Assignment
From consultants ready to solve fashion crises to personal concierge services and spa treatments at Le Couvent des Minimes Spa by L'Occitane in Provence, France, Nordstrom is using its varied loyalty programs to retain and increase its share of wallet among key customers. The retailer's research indicates that customers who have relationships with Nordstrom through either the rewards program or a salesperson spend more at Nordstrom than those who do not. Nordstrom shoppers automatically become members of Nordstrom's Fashion Rewards program when they sign up for the store's credit card. They earn points, or Nordstrom Notes, whenever they use the card-including on purchases made from other vendors-although Nordstrom purchases result in twice the points. Each time a customer accumulates 2,000 points, he or she receives a $20 Nordstrom Note, a gift certificate redeemable for Nordstrom merchandise or services. The program's different levels are based on annual net purchases; the higher the customer's annual spending, the more rewards earned. Nordstrom Notes encourage shoppers to move up to the higher levels by shopping at Nordstrom and by using the store's credit card no matter where they shop. Benefits available at different levels include free standard shipping, free trial-size beauty products, invitations to private shopping events, Nordstrom On Call (a 24-hour fashion emergency hotline), early access to Nordstrom's Anniversary Sale (the biggest sale of the year), and complimentary tickets to Nordstrom designer runway shows and a private shopping party hosted by Nordstrom. Nordstrom is not alone in its efforts. Its competitors have also ramped up their loyalty programs. Saks Fifth Avenue's SakFirst program allows shoppers to accrue points from in-store purchases made using a Saks credit card or another form of payment and from credit card purchases made outside the store with the Saks' "little black card." Points earned vary depending on tier and whether the purchase was made at Saks or at an outside vendor. Diamond Plus customers, who spend at least $25,000 a year at the store, receive free local delivery, complimentary valet parking, storage of one fur item at no cost, advance notice of sales, invitations to special events, and complimentary shipping on online and catalog orders.
Saks also partners with exclusive vendors such as Mercedes, The Palm restaurant, and The Yachts of Seabourn on exclusive offerings, and it rewards its top shoppers with elite travel services. Of the various programs, though, Neiman Marcus's InCircle, launched nearly 30 years ago, remains the granddaddy of them all. Customers at different spending levels earn points by using their Neiman Marcus credit card. Customers usually get 1 point for each dollar they spend, although at the highest tiers the point-earning formulas become more generous and members may choose one day each year on which to receive double points. Points are redeemable for gift certificates, in-store dining, alterations, fur storage, store delivery, or airline miles. The program's five tiers include the President's Circle, achieved by spending between $75,000 and $599,999 annually. Neiman's President's Circle members receive custom-designed travel, entertainment, or gifts. For example, members might take in a Broadway preview and dine with the cast, savor a private cooking class in a Tuscan villa with an Italian chef and sommelier, or enjoy the Kentucky Derby from Millionaire's Row seating and relax at the Barnstable Brown party.
DISCUSSION QUESTIONS
1. What are the design characteristics of an effective loyalty program?
2. How effective is Nordstrom's program in terms of developing customer loyalty?
3. Whom should Nordstrom target for its loyalty program?
4. Is the Nordstrom program worth what it spends to reward customers? Why or why not? Explain.
5. Are luxury consumers more drawn to reward/ loyalty programs than are those in other economic groups? Are they drawn to different types of programs?
6. What do you see as the strengths or weaknesses of loyalty programs such as Nordstrom's Fashion Rewards or InCircle at Neiman Marcus?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.