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Macy's loyalty pilot still circling the runway

May 16, 2011 by Lisa Biank Fasig — Director, JZMcBride and Associates

Fans of I.N.C, Martha Stewart and other Macy's exclusive brands will have to wait a while before earning new reward points for their purchases.

In a conference call with analysts May 11, Chief Financial Officer Karen Hoguet said the results of a year-long loyalty pilot have not been compelling enough for a rollout – not yet.

"We're still watching and seeing. But so far, while we've gotten sales lists (there's) not enough to pay for the program," she said. "We're still tracking along and seeing if, over time, it builds."

The test, which we first blogged about last August, is designed to complement Macy's Star Rewards, a four-tiered loyalty program that awards points and discounts for purchases. The pilot was launched in the spring of 2010 and 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.

Rewards are delivered by mail and at the register when a customer makes a purchase – again, by cash or credit.

The pilot is being tested in four U.S. markets, though it was originally reported to be in three – in the West, Midwest and Northeast. Hoguet said Macy's is testing slightly different approaches in each market.

The lackluster results should not be too surprising, considering the amount of loyalty competition out there. The average household is enrolled in more than 18 loyalty programs– more than 2 billion nationally, according to COLLOQUY, a global provider of loyalty publications, education and research. Yet only 8.4 of these household memberships are active.

That's a lot of idle plastic.

Deriving value from its loyalty programs – and also standing apart from the competition – will require that Macy's deliver rewards that are relevant, understandable and easy to redeem.

Exclusivity would also be a big incentive, and few retailers know how to work exclusivity as well as Macy's. Perhaps tea with Martha Stewart?

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