It’s nearly impossible to pinpoint which industry first started to consistently use loyalty programs, but coffee shops, department stores and travel agencies were definitely among the earliest adopters. But as time went by and as the technology behind reward programs evolved, new opportunities and features became available. This guide is dedicated to exploring next-gen department store loyalty programs and examining how department stores can use emerging reward strategies to their full extent and (re)establish a strong bond with the post-pandemic customer.
Table of contents:
What Are Department Store Loyalty Programs?
Department store loyalty programs are complex reward systems geared towards enhancing the department store’s value proposition. As a result, department store loyalty programs differ from mall or retail-oriented rewards programs.
One of the key characteristics that set these programs apart is their focus on premium treatment. Unlike many retail loyalty programs that target a general audience, department store reward programs cater heavily to high spenders because of their greater lifetime value.
In a loyalty program we can act on more traditional actions such as product purchases and tracking or engagement initiatives including stimulating and interactive material such as quizzes, podcasts, videos, personalization tools for photographs, etc. … And we can also add training objectives where users find useful materials for their professional growth path such as free courses, paid courses, certifications.
Chief Customer Officer at MagNews
Another noteworthy feature is that these types of loyalty programs heavily utilize the power of in-house products and services. From free parking to discounts at restaurants, such incentives offer exciting and versatile reward opportunities.
Lastly, department store loyalty programs tend to rely on tiers. It’s not a rule set in stone, but tiers facilitate long-term engagement and are an ideal way to highlight experiential rewards and VIP privileges.
“Given the multi-tenant nature of department stores, their loyalty programs are fundamentally different in design & operation to that of retail programs. The challenge is to create closer alignment in the operation of these two types of programs in the eyes of consumers in terms of how these programs ‘add value’ to the customer experience.”
Director of Mobile Loyalty Technologies Ltd
The Biggest Customer Retention Challenges for Department Stores
Department stores face a series of industry-specific challenges, each of which influences what kind of customer retention strategies are most useful to them.
- There is a wide variety of price points and customer spend levels, prompting department stores to create a more complex reward concept capable of increasing visiting frequency among low-spending customers, while also recognizing premium buyers with special privileges and high-value rewards.
- Department stores often lack customer information and insights into shopper behavior. Collecting customer insight has to be done across all channels: department stores not only need to find a way to identify and enroll customers both online and offline through the loyalty program, but they also have to bridge the gap between online and offline customer activities by creating a single customer view.
“The beauty of a department store loyalty programme, if designed correctly, is the vast amount of customer insights that can be collected across multiple categories and departments. Businesses that harness this kind of insights can encourage cross pollination, up-selling and increased dwell time within one location by keeping content and incentives relevant to customers. These tools allow department stores to support their brands and keep them engaged and invested.”
Founder & CEO of Swapi
- Increasing product discovery and dwell time is also high on every department store’s agenda. Since these businesses operate in a large space, loyalty programs have to creatively encourage customers to move from one point to another, without making it feel like a chore. Similarly, reward programs should offer features that encourage visitors to interact with brands and services they wouldn’t otherwise.
“Unlike generic retail programmes that normally focus on one type of product or business unit, there is an ability to use data across departments to understand propensity to buy into more than one product category. Using the data to map customer behaviour to target offers, communications and rewards for completing behaviours that make the customer ‘stickier’ across the whole store. If they normally always purchase Beauty for example, how can you push them into Lingerie, Womenswear and beyond? The more categories a customer buys into, the more likely you will retain and grow their Loyalty to the department store and increase lifetime value.”
Founder, Loyalty Expert of REACH
- In the customer’s eye, rewards and benefits are the main selling points of a loyalty program. Yet, many department stores are still largely offering transactional incentives. Discounts and gift cards will never be the highlight of the reward journey. Instead, department stores should try to reinvent their existing programs by adding gamification elements, challenges and surprise & delight incentives.
“Treating the most loyal customers well means involving them in dedicated activities. Cultivating this special relationship requires a brand to make the investment into activities dedicated to their loyal contacts. Gamification or loyalty programs are the main initiatives that generate the biggest rewards and enhance this relationship. Of course we must also take all the useful monitoring tools into account to assess the good performance of the program itself.”
