• by Laurie Sullivan , August 28, 2007

Borders has launched a Rewards Perks program to thank loyal customers. An e-mail blast began introducing the program to its more than 20 million Borders Rewards members in mid-July, with a plan to have the rollout complete by the first week in September.

The Perks program gives consumers exclusive deals on more than 2,000 products and services from hundreds of merchants. Some of the deals include 15% off at Brooks Brothers, 10% off at Blue Nile, free FedEx shipping, or 10% off at Hewlett-Packard. There are special discounts on car purchases from Chevrolet, Ford Motor, Honda, Nissan, and Toyota, too.

The process to opt into the Perks program requires consumers to answer a series of questions that Borders will use to target coupons and savings. The process asks for marital status and requests answers to purchasing decisions on topics such as electronics, baby items, or home and garden gadgets.

The Perks program also offers travel incentives from Orbitz, such as $100 when booking a flight and hotel package for five or more nights on purchases made through March 31, 2008. Upgrading to Perks Plus for $29.95 annually gives consumers exclusive savings and benefits from Philips, Kate Spade, Cole Haan, and others.

Today, the Perks program provides coupons related to questions answered during the opt-in process. Eventually the system could tie in to Borders' in-store, point-of-sale cash system and analytics software that monitors purchases. Consideration on provisions to protect consumer privacy are under review.

The process would also consider purchases to target consumers with coupons through e-mail and at the point of sale. Along with the sales receipt, the POS system would spit out a coupon targeting the consumer during the time of purchase, according to Welington Fonseca, Borders' director of loyalty and gift card marketing. "We're not quite there yet," he says. "It will take some time before we can build the database that enables us to be successful with that type of program."

Retailers typically begin rewards programs by tracking consumer purchases to understand buying habits better. The retailer eventually adds business intelligence and data mining software known as predictive analytics that analyze historic purchases to forecast future sales, says Suresh Vittal, senior analyst at Forrester Research. "The challenge is to match the sale with discount offerings in real time," he says. "While many retailers attempt to target consumers with relevant incentives at the point of sale, few do it well."

It requires the retailer to integrate store and Web site payment systems into backend operational systems and data warehouse, Vittal explains. For example, a loyalty card keeps track of the items purchased at the point of sale. Software in the registers collects the data and transmits the information to backend systems located at the company's headquarters, which in turn makes the decision on what discount coupons to spit out at the time of sale. So, if the consumer purchases two books on home improvement she might get back a 20% coupon from Home Depot along with her receipt.

Business intelligence software relies on sophisticated modeling and statistics that turn raw data into useful information to help companies understand what's likely to happen. Both American Airlines and sports apparel maker Puma rely on predictive analytics software from SPSS to increase customer loyalty, but sometimes companies will use the software to determine the products and the services selling best, as well as make inventory decisions.

For Borders, the move ties into a bigger IT initiative that began in 2004 when the company set plans in motion to overhaul its IT infrastructure, in-store software platforms and back-end systems that support Borders Group stores, which included Borders Books & Music and Waldenbooks divisions. During the same year, it inked a major e-commerce partnership with Amazon.com, which will change when Borders launches a new Web site in early 2008.