Target Checking Out New Loyalty Program

by Raymond Pucci 0

loyalty program

Big retailers are scrambling to generate both in-store traffic as well as online activity and Target is no exception. So the bullseye-logo merchant is kicking the tires on a new store loyalty variant—Target Red—as the following article describes.

Target  has begun to test a new loyalty program, “Target Red,” that combines discounts on delivery with cash back on later purchases. The program will serve as an alternative to the existing REDcard program which requires customers to sign up for a Target credit or debit card. With Target Red, customers instead earn 1 percent back on purchases that they can redeem on their next visit, as well as receive 50 percent off a Shipt membership, and free next-day delivery through Target Restock.

The retailer had acquired same-day delivery service Shipt in December for $550 million, and has continued to operate it as usual, after adding Target to the list of available stores, of course. It’s also now helping to push customers who were shopping rival grocers on Shipt  over to Target by pricing its own items the same as they are on the Target website, while others remain marked up.

Meanwhile, Target Restock is the retailer’s own entry in next-day delivery, which allows consumers to fill a box with everyday essentials – like household goods and pantry staples – and take delivery for $4.99 per box. (For comparison, Prime Pantry is now$7.99 per order, unless paying a $4.99 per month membership, which makes order over $40 ship free.)

However, Target Restock is only available in select metros at this time – following an expansion last fall, it now reaches over 70 million people, Target said. Target Red loyalty program members will be able to waive that $5 delivery fee on Restock, and can take half off the cost of the typically $99 per year Shipt membership, too.

More importantly, perhaps, is the one percent back, as a way to lure in shoppers who won’t sign up for REDcard. Target REDcard is already quite popular – as of the company’s latest earnings, it accounts for 24 percent of sales, with 12.7 percent from Target Debit Card, and 11.4 percent from Target Credit cards. But those figures aren’t climbing much these days. That’s where Red comes in.

Target has been on the rebound of late by introducing several new or enhanced initiatives from mobile payments to store re-design. So it’s no surprise that they have rolled out a pilot version of a new loyalty program that looks to leverage its recent acquisition of Shipt, the mobile order and delivery company. Target Red members will get 1% cash back, a Shipt discount, and delivery deals. However the 5% cash discount using the in-house REDcard will not be offered. Perhaps Target is using this as a way to segment in-store vs. online shoppers to meet their different needs. Not a bad idea, as it allows the customer to decide what works best for them. Customer engagement activity and sales results will reveal how things work out. Stay tuned.

Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group

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