Chief Marketing Officer at MagNews
- Sophisticated yet accessible loyalty technology is an often overlooked aspect of department store loyalty programs. Relying on a clunky, unresponsive management interface, or using an outdated platform that cannot be extended with new features or integrated with other marketing services will prevent the program from reaching its full potential. Meanwhile, program owners have to put in more effort to achieve weaker results.
“Modern department stores must provide a relevant, inspirational and aspirational shopping experience. Department stores are still associated with glitz and glamour – and an element of exclusivity. They are a social hub, a destination where friends can meet. They can’t be replaced by online shopping. That’s where a well-setup Loyalty program can kick in, ranging from an immediate free coffee to VIP shopping hours around Christmas with your friends. Provide your customers with a range of well-chosen rewards, adding a flavor of exclusiveness, packed in an entertaining format.”
eCommerce & Personalization Specialist at 4NG
Best Loyalty Program Features for Department Stores
With the aforementioned characteristics and challenges in mind, here’s a list of next-gen loyalty features that will propel your new (or revamped) department store loyalty program above the rest:
Digital Loyalty Cards
The first step toward a new or improved department store loyalty program is to ditch the traditional plastic card and go completely digital. Why? Because it’s less likely that members will forget to bring their card. Customers are more likely to identify themselves in store and redeem coupons when they can pull up an e-card on their phone.
The most straightforward way to achieve this is to assign a unique barcode or QR code to every customer, which they can access from their membership page. However, pulling up the membership page while standing in front of a cashier might not be worth the effort for many.
Another, more elegant and practical approach is to turn loyalty cards into passes. All smartphones offer Wallet functionality by default, where people can store their membership cards, coupons, and event passes in one, easily accessible place. Offer a loyalty card as a Wallet pass or, alternatively, make the loyalty card part of your dedicated loyalty app.
Our Customer Loyalty Demo Lab video demonstrates how the technology works in a store environment:
Using mobile passes provides the opportunity to send personalized push notifications, as well as use NFC and beacon technologies as part of the loyalty experience.
Cross-Brand Reward Journeys
With ‘built-in’ value propositions such as restaurants, salons and other services readily available at the department store’s location, it would be a shame to leave them out of the loyalty program. But when it comes to offers and campaigns, these businesses can do so much more.
Cross-brand offers and campaigns are unique types of rewards most often seen in coalition programs or in large retail hubs, like department stores. They function as a series of rewards. For example, spending $150 on eligible brands might grant members a $5 gift card at the restaurant or the beauty salon.
Cross-brand reward journeys have two main purposes. One, they make the rewards more colorful and engaging, as most customers find at least one thing they’re interested in. Second, they promote store discovery by moving members around the retail location, in hopes that they give new and different brands a chance.
Coalition Loyalty Hub
Unlike Nectar or Plenty, Antavo has developed a different approach to coalition loyalty programs: one that is more focused on retail locations, like airports and department stores. In this case, department stores are the program owners, offering a unified framework for tenant brands. Tenants are able to create their own offers and campaigns, but the department store retains full managerial control and is able to review everything.
The heart of this retail-centric coalition model is a hardware solution developed by Antavo, called the Coalition Loyalty Hub. It consists of an Android-based application running a device with one screen facing the customer, and the other facing the staff member behind the counter. The Coalition Loyalty Hub was created to connect participating brands to the loyalty provider, enable customer enrollment and identification using built-in NFC capabilities, as well as make point earning and spend an easier process for both customers and staff.
The Coalition Loyalty Hub plays a key role in collecting valuable customer information, as it forwards data (contact information and personal details from enrollment, transactional information from purchases, and loyalty activity, just to name a few) directly to the loyalty vendor’s database. There, that insight can be analyzed, segmented and used to personalize communications and offers in exciting, new ways.
Department store loyalty programs have the added benefit of helping to identify domestic and international customers when proper customer identification technology is in place. That helps department stores take the next step and set up partnerships with third-party companies, such as travel companies, to create joint offers for tourists. This is important because, although department stores should highlight their in-house services in their loyalty program, they should also branch out and create partnerships to make their reward catalog even more appealing.
