Off-Price Apparel Loyalty Programs Aid Retention Amid Competition

by Sean Ogino |

Off-Price Apparel Loyalty Programs Aid Retention Amid Competition

A buyer’s urge to have an item at the lowest possible price is as old as civilization. That’s why outlet-rich Las Vegas and many other cities in the USA are seeing people thronging at the off-price retail outlets. As saving has been valued equally by many, we are seeing a higher percentage of affluent consumers in that crowd. According to NPD Group Inc., a global information company, discount buyers are hardcore apparel purchasers and account for 75% of apparel purchases across all retail channels. It also found that off-price is second only to online in terms of growth rate. Shopping visits made to off-price retail stores- whether a consumer made a purchase or not- increased 4% in the year ending April 2016 compared with the same period the previous year.

It’s crystal clear that people want better deals and they know that they will find such deals in off-price outlets- not in department stores. Nordstrom’s last year’s move of opening up around 13 of its off-price Nordstrom Rack stores–compared to opening just one full-line Nordstrom store–must be viewed in this light. But how can sellers guarantee retention other than by offering the lowest prices or best selection? An off-price apparel loyalty program can remedy the situation.

Off-Price Apparel Loyalty Programs Capitalize on the Love of Markdowns

Remember that buyers of off-price apparel are price sensitive and they are heavily driven by the amount of money they save on each purchase. The other thing that catches their attention is a special offer. Loyalty programs let businesses–and shoppers–easily customize their offerings. This customization can be realized by rewarding frequent buyers or loyal customers by allowing them to have their next purchase at discounted rates or by giving them access to special offers.

Moreover, one study has also concluded that discounts are the most important features of any loyalty program. But as these are extremely price sensitive buyers, a value proposition needs to be a slightly different than the normal loyalty program. Customers should know how much extra discount they will get based on how much they spend. They would spend more or shop the same brand more regularly.

Also, the appeal of a markdown is a strong element in off-price apparel loyalty programs, as it gives a strong motive to the buyer to stay with the business. So much so that in many cases it has challenged the old wisdom of a loyalty program that it is only for heavy buyers. This study has found that the biggest increase in spending and purchase frequency among the program members was among light buyers. This is attributed to loyalty programs‘ ability to eliminate cherry-picking and to encourage cross-selling. Understandably, off-price apparel loyalty programs give a considerable stimulus in this sense.

Loyalty Programs Give Detailed Customer Insights

Every loyalty platform is a rich bank of valuable customer data. Over time, a company can reach the level where it can create a profile of each and every customer’s buying habits: what he buys and when, how full his basket is, how much he spends and how he pays. Companies can truly know their customers. Naturally, they can create entire marketing communication that revolves around their preferences, choices, habits and interests.

When your loyalty program offers enhanced data analysis and segmenting options, it’s even easier to upsell and cross-sell customers. An RFM dashboard–whose initials stand for the variables of recency, frequency, and monetary value–should be able to plug into your loyalty program to let you segment by variables inclulding:

  • RFM
  • Customer loyalty and advocate marketing data
  • Location of purchase or delivery
  • Type of product purchased
  • Interactions with the brand in-store, online, in-app, or on social
  • Any data imported from a client’s CRM, ERP, ESP, or personalization engine, among other third-party data sources

While off-price sellers are experiencing a boom right now, there is a limit to giving discounts, as they weigh on margins. Too much revenue may get skewed toward highly discounted items which will eventually have a negative impact on profits. The only way out is getting more and more purchases and repurchases. And considering the fact that a marketing industry survey found that 55% of people say that when choosing between two similar companies they will usually pick one with a loyalty program, an off-price apparel loyalty program.

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