The Modernization Of Lord & Taylor: Its First Loyalty, Mobile Moves
Written by Evan SchumanSeptember 16th, 2009
Lord & Taylor, the nation’s oldest department store (dating back to 1826), is trialing a loyalty program, based not on a customer’s dollar spend but on how frequently a store is visited. For example, two visits a month will deliver a $15 reward.
The 46-store chain is a slimmed down version of its historic self. In 2005—while part of Federated—the chain was bringing in annual revenue of about $1.6 billion. But the now-private concern today brings in annual revenue of about $492 million, according to ZoomInfo.
Although the motto that “every customer counts” is always true in retail, it’s fair to say that that’s especially true with Lord & Taylor’s customers, whose average daily purchases hit $75, said Ashley Baker, the chain’s manager of customer loyalty and credit services. The loyalty program is based on two visits, but the chain has a requirement that the customer must spend $100 per month to qualify. With an average daily purchase of $75, that’s not proving to be much of an issue. “The $100 qualifier ends up disqualifying very few people,” Baker said.
The chain started its six-month pilot in August and is initially monitored solely through Lord & Taylor’s proprietary store cards. The program will be officially launched on October 1 in Washington, D.C., which is the chain’s pilot market for this trial.
But the initiative, unlike some other loyalty programs, is not aimed at increasing revenue or profits. Rather, the goal is merely to keep more customers. “The visits were mostly strictly linked to customer retention,” said Baker, adding that most of their customers will spend the rough amount regardless of incentives. “She’s going to be spending a certain amount of money.”
A more controversial part of the campaign is Lord & Taylor’s core CRM program, which not only leverages data from its in-house card but also places a heavy reliance on capturing purchase data from other credit and debit cards that customers use. There is debate over whether it’s consistent with security payment card procedures to use credit/debit card data for anything other than processing payment card transactions, especially when the card numbers are being used as customer identification numbers. (See the related story about the card number use debate.)
Lord & Taylor officials are also exploring new ways of looking at E-Commerce and even mobile communications strategies. The chain’s E-Commerce group does not release revenue stats, but E-Commerce Director Dan Shelffo said that if his E-Commerce group was considered a store, it would rank thirtieth in highest revenue among the chain’s 46 locations.
When it comes to mobile investments, Shelffo said “we’re poking around” and that his group has made some “site modifications so that we can start to dabble” in mobile communications. But the spreadsheets do not look attractive.
“I have to protect the billion-dollar brand. When I look at the dollars that I am going to invest, I look at the return. I know what my ROI is,” Shelffo said. “When I look at mobile, I see a lot of investment.”
Full-fledged M-Commerce—where consumers can make purchases from their cell phones—is not even being considered. However, gathering mobile phone numbers for opt-in marketing campaigns is being explored very preliminarily. “We’re rolling something out in a testing environment,” he said.
One project, for example, is called “lunch break” and consists of a focused E-mail blast sent out around lunch time that notifies customers of a special sale that will only last two hours. “Instead of lunch, why don’t you shop this great offer?” Shelffo said. “The E-mail would say they could shop online or print this coupon and bring it into the store.” Most customers, he said, buy in-store.
This issue brings up the question of how in-store and online teams are incentivized. “We’re savvy enough to know” when coupons were printed and used in-store. “We know what the return is on the marketing spend.”
Even though he’s director of E-Commerce, Shelffo said he needs to do a lot to support in-store. “One way or the other, sales efforts that I drive would show up in my results bucket. I don’t have the freedom” to solely support online operations. “There are certain dollars that I have to invest” in-store.
-J- R
September 17th, 2009 at 10:00 am
The PCIKnowledgeBase’s research suggests the same thing: card data’s kept in a lot of places that it shouldn’t be. That’s the sort of thing that can make both E2E Encryption and Tokenization ineffective as enterprise-wide solutions if their implementation is only focused on the payment stream, not ancillary uses of the card data. We’ve found that encryption, for example, is differentially employed when the data are used for CRM and other apps.
I’m also interested in the role of “Data Mining” as a driver of card data retention. I think it would be really interesting to see how much of the “other uses” of card data is being driven by data mining and “new” CRM and other applications vs legacy apps that are, as Avivah said, just too expensive to re-engineer.
thx, Dave T
September 17th, 2009 at 10:05 am
This program is not innovative. Its tied to a credit card and younger buyers don’t want (or need) credit cards–they want multi-tender program. GE keeps pushing the same old story and every year the L&T customer gets a year older.
September 17th, 2009 at 10:11 am
Editor’s Note: I have no idea who Garbageman is, but it’s clear he knows a bit about this. We hadn’t mentioned GE in the story for space reasons, but they are indeed involved in this Lord & Taylor program.
September 17th, 2009 at 2:18 pm
Interesting of L&T (and GE presumably) to telegraph not only their launch date and pilot but also the stated objective being solely focused around retention.
Loyalty marketing, done right, should be about much more than retention, particularly for a department store like L&T. At $75 per transaction, they should be focused on ways to drive incremental store visits and build the basket. Part of achieving this is through integrating loyalty into the broader CRM efforts, especially those mentioned above.
September 17th, 2009 at 2:29 pm
Garbagemen is so right. GE Money pushes the same old tired Private Label loyalty program, and LT signed to it on because it costs nothing – GE does all the loyalty heavy lifting. They tell their retail clients that a non-Private label program will hurt the private label card (not true, if structured properly). And yet the LT Private Label card generates about a third of business – what about the other customers? Sounds LT is ignoring them. Taking the easy way out with this program.
September 18th, 2009 at 10:14 am
Hey, garbageman (and others),
What would be an example of a well-executed retail loyalty program not tied to credit cards? I’d like to know more.
September 18th, 2009 at 11:10 am
Back to the ‘based on visits’ part.Customers are not stupid and they certainly know that you are just trying to get them into the store. Though the data shows that the customer is indeed coming into the store more than once a month, they likely don’t realize it. And they likely don’t like that L&T knows it and is using it in a self serving way. I’ll bet some are going to be a bit miffed by this. In my opinion is not NOT customer focused, it’s all about L&T.
September 18th, 2009 at 3:50 pm
Lord & Taylor ought to teach their management staff how to treat and keep their current customers…didn’t we all learn in retailing 101 that it’s cheaper to keep a customer than develop a new one? The last time my wife visited L&T (last weekend, as a matter of fact) she was treated so badly by the management staff over a simple coupon issue that she cut up her L&T charge card in front of them…their response? “WHO CARES?” (a direct quote from their “manager on duty”).