By Bryan Pearson, President and CEO, LoyaltyOne Co.
If you have to ask, you can’t afford it, the old saying goes. But if you’re shopping at Nordstrom these days, you only have to ask how to pay, and you will be afforded rich rewards.
Well after Nordstrom changed its Rewards program so members could earn points regardless of how they pay, the numbers are in, and they’re impressive. The change, which means customers no longer have to register for a Nordstrom credit card to earn points toward rewards, resulted in 3.7 million new memberships, escalating total enrollment to 7.8 million active members.
At the same time, the costs associated with Nordstrom Rewards are slightly down. According to the company’s annual report, program expenses declined to $162 million in 2016 from $164 million in 2015. In 2014, costs were $149 million. Revenue advanced to $15.5 billion in fiscal 2016 from $14.1 in 2015.
The takeaway: Giving loyalty members the freedom to choose how to pay can contribute to topline growth and customer engagement — and it can also serve to promote branded credit cards.
Multiple Reasons For Multi-Tendering
In adopting a multi-tender program retailers recognizes the value of capturing not only those customers who use its credit card but also those who prefer to use other forms of payment. This benefits the brand, and shoppers, in many ways:
- Value equation: Multi-tender rewards programs extend the value proposition for retailers because they capture more customer data. It’s also more accurate data since shoppers want to ensure their information is up to date in order to receive rewards and other benefits. Retailers can use these insights to provide higher levels of service and improved communications in return.
- Engagement: Because customers are not required to register for a credit card, multi-tender programs are accessible to a broader number of people, ratcheting up participation. And they can do so among lucrative market segments. Retailers that rely strictly on credit loyalty programs may not be fully engaging their younger customers, something that they should consider given the decades of shopping they have ahead of them and the ability to influence those purchases (and later credit applications).
- More spending options: Give people more ways to pay and earn rewards and they’ll find more reasons to spend with the brand. In most cases, members of multi-tender retail rewards programs generate 70% to 90% of brand revenue, according to Kobie Marketing research.
- Easy-pleasy: By extending payment options, retailers are recognizing the advantage, and increasing preferences for, mobile wallets.
With virtually every retailer offering a rewards program today, standing apart requires greater ease, value and availability. I expect more retailers that never issued reward-based credit cards, such as supermarkets and drug stores, to do the reverse of Nordstrom, and explore issuing credit cards with enriched rewards.
The trick, of course, is in knowing one’s best customers. If the retailer still has to ask, then it probably can't afford to take chances.
Article was previously published in Forbes.