Situation

Talbots launched Classic Awards, one of the first retail credit card loyalty programs in the U.S., in 2001 after extensive testing. The goals were to increase the Talbots Charge card base, as well as drive usage and sales. The structure was simple: Charge customers earned 1 point per dollar spent and received a $25 reward when they earned 500 points.

Although the classic women’s apparel retailer considered the program an ongoing success with an average 6 percent increase in sales annually and 91 percent redemption of rewards, Talbots asked CCG to review the Classic Awards program beginning in 2006. Not only was the retailer faced with increasingly competitive rewards programs from both bank and other retail private-label cards, but the portfolio size had also remained flat and penetration was beginning to show signs of decline.

CCG was also asked to determine if the refreshed Classic Awards should be launched in Talbots’ Canadian market, which had never participated in the Charge loyalty program.

Solution

After extensive research, CCG recommended that Talbots leverage the high awareness and participation in the existing Classic Awards program, but expand it to track, reward and ultimately drive the behavior of non-Charge customers. Our transactional analysis combined with primary research showed that there was a significant opportunity to better serve these core customers. But part of the challenge in expanding the program was ensuring that we continued to encourage use of the Talbots Charge, which is more profitable for the retailer.

CCG recommended that the refreshed Classic Awards be structured as an umbrella loyalty program comprised of three tiers based on member’s payment method and total spend. Members who pay with non-Talbots Charge methods participate in Classic Awards Red and earn .5 points per $1 spent. Members who use their Talbots Charge for payment earn 1 point per $1 spent in the Platinum tier. Once they spend $1,000 on their Charge they become Black and earn 1.25 points per $1 spent. The Platinum and Black tiers also have escalating benefits, such as higher birthday bonuses and point rollover.

CCG’s detailed recommendations and business case outlined the overall program structure, benefits for each tier, marketing plan, business requirements, line-item budget for incremental costs, anticipated participation rates and ROI pro formas. We have also partnered with Talbots on implementation and management of the program.

The new structure accomplishes the program goals to:

  • Establish a one-to-one dialogue that fosters loyalty with non-Charge customers
  • Encourage non-Charge customers to visit and spend more
  • Maintain the simplicity and leverage the infrastructure of the existing Classic Awards program
  • Provide greater benefits if customers pay with a Talbots Charge

CCG ultimately recommended that Talbots consider another alternative for their Canadian stores since that market is already saturated with loyalty coalition programs offering higher funding rates that would make Classic Awards less compelling.

Results

Initial results show that despite launching during one of the worst periods for retail sales in recent history, the program is driving sales from members. And Talbots Charge penetration is currently at the highest level in the company’s history.

  • Total Classic Awards participation is up more than 10 percent
  • Almost 30 percent of enrolled Classic Awards members are new to the database
  • Overall members spend 79 percent more and shop two times more than non-members
  • Store Managers rate launch of program 4.5/5.0 (5.0 = very satisfied)