Nordstrom ups the ante with new loyalty program

Last week Nordstrom, the U.S.-based fashion retailer, announced the launch of a new loyalty program. Despite its rather uninspired name, The Nordy Club is intended to broaden customer engagement while increasing earn rates by 50% for members paying with a Nordstrom credit card. The new program also offers more access to services and personalized offerings.

At first blush, Nordstrom seems to be emulating what brands as diverse as Neiman Marcus (Note: I worked on the InCircle redesign some 10 years ago), StarbucksUlta and others have long recognized. First, an engaging rewards program is a foundational element for gathering data and leveraging customer insight. Second, programs that have what amounts to a cash-back feature—as many do when they rely on gift cards as primary redemption vehicles—can often provide discounts more cost effectively than one-size-fits-all promotions. Third, reward points create a currency for highly targeted offers to drive specific desired outcomes for the retailer. Fourth, through the use of well designed tiers, the best loyalty programs provide “stretch” incentives that encourage customers to spend more to earn higher rewards and obtain access to unique services and experiences.

At their core, the best in breed reward programs focus on two components. First is transactional loyalty. Here the brand is simply providing a tangible value exchange for increased shopping behavior (and better access to customer data). Calling this “loyalty” is a bit misleading, as this is more akin to bribery. While this program feature incentivizes customers to increase their spending, many customers will respond because they are essentially leaving money on the table if they don’t. The more strategic program designs recognize that true loyalty is an emotion.  In this case leading programs typically use accelerated point accumulation and more experiential offerings to further engender a deeper connection to the brand. This typically includes preferential access to merchandise and events and special or enhanced services (free alterations, valet parking, etc). In this regard, Nordstrom isn’t breaking any new ground.

What does appear to be more on the leading edge, however, is how Nordstrom is leaning into at least 4 of what I call the “8 Essentials of Remarkable Retail.” And this provides the potential for meaningful competitive advantage if done right.

Harmonized. This is the idea that, regardless of how and where the customer chooses to shop, retailers must eliminate points of friction in the customer journey and deliver experiential elements that amplify relevance. In the press release, Nordstrom VP Dave Sims said “when thinking about this evolution, a guiding principle was to offer something for everyone, no matter…where they interact with us.”

Mobile. Many retailers have come to realize that customers no longer go online—they live online and their smart device is often a constant companion in the shopping journey. The new Nordy Club app looks set up to be a core component of how members will engage with the brand.

Personal. As I talk about in my current keynote, no customer wants to be average. More importantly, no customer has to be, given how the power has shifted to them. Making personalization a key aspect of the new rewards program is very responsive to what consumers want and what smart retailers need to do to be more relevant and unique.

Memorable. Today’s consumer is deluged with a tsunami of information and choices. To be the signal amidst all the noise, to truly command meaningful attention, all brands are challenged to become more unique, more relevant and more remarkable. A key way to do that is to create memorable experiences. It’s a bit difficult to ascertain at this point how truly unique some of the benefits will be for elite members (particularly since many of these will never be advertised), but I’m willing to bet that this program dimension will be dialed up substantially.

Of course it remains to be seen how well this new effort will work when fully deployed. Clearly Nordstrom is adding considerable cost to the program. Whether this turns out to generate a good ROI will take years to assess. Moreover, some aspects of what was just announced just bring the company to competitive parity and therefore can be viewed as largely defensive. Others may risk setting off a rewards point war. If that happens, that is a battle that customers win and investors lose.

More interesting for the long-term is how Nordstrom will evolve the harmonized, mobile, personal and memorable pieces of the program and how those will authentically resonate with the others aspects of the branded customer experience for which Nordstrom is justly well regarded. Here, much as they have done over the years staying on the leading edge of digital commerce and executing a well integrated “omnichannel” experience, Nordstrom does seem to be upping the ante and leading the way. How (or if) the competition responds will be the next thing to keep an eye on.

Note: For a far more comprehensive and insightful look at loyalty, I heartily recommend my fellow Forbes Contributor Bryan Pearson’s book The Loyalty Leap.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

Over the next few weeks I’ll be in Austin, Chicago (twice!), Dallas, Toronto and San Antonio delivering an updated version of my keynote “A Really Bad Time To Be Boring.” For more info on my speaking and workshops go here. And stayed tuned for announcements on early 2019 speaking gigs and my new book.

Demanding loyalty

It seems rather natural to want loyalty. Maybe sometimes we even crave it or desperately feel as if we need it. From our employees. From our customers. From our friends or partner.

But as the boss, we shouldn’t think we have loyalty when conformance with our agenda–or praise from a parade of sycophants–is engendered out of fear of humiliation or termination.

As brand leaders, we shouldn’t claim we have loyal customers when the primary reason they buy our product is because we bribe them with endless discounts.

As someone in a personal relationship, we might deservedly expect loyalty, but if we only feel it exists when we threaten negative consequences we are merely kidding ourselves.

Loyalty is an emotion. And when deeply felt it can lead to our getting what we desire.

Loyalty is earned. Over time, through remarkable, relevant and consistent actions that build trust.

Demand loyalty all you want. If you aren’t getting it, don’t waste your time blaming your employees, customers or loved ones.

Our work is to get real, get accountable, and yes, get vulnerable. Loyalty is available to those that do the work and earn it.

 

The world’s best growth hack

We spend so much time, energy and money searching for new customers. Yet, in case you haven’t noticed, in many cases acquisition costs are rising–often substantially–and often to the point where these efforts are cash negative.

Once we’ve acquired a new customer, we hit them with an never-ending stream of emails, free shipping offers and the like to increase shopping frequency or build order value. Unfortunately, if you actually do the math, a lot of these tactics are unprofitable or unsustainable.

We chase new store openings, product line extensions and the latest bright and shiny item like Donald Trump looking for the next person to insult. To what end?

Sadly, when it comes to the search for growth, far too many brands are doing it wrong. For most relatively mature companies, the best growth hack is retention.

If you don’t know your churn rate and how many dollars you lost to lapsed customers last year, go find out.

If you don’t know the reasons why they left, I suggest you get focused and get busy.

If you don’t whether they were worth saving in the first place, sounds like you have some work to do. The good news is the work is well worth doing.

And, going forward, make sure you distinguish between a hack and the hackneyed.

The wrong side of scarcity

The formula for success in retail–in being intensely relevant and remarkable for customers and investors alike–is ultimately rooted in scarcity.

Scarcity for a highly desired good or service amplifies demand and enables a brand to command a premium price. Conversely, abundance undermines those abilities.

So, let’s be honest, in your market sector are any of these things truly scarce?

  • Frequent % off promotional events
  • TV ads that focus on the above
  • A cash back rewards programs
  • Free shipping offers
  • Ability for consumers to gather product and price information
  • A selection of major national brands
  • Sunday newspaper circulars
  • A professional looking website
  • Convenient locations
  • Friendly sales associates.

How about these?

In a slow growth, ever noisier, consumer-in-charge world, it’s hard to see how doubling down on the already abundant is likely to get any brand very far. Yet that is where most our focus, energy and resources seem to be pointed.

Unfortunately what passes for strategy at a lot of companies is the notion of being better at being common. Good luck with that.