Having a healthy business model is the be-all-end-all for every company. A strong team of sales associates doesn’t do any good if your business can’t create loyal customers. Loyal customers don’t do any good if the cost to retain them outweighs the revenue they generate back to your business.
One way to ensure a healthy business model is by operating a cost-effective customer loyalty program. For retailers especially, these programs are incredibly important in order to mature and grow. One retailer that has found tremendous success with its customer loyalty program is New York & Company. By tacking tough challenges head on and engaging shoppers how they want, the fashion retailer now sees 40 percent of sales come through its loyalty program.
Who is the New York & Company customer?
A loyalty program can only be impactful if you truly know who your customer is, so we have invested time and resources into really getting to know our shopper. The New York & Company customer is between 30 and 50 years old and has been trending younger in the last couple of years. She is extremely busy carrying potentially multiple jobs, finishing college and has children. She has limited time to shop and is looking for the easiest way to get things done, therefore she is extremely mobile-centric. Seventy percent of our email click activity is on a mobile device, so it is extremely important to mobile optimize all digital marketing and eCommerce experiences.
How does the loyalty program work?
Our loyalty rewards at New York & Company is through a private credit card program, which has two tiers: Gold (customer spends up to $400 annually) and Platinum (customer spends $400+ annually). Although there are other perks, the program’s main benefit is the gift card reward. Gold members get a $10 gift card for every $200 they spend (or 5 percent back) and Platinum members get a $20 gift card for every $200 they spend (or 10 percent back).
When a customer becomes Platinum they are twice as valuable to us, since they’re visiting and spending twice as much as Gold. Therefore, the two most important strategies for the program are customer acquisition into the program and upgrading the tier. The easiest way to drive both of these is communicating the value of the gift card reward.
Email is our biggest sales driver to stores and online and therefore, continues to be the most important marketing vehicle for the program. We currently send two emails per day to every customer and change up offers on a daily basis to keep her engaged.
What were some challenges you and your team focused on improving?
Once a customer earns her reward gift card, she has 60 days to redeem it. Before I joined New York & Company, redemptions averaged around 28-30 percent. That conversion seemed too low to me, especially if this gift card reward was the primary value of the program.
After some research and analysis, we identified three main areas we needed to focus on in order to better drive the rewards value to our customers.
- Communication: Traditionally, customers would get their reward via email, and anyone who wasn’t on the list received the reward via direct mail. However, since email open rates aren’t 100 percent, the rewards were being missed. We needed to figure out how to improve our communication to get the reward in front of our customers.
- Ease of Use: The way our program was previously structured also wasn’t very easy to use. The customer could access their reward in their credit account online, but customers wouldn’t typically login unless they had to pay a bill. We simply needed better accessibility overall.
- Better Reminders of the Reward: Finally, we needed to enhance the straightforward communication of, “Hey, you still have a reward to use!” and complement that message with something more recent and relevant to encourage customers to redeem.
What solutions did you implement to address these challenges?
Once we had our core challenges identified, we were then able to come up with strategies and tactics that addressed each:
- Direct Mail Collaboration: In addition to sending rewards via email, every customer now also receives their reward gift card through direct mail. We’ve found that customers who get the same communication in both forms of marketing are much more likely to respond and redeem.
- Mobile App Integration: With seventy percent of our email click activity on a mobile device, it was necessary to launch access of the Loyalty Program through our app. If a reward is available, it can be accessed through a tab in the app. This alone has driven redemption up to fifty percent.
- Email Cadence Change: Finally, we’ve changed our email program to add any outstanding reward to the top of every Friday email, just in time for the weekend. In addition, instead of sending the customer their reward via email as soon as they earned it, we changed the cadence so that rewards are now distributed with every new set change, such as when new merchandise hit the floor and online. Aligning these events encourages the customers to use their reward immediately. It also has customers visiting the site more frequently and for longer periods of time, thus increasing their spend.
What kind of results have you seen with these solutions?
With the implementation of these new initiatives, we’re very proud of the impact we’ve seen on the business:
- Improved Redemption: Giving our customers a better reason to engage and making the rewards more accessible increased our redemption rate from 30 to 45 percent, which has been a huge win for the company.
- Increased Mobile App Engagement: We estimated to have driven an incremental $8 million in the first half of the year, since adding the rewards piece to the mobile app, not to mention the long term impact of the increase engagement can drive in the future.
- Growth in Sales Contribution: Our loyalty program now makes up 40 percent of overall company sales – much higher than most retailers in the industry, which clearly indicates strength in loyalty and retention altogether. While a good amount of this loyalty existed prior to some of the enhancements made in the last year, it continues to grow with these changes.
The retention program has been a very big project for New York & Company. With it representing such a large piece of the business, its success becomes even more significant. Although we’ve seen tremendous success with these changes, we are dedicated as an organization to continue to test, learn and optimize this program.