Chico’s FAS Inc. debuted a new loyalty program in June 2022, with hopes of seeing 65% of its customer base join in the first year, senior vice president of marketing Leana Less says. Within nine months, 80% of Chico’s customers were members of the program, she says.
Loyalty programs are still fairly uncommon among retailers in the Top 1000, Digital Commerce 360’s database of the largest North American e-retailers. Fewer than one-third of Top 1000 retailers have a loyalty program, and under 40% of apparel retailers have the option. Just under half of retail chains have loyalty programs, more than any other merchant type, according to Digital Commerce 360 data.
The loyalty program, Chico’s Rewards+, divides customers into four tiers based on their annual spending. The lowest tier encompasses customers who spend less than $200 in a year, up to $2000 or more for the highest level of the program. Members are also eligible for rewards points based on their spending, free shipping, and free returns, depending on which level they’re on.
Chico’s ranks No. 108 in the Top 1000. The apparel retailer‘s brands include Chico’s, White House Black Market, and Soma.
Retailer uses technology to better target customers
2022 was the first time Chico’s made major changes to its loyalty program since the 1990s. 30 years later, “our technology was outdated,” Less says.
“The previous programs had significant limitations of what we would be able to do in the future,” she says.
The new technology gave Chico’s the capability to better target consumers. Now, the retailer has access to “really phenomenal micro segmentation” of consumers, Less says, calling it “really critically important.”
With the previous technology, a promotion would go out to the entire rewards member base. Now, Chico’s can target promotions to get the most value; for example, by giving a specific discount to members who are at the top of one tier to migrate them to the next level, Less says.
Chico’s most loyal members have near 100% rewards redemption rate
Chico’s Rewards+ members are incredibly valuable for the retailer, according to Less.
In the most recent fiscal quarter, average spend per customer was 40% higher among members than among non-members. While there isn’t year-over-year data because the rewards program is so new, early results are promising. The average member “spends significantly higher [than non-members] and then the likelihood of her coming back the next quarter versus somebody that’s not in the loyalty program is significantly higher as well,” Less says.
Order frequency is also “off the charts,” she says. Members order three to four times more frequently than non-members.
Those numbers are even more appealing for Chico’s when looking exclusively at the Phenomenal tier, made up of customers who spend at least $2,000 annually. That tier is the smallest of the four in terms of how many members are in it, but is overrepresented in sales, Less says, and is responsible for “the bulk of revenue.” The top 100 customers in the program are responsible for $15,000 in annual sales. These top purchasers are ordering five to 10 times as frequently as lower-tier members, who are already outpacing non-members, Less says.
Members at that level also have “close to a 100% redemption rate” on rewards, she says. Rewards at Chico’s expire after 90 days. The high utilization rate shows members, especially those at the top level, enjoy “playing the game” of using rewards to get the best deal, Less says.
Rewards are important to consumers across retail
Though a minority of retailers in the Top 1000 offer a free loyalty program, they can be a valuable way to collect consumers data. For some retailers, consumers embrace the membership and discounts that might accompany it.
40% of consumers said they’re most likely to open an email with an offer tied to a loyalty program in a Digital Commerce 360 and Bizrate Insights survey of 1,015 people in May 2022. That’s behind messages about discounts, and shipping, order and delivery confirmations, but more likely than free shipping, back in stock and other messages.
28% of consumers said being a member of a loyalty program makes them more likely to place an order from that retailer, in a Digital Commerce 360 and Bizrate Insights survey of 1,060 online shoppers in January 2023.
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