard benefits so that the right number of customers earn them.

  • Too many customers earning a rich benefit will lower program return on investment and beat up margins because there is not enough incremental spending occurring to offset the cost of the benefit.
  • Too few members earning a hard benefit can signal a lack of engagement in the program.

For instance, years ago a major automotive retailer required customers to spend $1,000 to earn a free oil change. Most customers found that unachievable and disengaged themselves from the rewards program.

Soft benefits allow retailers to hedge their bets by offering less costly program benefits that more customers can earn. One reason Talbots earned a Best in Class rating as one of the best loyalty programs in retail is because they strive to maintain that crucial balance in their program benefit offerings.

Improve your loyalty program performance by communicating rewards status and its value proposition early and often.

Talbots updates members on their rewards and membership status at least quarterly. The retailer also includes the Classic Awards value proposition in most of its customer-facing communications. Additionally, customers may access their current rewards status online at any time.

Shockingly, our customers are not thinking about our loyalty programs all the time! Most consumers are members of at least a dozen or more rewards programs at any given time so it’s easy for our program to get lost in the crowd. Many retailers passively communicate rewards status and their value proposition by providing it online and expecting customers to take the time to fire up their devices, go to the retailer’s website, find the program microsite and remember a password and login to obtain this information.

To gauge whether customers are actively engaged in your program, calculate your percentage of member transactions compared to overall transactions. If the result is not where you think it should be, consider additional ways to promote the program (at least a simple description) through customer-facing communications — such as FSIs, promotional emails and social media. The point is that you always want to reinforce to customers that if they do X (e.g., spend $200), they will get Y (earn a $10 reward and receive invitations to members-only sales events).

By providing members with their status and reminding them what’s in it for them, Talbots actively drives their loyalty program’s performance. Talbots also earned extra points because they put loyalty members in the driver’s seat by giving them direct control over the communications they receive, from choosing their preferred channel of communication to setting how often they get updates.

Four Factors of a Best in Class Loyalty Program

In conclusion, Talbots Classic Awards earned a Best in Class rating because of four critical factors:

  • Its commitment to continually improve and evolve Classic Awards over time as Talbots’ customers, competitors and the industry have changed.
  • Its position as a student of its customers — offering a program in which many customers want to participate, enabling Talbots to collect customer data and insight that has become the lifeblood of the organization.
  • A program that balances hard and soft benefits so it’s a win-win for both the company and its customers.
  • Its efforts to ensure that customers stay engaged by frequently communicating the value of the program and the customers’ place within it.

All of this makes Classic Awards one of the top retail loyalty programs and truly Best in Class.

More Retail Loyalty Program Features Worth Emulating

Looking for more inspiration? Learn from some of the best with these articles that look at stand-out retail customer loyalty components and programs:

 


Is your loyalty program best in class or merely so-so? How does it stack up to other retail loyalty programs? Discover strategies and steps to build loyalty specifically for your business and boost the bottom line: Take the CCG Loyalty Marketing Self-Assessment.

Sandra Gudat is president & CEO of Customer Communications Group (CCG), a full-service customer relationship marketing (CRM) agency that helps Fortune 2000 retailers and financial institutions improve their bottom line by improving their customer relationships, loyalty and retention.