On the other hand, reward programs have the potential to drive purchase frequency among domestic buyers. To do so, offer incentives that revolve around making store visits smooth and memorable. Many department store loyalty programs do this by offering free or priority parking spots to high-tier members, but the benefits can become even more attractive with experiential rewards like appointments at the beauty salon or with a stylist in the suit department.
Early Access & VIP Clubs
The importance of experiential rewards, high-tier privileges and VIP treatments for department store loyalty programs cannot be emphasized enough. These stores often house the most desirable labels, so it comes naturally that their loyalty programs should make members feel like royalty, right?
Well, the easiest way to make customers feel special and privileged is to give them early access to new product releases. This is not only a practical benefit, as members can reserve highly desirable products before others, but also a status symbol—something they can be proud of.
To provide the ultimate VIP experience, consider making early access part of a special interest group. Interest groups function like an insiders’ club within the loyalty program. Unlike top-tier benefits, VIP clubs are available for all members, as long as they pay the entry fee in loyalty points. Opening up the VIP program to all members makes early access more accessible for fresh members who are willing to make high-volume purchases. Plus, VIP club membership adds another, unique layer of privilege.
“Today’s department store loyalty program must be multi-tender, multi-channel and focused on best customer dialog, relevance and experiential benefits. A “club-within-a-club” concept works for the Department Store because of the breadth of offerings (women’s, men’s, housewares, fragrances, sports & leisure, etc.) and could easily be applied to specific affinity or demographic groups.”
Certified Loyalty Marketing Professional and Dean of The Loyalty Academy
No-Code, Pure-Play Loyalty Platform
In order to take advantage of all the game-changing features mentioned above (and then some), you’ll need to select a sophisticated, yet flexible loyalty technology provider. There are plenty of vendors out there, but the most cutting-edge capabilities are generally offered by pure-play loyalty providers, due to their sole focus on loyalty.
During your search, be sure to look for a no-code platform. Because department store loyalty programs are so much more complex and require more campaigns than traditional programs, marketers and administrators have to spend a lot of time engaging with the interface. A no-code platform allows administrators to manage rewards, campaigns and reporting on their own, without the need for coding knowledge or IT assistance. This ensures that time and money are only spent on tasks that really matter.
10 Inspiring Loyalty Programs for Department Stores
Here are ten inspirational examples of well-known department store loyalty programs:
1. Harrods Rewards
Located on Brompton Road in Knightsbridge, London, with over 330 departments in a 1.1 million sq ft retail space, Harrods is a highly recognizable department store. The Harrods loyalty program fosters both online and in-store purchases, with a digital loyalty card serving as a bridge between the two channels.
- Members earn one point for every £1 spent, and receive £5 cashback after every 500 points collected
- There is a 4-level tier system, including benefits such as free tea or coffee in the store, extended discount days and free delivery for online orders
- Harrods Rewards also offers a wide range of experiential incentives: mystery gift boxes, Mini Harrods events and a guided shopping experience where the staff attends to all your needs
2. Liberty London: Liberty Collective
London-based luxury department store Liberty London is known for championing art and fashion, often providing opportunities for up-and-coming designers. The company’s loyalty program relies heavily on vouchers, but also offers surprise & delight and experiential perks.
- Members earn 5 points for every £1 spent and receive a £10 coupon after every 1,000 points earned
- Vouchers cannot be claimed instantly, but are instead assigned quarterly based on the total amount of points accumulated
- In lieu of tiers, members are eligible for birthday rewards and are able to book one-to-one shopping consultations with a shopping expert
3. Printemps: Printania
French department store chain Printemps operates a simple, yet effective loyalty program that puts transactional benefits at the forefront, prompting customers to use their loyalty cards more actively, especially in physical stores.
- For every €2 spent, members earn 1 point
- As points accumulate, members access new tier levels and discounts
- After earning 1,000 points, members receive a €10 coupon. Customers can also earn double points when shopping at highlighted brands.
