Profiting From Loyal Shoppers

Loyalty to one's King, loyalty to one's country, loyalty to oneself — sure. But, loyalty to a store? Absolutely. Loyalty programs for customers have been around for years, and they work very well. Integrated technologies, however, have taken these programs to unforeseen levels of efficiency and performance. Ask Chico's, the Fort Myers, FL-based retail women's clothing chain. With 180 stores in 38 states, 2,000 employees, and plans for 50 new stores within the next year, Chico's has to pay attention to customers. "We know we have a loyal customer base," explains Jim Frain, director of marketing. "In our stores, we see repeat customers with frequent, high-transaction visits. There is a relatively small group of customers bringing in a lot of business." The focus on the cultivation of customer relationships was the catalyst behind Chico's latest best-customer program, the "passport program."

Finding Loyal Subjects
Despite all this attention to customer loyalty, though, past programs hadn't always proven successful for Chico's. Several years prior to the implementation of its current passport program, the company had implemented another loyalty program of the same name. "The old system threw all the data in one big pot – it was a mess," explains Frain. You knew how much someone spent, but you didn't know when."

Paper-based records and an inability to conduct specific tracking contributed to the program's demise. Chico's knew the idea was right, but had no means of realizing the vision of its loyalty program. That's until the fall of 1998, when the company found STS Systems, an international supplier of retail integrated computer applications. Chico's chose STS' MarketWorks customer relationship management (CRM) solution, and after three months of implementation, went live in February 1999.

The premise behind the program is simple: Customers that spend $500 at Chico's are entitled to a permanent 5% discount. Passport members accrue money on their passport cards from the day they enroll in the program. Customers in the program are referred to as "preliminary customers" or "members," depending upon whether they have surpassed the $500 enrollment level. Customers have the incentive to reach the $500 reward, yet the card still tracks statistics and demographics for customers who don't reach that goal. When customers pay for purchases at the POS station, they present the passport program card. The sales associate then manually keys in the number, and the data is downloaded into the MarketWorks database. Once the information is keyed in, passport members automatically receive the 5% discount. In an effort to attain a total integrated solution, Frain also explains that the company is switching from Chico's "antiquated registers." "We already have a provider and will be implementing new registers in January," says Frain.

The Benefits Of Tracking The Loyal
With loyalty programs everywhere today, you might dismiss the implementation as passé – that is, until you look at the statistics that support their success. Since the implementation in February, Chico's has signed up 400,000 preliminary customers and passport members. In September, there were 33,000 sign-ups. These numbers seem impressive, but the demographic data behind them is the marrow. The cards allow the store to track a number of specifics: customers' geographic location and the frequency and amount of purchase. This information is invaluable for marketing purposes, and Chico's has taken advantage of it.

"We have developed marketing programs that fit in with this tool," describes Frain. "Every month we have either a catalog-type mailing or bulletin with some sort of response device that the customer has to bring to the store to redeem – a coupon, percentage off, or free gift offer." A small test of the bulletin in August produced a response from 50,000 customers. Based on that success, Chico's ramped up to 220,000 mailings in October and redeemed 4,500 coupons in four days. In September, the company had 43,000 coupons redeemed from the catalog, accounting for $6.5 million dollars in coupon-related sales. This allowed the retail chain to finish the month up 31% from the prior year. This was a significant number, since the prior year's same month sales had also grown about 30%.

Assessing The System's Value
The STS system took Chico's three months to implement. Comments Frain, "The system is very simple for store employees. The corporate level is much more difficult, but only because it offers so much that we are not even using. We haven't even tapped out the system's potential, so we sent someone for advanced training on the system." Beyond this untapped potential, Chico's has been thrilled with the system's performance. "This system has showed us two important things: how important a small segment of our customer base is, and how much unachieved potential there still is. We will be taking full advantage of the system. I see e-commerce and catalog ventures as the next logical step sometime next year." From Chico's example, it appears that loyalty to a store can translate into big profits – if businesses are willing to pay attention to the customers that are faithful to their cause.

Doug Campbell