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Macy’s Revival Means Plenty Is In Store For Star Reward Members

(Photo by Alexander Scheuber/Getty Images)

This is evidently one of the key spokes in the wheel that is turning Macy’s performance around. After relaunching its Star Rewards program in October — with the specific goal of attracting new customers and increasing spending among the 10% who generate roughly half its sales — Macy’s said it would cut ties with Plenti, the multi-retailer rewards program run by American Express.

And now the next spoke is emerging: Macy’s plans to enable Star members to earn points for purchases made on other credit cards. Put another way, non-cardholders can join the program.

Essentially, Macy’s is doing a reverse-Plenti, and counting on the inclusion of other credit cards to boost sales. For a company that generated $160 million from its own credit card business in the third quarter of 2017 — a decline of $4 million from the same period a year before — this indicates Macy’s is finding rewards memberships more lucrative than credit card memberships.

It’s about time. With roughly 1.6 billion retail reward program memberships in the U.S., according to COLLOQUY, Macy’s needs to focus on how to elevate its Star.

Macy’s North Star

When Macy’s in early February said it would pull out of the Plenti program on May 3, it was already waist-deep into a restructuring strategy it calls North Star.

Among the five points of North Star, which include emphasizing Macy’s exclusive brands and optimizing its digital experiences, is using customer analytics to make smart investment decisions. Star Rewards facilitates this, but it needs more member buy-in to make the most of the data.

To that end, the new, three-tiered Star Rewards program focuses on simplicity, with more emphasis on rewarding its best shoppers and less on promotions. For example, it rewards top-spending members ($1,200 a year or more) with 5% back on every purchase. They also get 25% off purchases with its “Star Pass” coupons, with no restrictions — an important distinction since previous coupons were laden with them. (Mid-tier members receive the same perks, while lower-tier members receive the coupons with some restrictions.)

Macy’s will add more enhancements in 2018, including experiential benefits such as winning access to events only Macy’s can offer, the company said.

“Loyalty is a foundational element of our North Star Strategy, and stronger relationships increase the lifetime value of our customers,” Jeff Gennette, Macy’s CEO, said in a press release.

Bad, Good and Plenti

Loyalty is, evidently, more foundational to Macy’s than its credit card business, which has been on the decline. Income from credit operations amounted to $524 million in the first three quarters of 2017, compared with $528 million in the same period a year before. In all of 2016, it declined to $736 million, from $831 million in 2015.

Focusing on its own Star Rewards appears to be the alternative to its credit business, and to venturing further out with Plenti. The program has been slow to catch on with consumers, according to reports. More important, the new Star enables Macy’s to more directly engage with its shoppers and offer tailored experiences that generate brand loyalty, versus a hunt for deals.

In its defense, the Plenti model is new to U.S. consumers. The multi-retailer program enables members to earn points by spending with a number of participating partners, including Macy’s, Enterprise Rent-A-Car and Hulu, and redeeming those points across the same network of brands. Such programs, also called coalition programs, are more common outside the U.S.

Making a Star Rise: 3 Principles

Soon, by enabling Star members to use any credit card to pay for their Macy’s purchases and earn points, the retailer appears to be introducing its own form of multi-tender program. But to resonate with shoppers and establish genuine loyalty (not discount addiction), it will need to adhere to three critical principles.

Make the brand (not the program) the love interest. Too many programs reward or attempt to build emotional connections with their members through transactions alone. Macy’s, by focusing on its exclusive labels, unique experiences and well-integrated digital presence, is bolstering the brand attributes that make its members’ shopping lives more enjoyable. It’s also distinguishing itself from other retailers that cannot offer the same labels and experiences.

Make redemption fun, fast and surprising. Macy’s gives $10 in “Star Money” to platinum members, which can be used immediately, once they spend $200. The low spending requirement and immediacy are critical since 57% of surveyed shoppers told COLLOQUY they left programs because it took too long to earn rewards. Also, by cutting the restrictions on its Star Pass coupons for upper-tier members, Macy’s is making the redemption experience breezier while lavishing members with a sense of privilege.

Make rewards work harder. By stripping out the deals aspect of Star Rewards, Macy’s is able to focus instead on how the program can solve shopper issues and ease the shopping experience. Further, by allowing members to use other credit cards to purchase and earn points, Macy’s has the potential to gather more reliable, conclusive data, which it can use to improve its merchandise mix, plan store events and train employees. Importantly, the data can help Macy’s time these functions to the ebb and flow of shopping segments.

In the end, the credit for a Macy’s recovery will likely go to a combination of strategic practices. But if Macy’s combines these three principles into its overall North Star strategy, the department store icon could make rewards the rising Star of its recovery.

This article originally appeared in Forbes. Follow me on Facebook and Twitter for more on retail, loyalty and the customer experience. 

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