- There are four tiers, each containing benefits like double points on in-store purchases, basic and complex alterations, and unlimited access to store lounges
4. Lane Crawford: Privilege Programme
Lane Crawford is a department store that sells luxury goods in Hong Kong and Mainland China. As such, the company loyalty program emphasizes VIP privileges and has a four-tier structure.
- Members earn 1 Reward Point for every HK$ / RMP spent and receive coupons after they have accumulated 8,000 points
- The coupon amount changes based on the customer’s tier level
- High-tier benefits include free basic alterations, exclusive access to special sales, free parking and seasonal pre-order opportunities
5. Woolworth: WRewards
Popular South African department store Woolworth puts a spin on its loyalty program by using perks instead of tiers and points. This means that all members enjoy the same privileges from the moment they enroll, without any progression or limitation.
- Members can choose from an ever-changing list of vouchers
- Once enrolled in the program, members receive a welcome coupon and 10% birthday voucher
- The program is available through an app
- Participants have access to members-only events
6. Galeria Kaufhof Kardstart: Galeria Kundenkarte
German department store Galeria Kaufhof Kardstart operates a loyalty card program. They offer two cards: a default card, available for everyone who joins the program, and a VIP card, for high-spending members.
- Standard cardholders get access to limited free shipping, exclusive coupons and cashback based on points accumulated
- VIP cardholders earn double points for each purchase and enjoy bonus coupons during the holidays, unlimited free shipping and free shopping bags in store
- Both loyalty cards are available through the app
7. Nordstrom: The Nordy Club
American luxury department store chain Nordstrom takes incentivized shopping to a whole new level by rewarding members of its loyalty program differently based on their status and payment method.
- There are three tiers in total: Member, Influencer and Ambassador
- Customers earn 1 point per $1 spent by default, 2 points per $1 spent for using the Nordstrom credit card, and 3 points per $1 spent when they use the Nordstrom credit card as an Ambassador-level member
- Members and Influencers can redeem 1,000 points for a $10 coupon, while Ambassadors have the option to get a $20 coupon in exchange for 2,000 points
- The Nordy app allows users to exchange a smaller amount of points for $5 and $15 coupons
8. Bloomingdale’s: Loyallist
Founded in 1861, venerable US department store chain Bloomingdale’s has a loyalty program that showcases the power of networking when it comes to rewards, due to their partnership with American Express.
- The program has three tiers, and on each level members can earn more points for every $1 spent if they use their Bloomingdale’s credit card or Bloomingdale’s American Express Card
- Instead of double points days, the company offers triple points days to really entice shoppers
- American Express gives members additional offers for dining, shopping, and travel, as long customers use their Bloomingdale’s American Express Card
9. Åhléns: Benefits
Swedish department store Åhléns created a loyalty program that focuses on personalization and promoting values and services that are important for its members, thus building an emotional bond through a shared link with customers.
- The program includes personalized offers for members, an inspirational newsletter, and customers receive receipts digitally to protect the environment
- Higher-tier discounts include free storage and use of toilets at the Stockholm location, buy 3, get 4 on Åhléns brand bathroom towels, and special event invitations
- Higher-tier members receive discounts tied to a specific brand or service provider within the department store
10. Illum Key
Based in Copenhagen, Illum is a department store that has fully embraced the digital-loyalty-card and app-based-shopping trends in its loyalty program.
- Members who sign up for the program via the app receive an instant 10% discount and can use the app to compete for special prizes
- Gold-tier members are privy to exclusive fashion, food and design-themed events
- Gold-tier members can also register for free to a concierge service that delivers shopping to their doorstep
Highlight Your Best Products and Services With a New Department Store Loyalty Program
Capturing your audience’s attention and building a long-lasting bond with them is more attainable with a solid, well-planned loyalty program concept coupled with pure-play loyalty technology capable of turning your ideas into reality.
If you wish to continue the discussion about the potential of department store loyalty programs and features that make them special, our experts are more than happy to speak to you directly. So make sure to get in touch with us by booking a demo or sending us an RFP.
Need more insight on next-gen loyalty programs before making the commitment? Worry not! Here’s our most popular ebook on the subject: