Retail loyalty programs are no longer in the cards

Photo: RetailWire
May 15, 2018

Macy’s will now allow customers to join its Star Rewards loyalty program without having to sign up for a store credit card.

Macy’s new Bronze tier enables customers to earn three new rewards: Star Money Days (earn points for future discounts), Perks & Offers (extra savings offers at checkout, event invitations, etc.) and a Birthday Surprise.

Cardholders at three higher tiers earn additional benefits for using their Macy’s card: Silver (up to $499 annual spend), Gold ($500 to $1,199) and Platinum ($1,200 or more). All three receive 25 percent off any day they choose with Star Pass coupons. Gold members earn free shipping. Platinum customers further earn five percent back on purchases.

Star Rewards relaunched with the tiered levels last September. Said Rich Lennox, Macy’s chief marketing officer, in a statement, “Since the relaunch of Star Rewards last fall, our customers have responded with tremendous enthusiasm for enhanced benefits and rewards they received as part of the program. With the addition of the Bronze level, we’ve made earning rewards simple for everyone, no matter how you pay.”

Target is also piloting a loyalty program without ties to a card, which began in April in the Dallas-Fort Worth area. Target Red includes one percent back on purchases that can be redeemed at a later visit, a chance to vote for local organizations to help direct Target’s community giving, half off first-year membership on same-day delivery with Shipt, and free next-day delivery on essentials with Restock.

Target REDcard holders, who earn five percent savings on purchases, can also register for Target Red, although the one percent discount isn’t stackable.

Retailers are apparently seeing that limiting rewards to cardholders risks alienating those who don’t want another credit card as well as Millennials, who many see as debt-averse after having grown up in the Great Recession.

Yet providing rewards to non-cardholders may kill the incentive for signing up for a card. A Vyze/Ipsos survey from last year found 40 percent of consumers saying they are more likely to shop again at a retailer with whom they have a store card.

DISCUSSION QUESTIONS: What do you think of Macy’s new Bronze tier as a loyalty proposition for non-cardholders? Will offering rewards to non-card users undermine the customer loyalty retailers have depended on from store cards?

Please practice The RetailWire Golden Rule when submitting your comments.
"Customers shouldn’t need a PhD in how a retailer’s loyalty program works in order to reap the benefits of the program."
"Loyalty is a concept that’s ripe for reinvention. "
"I believe many loyalty programs will look to incorporate e-payment into the mix..."

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23 Comments on "Retail loyalty programs are no longer in the cards"

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Max Goldberg

When every retailer has a loyalty program, how does a retailer make its program stand out? The loyalty programs offered by Macy’s and Target are too complicated and are not aspirational enough. Therefore, I don’t think they will negatively impact their credit cards.

Nir Manor

A retail loyalty program that does not require a store credit card makes sense because of few reasons. New technologies allow retailers to collect shoppers data without using a card. It can be done via mobile app or online or offline with a collection device. A card is not imperative. Also younger generations of consumers are more reluctant to apply for a card but would be happy to get loyalty benefits. The way to increase loyalty is to personalize offers based on shopper behavior, purchase history, location demographics, etc. store cards can be offered as an option but are not required as the basic loyalty enabler.

Bob Amster

Retailers should not force customers to sign up for a credit credit card in order to reap the loyalty rewards. The new program enhances the impact of having a loyalty program.

Anne Howe

Loyalty is a concept that’s ripe for reinvention. It makes total sense to offer a new entry point to shoppers.

Ken Lonyai

The ultimate loyalty program is Prime. Everyone else is trying to find a combination that will compete, but discounts just won’t create the same loyalty.

Macy’s has always had a discount system through structured price discounts where they knew how each discount level would translate into sales. To me, this “loyalty” system is a new spin on old practices and one, despite positive claims, that is not going to be very beneficial in the long run. In fact, if Macy’s bets too heavily on this “loyalty program” while ignoring more crucial factors like invigorating the store experience, decluttering the sales floor and better targeting merchandise, they are going to continue to drive customers further away.

True loyalty can’t be bought by discounts — that’s just a race to the bottom. Loyalty comes from resonating with customer needs and desired experiences in a way that stays fresh and intrigues them to shop and shop again.

Peter Charness

I really do wonder some days what the “true” retail value of my product is. After the retailer builds in the price buffer for those 3x credit card points, followed by the 5 percent loyalty discount and a 50 percent off BOGO, maybe a simple 10 percent reduction in price for everyone makes more sense? Nah, we love a deal — if it really is one.

Kevin Graff

Forcing customers to sign up for a credit card to be able take take advantage of loyalty perks is as outdated a concept as — well — most department stores. And let’s face it, loyalty just ain’t what it used to be. Everyone has loyalty programs, yet few are really effective (just ask yourself, of all the loyalty cards in your wallet, how many of those retailers really hold your loyalty).

Membership seems to be where it’s at these days. Maybe Macy’s and others could look at creative ways to build in membership programs to their stores or key departments.

Dave Bruno

I have always questioned the logic of requiring a credit card in order to join a loyalty program. Premium incentives for credit card holders are one thing, but requiring credit cards as table stakes to join? Never a good idea in my opinion. We need to make it easy for people to shop, and deliver assortments and experiences that bring them back for more. Requiring credit cards is antithetical to making it easy.

Neil Saunders

In retail, loyalty has rarely been driven by loyalty schemes. The fact that most people have more than one loyalty card tells you exactly how loyal they are!

That said, these schemes are good for data collection, marketing, activating customers on specific campaigns and so forth. I don’t see them as going away, but neither do I see them as prime drivers of loyalty.

