Loyalty programs, once discount-centric, are evolving to reflect the experience economy.

What happened

  • The vast majority of brands and retailers offer membership in one shape or another, but the benefits have remained rather thin, often composed of discounts or point-system-based rewards. But now some companies are revamping their membership and loyalty programs to include exclusive experiences and events.
  • Nordstrom will debut new elements to its loyalty program that’s 10 million members strong this holiday season, including a tier called “icon” status that will be invite-only and offer private dinners with designers, among other events. Macy’s platinum card members will receive free seats to this year’s Thanksgiving Day Parade and Nike’s new Manhattan flagship will include a floor devoted to members with personal shoppers and special products.

Why it matters

  • These changes infuse run-of-the-mill membership and loyalty programs with elements of the hospitality and entertainment industries, both of which have trailblazed customer-brand relationships in ways that traditional brands and retailers are beginning to learn from. The idea of a VIP pass at a concert—which Macy’s is accomplishing with tickets to the parade, and Nordstrom is achieving with one-on-one dinners with designers—can certainly transfer to the retail world, it just manifests in a different way.
  • Not only do providing exclusive experiences give loyal customers a new way to live and create memories with the brand—they also keep them coming back to experience the brand in person, instead of choosing the convenience of an ecommerce behemoth like Amazon. Especially when these member experiences are limited to a small selection of the most devoted shoppers, the customer-brand relationship is likely to strengthen.
  • Additionally, providing ways for customers to gain special access to the brand and its products not via discounting merchandise keeps the brand at a higher premium. So many brands and retailers are quick to dole out coupons, which cheapens brands over time and cements the expectation among shoppers that they will receive items at lower prices (it’s also very price-centric, while experiences transcend the transaction). Data also suggests that pouring more money into cultivating these loyalty programs is worth it: Companies put an average of 1% to 3% toward these programs, and at a company like Macy’s, 10% of customers generate half the company’s annual revenue.