Stealth Marketing for Retail Loyalty Programs

Six examples you can learn from and leverage to enhance your loyalty efforts.

By Lane Ware, SVP Consulting and Account Services

Stealth marketing for retail loyalty programs and CRM initiatives isn’t a new concept. But it’s almost surprising how well they’re thriving today, despite our connected, transparent, share-everything-with-everyone world. Modern technology, in fact, has provided a boost to these undercover marketing efforts by assisting retailers with two essential pillars of any effective loyalty effort: capturing customer data and tracking behavior throughout the purchase cycle — all to increase customer engagement.

Why try a stealth marketing initiative? Retailers have many reasons, from testing a new loyalty program, tier or approach, to seeing how well a CRM plan addresses business challenges. And there are many different ways to approach it, whether you present it as a traditional (if clandestine) loyalty program, hide it within a mobile app or simply keep a hush order on promoting program specifics.

To get a taste of how your competitors are using stealth marketing tactics — and perhaps pick up some ideas for your own loyalty and CRM initiatives — we’ve rounded up six real-life stealth marketing examples from the retail world.

Petco: Recognizing “Top Dogs”

Several years ago, we worked with Petco on Top Dog, a stealth loyalty program targeting the top 10 percent of the chain’s customers. These customers were rewarded and recognized through regular communications and even had a unique Top Dog membership card.

PETCO Pals Best of Class | TOP DOG

At the time, the store’s standard loyalty program, PALS Rewards, provided a wealth of data. Using that, we were not only able to identify best customers, but also had access to their type of pets, shopping frequency and basket mix. The new Top Dog program was designed to test both communications and benefits targeted by pet type; and eventually the learnings were layered into the retailer’s mainstream PALS program.

Target: Testing Perks and Discovering Quirks

Even in today’s era of forced transparency due to the internet and social media, retailers are still leveraging stealth marketing tactics for testing. In 2015, Target tested REDPerks, an app-based mobile rewards program, in the Raleigh-Durham, N.C., area. With REDperks, customers received a 5 percent off coupon after accumulating 5,000 points. Despite some publicity, Target kept the test on the down-low and eventually transformed the test into “Cartwheel Perks” in the Denver, Houston, San Diego and St. Louis areas.

While the stealth REDperks app was originally separate from the Target app and Target’s Cartwheel app, the new iteration of the program is integrated into Cartwheel. This allows customers to select deals for products on their phone and then have a bar-code scanned at checkout where savings are deducted.

The new perks feature allows customers who download the Cartwheel app to receive 10 points for every dollar spent at a Target store, with the exception of CVS pharmacy purchases and gift cards. Once users reach 5,000 points, they may redeem the reward for merchandise that ranges in value from $10 to $20, including free sunglasses, laundry detergent and athletic apparel.

The change was made to simplify the program after the retailer discovered that consumers perceived the rewards and gifts as more valuable than a discount.

Testing the REDperks app separately paid off for the retailer. It didn’t take long for some shoppers to figure out how to game the app. Upon enrolling, new members received 250 points — enough for a “special introductory Perk,” such as a free Target Cafe item, a free drink at Starbucks or a free “checklane treat.”

Target defined a “checklane treat” as “any food or beverage item found in the checklane,” such as a soda or a snack. But some Perks members soon discovered that the “checklane treat” bar code worked on much more valuable items, such as 24-packs of water; multipacks of Red Bull, Gatorade, Snapple, Coke and Starbucks; and family-sized containers of snacks.

That was just the beginning. By signing up for the Perks program multiple times under different identities, shoppers found they could get multiple introductory Perks rewards. The nefarious activity reached its height during the midst of the holiday shopping rush when shoppers showed off their hauls online, displaying photos of carts filled with high-value freebies, and describing their plans to go back for more. That is, until Target caught on to what was happening and shut down the loophole.

Walmart: Mobile App Camouflage

Mobile apps are rapidly gaining momentum as cloaked loyalty programs. And they offer some attractive features, including real-time capabilities, push messages, mobile wallets and bot usage.

Even Walmart, who has never been a proponent of traditional loyalty initiatives, is piloting an app that acts a lot like a traditional loyalty program under the covers in four markets. Walmart has always said that a loyalty program doesn’t fit within its EDLP positioning, yet its “scan & go” app, which allows customers to skip the checkout line by scanning product barcodes and even paying through the app, is designed to collect data and engage customers.

It not only provides valuable information on what customers are purchasing, but also tracks the length of time they’re shopping in the store, and what offers and coupons might drive future purchases. Customers appreciate the convenience, and Walmart collects valuable data.

Devil’s in the details … or is it?

Another way to avoid public exposure is to simply avoid giving the details. Zappos created an Elite tier that is advertised with associated benefits — except it doesn’t provide any details on how you become an Elite member.

The Elite Tier is an exclusive, invite-only Tier. Like the other Tiers, Elite Tier status lasts from the date you join the Elite Tier until the last day of the next full Rewards Year. Although joining the Elite Tier is by invite-only, in order to remain in the Elite Tier, you must continue to earn 6,000+ Rewards Points each Rewards Year. Zappos Rewards

Two QSRs Add the Element of Surprise

Quick serve restaurants (QSRs) seem particularly fond of providing stealth rewards — or perhaps it’s a case of two competitors keeping their rewards confidential from each other. Both Caribou Coffee and Panera Bread play up the surprise and delight of their loyalty program benefits — but choose to leave the details to the members’ imaginations.

Customers enrolling in Caribou Coffee’s Perks program earn a free medium drink for registering. Members who opt-in to receive email or text messages are notified each time they earn rewards, which Caribou says will always be a surprise. Rewards may include a beverage size upgrade, an item from the bakery case or a favorite Caribou drink.

EARN REWARDS + BEST OFFERS

It’s a surprise! The more you visit, the more Perks you’ll earn, plus members get the most and best offers

What types of rewards can I earn?

Perks can vary based on when and what you buy. Sometimes it will be a size upgrade, or it could be 50% off your next beverage, or even one of your favorite Caribou drinks on the house!

Panera Perks advertises that membership allows you to earn rewards and receive the best offers. But it leaves the details open-ended:

Simply put, we want to reward you for what you already do — enjoying all your favorites at Panera Bread®. Just present your card every time you visit; we’ll swipe it and once we get an idea of what bakery-cafe items you prefer, we’ll do our best to reward you with more surprises based on what you love. It’s another way we say “thanks” for choosing us!

Both programs offer highly personalized rewards and, despite the lack of details, have a high perceived value.

Worth the Risks and Rewards

As technology continues to evolve, the opportunities for stealth marketing strategies and tactics will increase — but so will the pressure of online and social media exposure. Still, strategic and innovative retail marketers will continue to find ways to test and provide compelling personalized rewards through clandestine efforts. Not to mention collect and track a wealth of data from the initial purchase intent through the post-sale.

Our retail marketing experts can help you with public or stealth retail loyalty strategy and tactics. Check out our retail marketing services for all the ways we can assist you in achieving greater success. For a complimentary one-on-one discussion, call us at 800.525.0313 or email us today.

As CCG’s senior vice president, consulting and account services, Lane Ware combines strategic expertise and experience in multiple industries with implementation and project-management skills.