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A Test Material Girls Should Love: Macy’s Pilot

August 25, 2010 by Lisa Biank Fasig — Director, JZMcBride and Associates

A new loyalty program may soon be rewarding shoppers who purchase brands by Madonna, Martha Stewart and Donald Trump – and they do not have to charge it.

Macy’s Inc., which sells exclusive labels under each of these celebrities, is testing a new loyalty program in three U.S. markets. The Cincinnati-based department store company is pretty mum on the pilot – it does not want to risk skewing the results – but did confirm the test launched in the spring and that it is tender neutral, meaning customers can earn rewards whether they use a Macy’s card, a third-party card or pay by cash or check.

In an Aug. 11 conference call with analysts, Macy’s Chief Financial Officer Karen Hoguet said early results of the pilot are encouraging, but it is “way too early to judge the results.”

The test is designed to complement Macy’s Star Rewards, a four-tiered loyalty program that awards points and discounts for purchases. But instead of delivering the rewards in the mail with a statement, the pilot program also delivers them at the register when a customer makes a purchase – again, by cash or credit.

A company spokesman said the test markets are in the West, Midwest and Northeast U.S. and that an end-date for the run has not yet been established.

Macy’s has made significant strides in terms of customer engagement since completing the roll-out of out its national My Macy’s merchandising program in 2009, a sweeping reorganization designed to improve sales by tailoring merchandise on a store-by-store basis. This localization effort, which puts merchandisers and planners right in the aisles, is credited with improving sales and margin. (Same-store sales rose almost 5 percent on the second quarter, beating expectations.)

Macy’s also is in the midst of training 130,000 sales associates and managers on customer engagement, a process expected to be complete in September.

As for those celebrity brands – that has been a Macy’s strategy for several years. Being a national department store brand, its CEO, Terry Lundgren, recognized that private labels and exclusive merchandising agreements would differentiate the chain from competitors. Almost 20 percent of its 2009 sales were generated from private labels, such as Alfani, I-N-C and Hotel Collection. Martha and The Donald, et al., kick in an estimated 15 percent to 20 percent on top of that.

The loyalty program, if it succeeds, would be one more differentiator, with the added benefit of encouraging dedication to these brands.

About Lisa Biank Fasig

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