The retail world is rarely stable. We’ve seen high highs and low lows, but lately there seems to be more cause for concern.
Some well-known brands have simply disappeared, whether that means filing for bankruptcy or erasing any brick-and-mortar footprint, as we’ve seen recently with HHGregg and The Limited. Other retail brands are working to find a new equilibrium, but it’ll be a bumpy road to get there.
Could loyalty programs be the key we need to navigate this uncertain retail climate?
Abercrombie & Fitch Co. (A&F) recently launched a new loyalty program during its negative nose-dive. The program is rather simple, relying solely on points to engage and reward its best customers, with a VIP version that can earn points more quickly. For most members, every dollar spent equals 10 points, with a $10 reward coming at 2,500 points. Even with a below-average funding rate—it takes a lot of points for a minor reward—the company has seen success in the market with a similar rollout at its Hollister Co. brand.
Sephora is another great example of a stalwart brand that has harnessed its loyalty program to stabilize and improve its customer experience. The brand represents one of the few bright spots in an industry plagued by stagnant sales. In fact, its quarterly profits show record growth in the U.S. and even in China. Sephora is eating up market share quicker than competitors can keep up. It’s no coincidence that Sephora’s profits are rising while the company focuses on engaging and retaining its core customers.
American Girl’s AG Rewards program has also seen success among a passionate fan-base of moms and daughters. The company has engaged its best customers with a massive enrollment that focuses on hard benefits and unique experiences. American Girl focuses heavily on content, not just product, to enhance the member experience and provide education to young girls.
So what do these programs have in common?
Understand Your Customer
Although it occurs in different stages in their loyalty programs, one aspect remains constant for the brands listed above: they have a detailed understanding of which customers they’re targeting, who those customers are, and how their brands interact with those individuals.
It’s not an accident that American Girl and Sephora, while in different industries, are succeeding by harnessing their passionate customer bases. They’ve built brands around those individuals and they’re reaping the benefits. It’s the baseline of any great brand. Brands that understand their customers and their relationships tend to succeed where others fail, regardless of the loyalty offerings that they have in place.
Bring Your Brand to Life
AG Rewards and Sephora’s loyalty program are perfect examples of harnessing a brand image to engage customers. The programs bring the brands to life through unique experiences, rewards and events that draw on their members’ passion for their products.
A&F has taken a bit of a different approach, but with similar results. The brand has a strong customer base, yet A&F’s program is almost exclusively points-based. A&F enhances this offering by showcasing its creativity through email to embody the brand and tie it back to the loyalty program. Their craft shines through in uniquely textured backgrounds reminiscent of quality product. That background is consistently and specially used in loyalty marketing. They also have great photography that brings the brand to life in email and ecommerce marketing.
Listen and Adapt
From different angles and levels, all three of these brands have adapted to their customers.
Sephora, to a large extent, is a product of the new type of customer. It’s a digitally savvy brand that knows how to communicate in the right channels. Sephora has one of the most useful retail apps, allowing customers to “try on” product digitally. They also have clear and concise communication on rewards and offerings through email and at point-of-sale.
American Girl evolved to focus on developing rich and powerful content that shapes its brand mission to help educate young girls and provide great experiences with their families. The brand had to reimagine its content for the digital age.
But the most radical adaptation is A&F. Its customers abandoned the brand as it grew out of touch with today’s demand and didn’t fit the passions of its base. Since then, with some bumpy years in between, A&F completely shifted its target customer, while also getting back to its roots as an outfitter. Where digital was once an afterthought, it is now the brand’s main driver of loyalty.
At the end of the day, retail brands need to remember who drives their businesses forward in the first place. It’s easy to become complacent and to hold onto old methods of customer service just because they’ve worked in the past. But retail brands will only survive if they grow with their consumers and build loyalty over time.
So take a close look at your consumers today. Figure out what they need, what they want, and how you can connect with them in a better way. Build a more meaningful relationship based on loyalty, and your future will become a little more certain.