Do loyalty programs really work? Possibly, but they only generate long-term results when coupled with a human-to-human component. According to a recent article in The Wall Street Journal, Macy’s Faces a Test of Loyalty, the company recently released a financial statistic rarely disclosed. Nine percent of Macy’s customers account for 46 percent of their sales. Those numbers are quite astounding. Macy’s revenues are approximately $25 billion (including Bloomingdales, etc.). So, 46 percent of $25 billion is $11.5 billion; a rather substantial chunk of change. Macy’s new plan is to treat those customers “better” by rolling out a new loyalty program in the fourth quarter. Is a new loyalty program going to fix what is broken at Macy’s? I don’t think so. Macy’s is not being thorough if a redesign of their company doesn’t include the crucial ingredient of customer loyalty: the human-to-human connection.
Except for a few brands like Amazon, Apple, and Zappos, customers who frequent the same retailer do so for a reason. As a customer retention expert, I think the piece of the puzzle that is missing is that a customer returns because a bond has been created with a specific person at the retailer. That person, the associate, knows their customer’s needs, provides excellent service, and keeps in touch. Loyalty programs can entice short-term sales, but human-to-human relationships are built over time. The Wall Street article also explains how Macy’s is going to carry more exclusive brands and fashionable products. Loyalty program members are entitled to free tailoring, shipping and gift-wrapping and invitations to special events. But there is no mention about developing person-to-person bonds that create the foundation of loyalty.
Why do customers return? People frequent the same coffee shop because “Mary” knows their name, gives them that big smile, automatically knows how many sugars or none at all and asks them where they have been if MIA for a few days. My theory is that most likely the 9 percent of Macy’s customers who are responsible for 46 percent of their sales are working with specific associates and not just showing up at the store randomly. If I were in charge at Macy’s, the first order of business would be to find out more about the 9 percent, their loyal customers. Why do they shop at Macy’s? What do they like and what would they change? I know one of the answers if the question is asked is going to be that the customer found a “Mary” who knows they are coming, gives them a welcoming smile, asks them about their family and has the perfect outfits set aside for them to try on.
The same article pointed out that Macy’s “touted the successful launch of Plenti, a points program that involves multiple companies including Exon Mobil, AT&T and Rite Aid. By the following quarter, Macy’s said 9 million people had signed up, but never mentioned it again.” Perhaps it was because the program wasn’t a success.
Loyalty programs designed without a human connection are short lived until a competitor comes up with a similar or better package of give-a-ways. Loyalty programs that focus on hiring the right staff, training them to build human bonds and empowering their associates to reward their loyal customers at the appropriate time, produce long-term results.
How many loyalty programs do you belong to?