Interesting story in today’s WSJ about rewards at top retailers.
Credit card issuers have a long tradition of using points to reward spending. Special treatment is often afforded to high net worth individuals through premium reward programs and introductory bonuses, but can card issuers compete with some revamps in retailer programs? Retailers aim at the top of the market.
- Retailers say it is worth the extra expense since loyalty members tend to spend more.
- Macy’s gets half its $24.8 billion in annual revenue from 10% of its customers.
- And Nordstrom says loyalty members spend four times more than nonmembers.
- Neiman Marcus Group Inc. was one of the first retailers to launch a loyalty program in 1984. These days, shoppers who spend more than $600,000 a year can choose a complimentary travel excursion and get an array of other services ranging from free in-store dining to fur storage.
$600,000 at Neimans a year. You’d need income north of $3 million per year to support that. The travel excursion might keep your interest but unless you live in the cold northeast, free fur storage would not seem to be much of a perk. The shopping excursion might take you from your Miami home to Stockton Street in San Francisco.
Macy’s program might be more suitable for the rest of us. Spend $1,200 on your card each year and you will enter the Platinum level where you can pick a 25% off coupon for all-you-can-purchase shopping spree, 5% in reward back credits, and best of all, special access to the Macy’s Thanksgiving Parade.
Nordstrom has their top program which is far below the Neiman threshold at $10,000 per year in spend; candidates have a wide range of discount and point offerings, plus VIP spa and shopping experiences.
Credit card issuers focus a wide variety of segments, from secured cards to high net worth individuals. Risk pricing and rewards separate the two, but do issuers need to begin thinking of more personalized rewards to capture more scale?