Georganne Bender

Loyalty programs that require customers to use the store’s credit card aren’t really true loyalty programs. They are incentives to use the store card.

Loyalty programs should be simple and easy to understand. Nordstrom gets it, rewarding members each time they shop, no matter how they choose to pay. Customers shouldn’t need a PhD in how a retailer’s loyalty program works in order to reap the benefits of the program.

Jennifer McDermott

Cards were an easy way of tracking loyalty, but don’t necessarily represent true repeat potential. I think the bronze tier will be a successful acquisition play for Macy’s.

Shep Hyken

Loyalty programs should be simple. Also, loyalty programs are marketing programs. Not all customers are loyal to the company, but to the program. So the retailer needs to decide what they are going after; a truly loyal customer or a customer who is loyal to the rewards. And if you tie the rewards/loyalty program to a card it can do the same thing. The customers are more loyal to the card and program. That may not be a bad thing. Customers love to see their points and rewards accumulate. Retailers love it, too!

Ray Riley

I think in this case, Macy’s is focusing on the wrong end of the funnel. Retail private label credit cards are archaic and, as mentioned, there are so many other ways to aggregate consumer data. Therefore it’s a no-brainer to remove that requirement. Loyalty and retention are critical, but what if Macy’s placed an emphasis on having relevant, stylish, well-priced merchandise? What if their stores were clean, and updated from 1985? In that case, they may attract a younger consumer and loyalty could be a more valuable component of their strategy. To me, this is plainly putting the cart before the horse.

Mark Heckman

There are a couple of things going on with loyalty programs currently. First, mature loyalty programs that originally required a card for identification at the point of sale no longer require such, because using smartphone apps or just using an alternate identification number, such as a phone number, is now a viable substitute. Programs that do require a card are now typically payment-based cards, such as Kohl’s uses so effectively to incentivize their shoppers with additional discounts for those Kohl’s payment card transactions.

Both are viable tracks for loyalty programs, however with e-payment systems becoming more widespread, I believe many loyalty programs will look to incorporate e-payment into the mix for all the reasons that Kohl’s wants every shopper to use their private label card. In my view, what Macy’s is doing with tiering their program and rewards borders on being too complicated for the average consumer. Simplicity is key.

Cate Trotter

I think this is just another example of how much loyalty as a concept needs rethinking. The store card is quite an outdated concept and as the piece notes seems especially unattractive to younger shoppers — who retailers need to court to ensure they have a customer base in years to come. It’s not just the cards though, retailers need to really think about their loyalty programs and if they’re worthwhile. Or can they drive customer loyalty in other, more effective ways.

Sterling Hawkins

It’s about time. Loyalty programs are about gathering, understanding and using data; only having a program tied to a store card severely limits engagement potential. I think this is 100 percent the right move for Macy’s to have the card as a premium option, not a requirement to participate. The benefit of having more data from more people far outweighs anything they’re giving up to make it happen. There’s so much opportunity around customer loyalty and data retailers are only beginning to scratch the surface.

Craig Sundstrom

Overly complicated (at least the way it’s explained here; maybe in practice, or if it’s diagrammed out, it seems more intuitive).

As for extending the benefits: Macy’s goal should be to have people shop at its stores. It might like them to use a Macy’s card to do so, but the reality needs to be faced that lots of people don’t want to do that, and it’s counterproductive to alienate them. Indeed, my belief is that, with the nearly universal acceptance of Visa/MC (and to some extent Amex and Discover), “store” cards are largely doomed.

Kai Clarke

These moves by major retailers are simply the reflection of the end of cards. Any card. Why tie your future and the participation of your target markets to your loyalty program to a dying concept (store cards)? Instead, by making these virtual, stores are better able to plan, prepare, and collect data in the cloud, and use it faster and easier. Stores will find greater satisfaction with their customers and better security and controls with their loyalty programs.

Javier Cazares

Like everything else in retail and in the rest of the industries, what really matters is what the customer wants. And what customers want is convenience, price and a seamless experience. So, instead of making a super complicated loyalty program that even associates don’t even understand, build a simple and attractive loyalty program based on what your customers want. Does a personalized loyalty program sound like a potential disruption? It does to me.

4 years 1 month ago

There is no loyalty to a retail store! If you want loyalty, get a dog.

Ric Noreen

The ease of becoming a Bronze level shopper in Macy’s program feels flexible with no strings attached, and therefore valuable to their currently less loyal shoppers. As always, the return on the cost of these benefits is unlocked by maximizing the insights gleaned from the data. Customized offers, linked to the demographic and life-stage is key to gaining that marginal purchase.

And as always, the vendor’s ability to learn and leverage these insights in their there promotional efforts directed at the retailer’s shopper base in vastly under-utilized. If manufacturer’s were to join forces to market both individually and collaboratively to these loyalty card holders, the flywheel would really begin to turn.

Richard J. George, Ph.D.

We have loyalty backwards. Why should customers be loyal to a store or brand? Be loyal to your family, school, church, country, etc. not to your brands or retailers. Brands and retailers need to be loyal to their customers. How? Deliver/exceed your promises to your customers.

Kevin Simonson

For advocacy, we recommend email as the primary tool. It’s a powerful way to build brand ambassadors. After all, the best way to find new customers is through existing ones. One example would be a launching a drip campaign that incentivizes customer for each new person they refer with points, rewards and so on.

"Customers shouldn’t need a PhD in how a retailer’s loyalty program works in order to reap the benefits of the program."
"Loyalty is a concept that’s ripe for reinvention. "
"I believe many loyalty programs will look to incorporate e-payment into the mix..."

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