The Modernization Of Lord & Taylor: Its First Loyalty, Mobile Moves

Lord & Taylor, the nation's oldest department store (dating back to 1826), is trialing a loyalty program, based not on a customer's dollar spend but on how frequently a store is visited. For example, two visits a month will deliver a $15 reward.

The 46-store chain is a slimmed down version of its historic self. In 2005—while part of Federated—the chain was bringing in annual revenue of about $1.6 billion. But the now-private concern today brings in annual revenue of about $492 million, according to ZoomInfo.

Although the motto that "every customer counts" is always true in retail, it's fair to say that that's especially true with Lord & Taylor's customers, whose average daily purchases hit $75, said Ashley Baker, the chain's manager of customer loyalty and credit services. The loyalty program is based on two visits, but the chain has a requirement that the customer must spend $100 per month to qualify. With an average daily purchase of $75, that's not proving to be much of an issue. "The $100 qualifier ends up disqualifying very few people," Baker said.

The chain started its six-month pilot in August and is initially monitored solely through Lord & Taylor's proprietary store cards. The program will be officially launched on October 1 in Washington, D.C., which is the chain's pilot market for this trial.

But the initiative, unlike some other loyalty programs, is not aimed at increasing revenue or profits. Rather, the goal is merely to keep more customers. "The visits were mostly strictly linked to customer retention," said Baker, adding that most of their customers will spend the rough amount regardless of incentives. "She's going to be spending a certain amount of money."

A more controversial part of the campaign is Lord & Taylor's core CRM program, which not only leverages data from its in-house card but also places a heavy reliance on capturing purchase data from other credit and debit cards that customers use. There is debate over whether it's consistent with security payment card procedures to use credit/debit card data for anything other than processing payment card transactions, especially when the card numbers are being used as customer identification numbers. (See the related story about the card number use debate.)

Lord & Taylor officials are also exploring new ways of looking at E-Commerce and even mobile communications strategies. The chain's E-Commerce group does not release revenue stats, but E-Commerce Director Dan Shelffo said that if his E-Commerce group was considered a store, it would rank thirtieth in highest revenue among the chain's 46 locations.

When it comes to mobile investments, Shelffo said "we're poking around" and that his group has made some "site modifications so that we can start to dabble" in mobile communications. But the spreadsheets do not look attractive.

"I have to protect the billion-dollar brand. When I look at the dollars that I am going to invest, I look at the return. I know what my ROI is," Shelffo said. "When I look at mobile, I see a lot of investment."

Full-fledged M-Commerce—where consumers can make purchases from their cell phones—is not even being considered. However, gathering mobile phone numbers for opt-in marketing campaigns is being explored very preliminarily. "We're rolling something out in a testing environment," he said.

One project, for example, is called "lunch break" and consists of a focused E-mail blast sent out around lunch time that notifies customers of a special sale that will only last two hours. "Instead of lunch, why don't you shop this great offer?" Shelffo said. "The E-mail would say they could shop online or print this coupon and bring it into the store." Most customers, he said, buy in-store.

This issue brings up the question of how in-store and online teams are incentivized. "We're savvy enough to know" when coupons were printed and used in-store. "We know what the return is on the marketing spend."

Even though he's director of E-Commerce, Shelffo said he needs to do a lot to support in-store. "One way or the other, sales efforts that I drive would show up in my results bucket. I don't have the freedom" to solely support online operations. "There are certain dollars that I have to invest" in-store.