Retailers Look To Airlines To Improve Loyalty Programs

Retailers are tweaking their loyalty programs in an attempt to get customers to spend more, and they're looking to the skies for ideas. New tiered rewards programs bear an eerie similarity to frequent flyer miles, allowing customers to break into elite echelons—as long as they can pony up the cash to get there.

Cosmetics retailer Sephora relauched its Beauty Insider program in July with a new tier featuring free shipping, early access to new products and sales, and invites to VIP events. Similarly, Gilt Groupe launched its Gilt Insider Program that rewards shoppers with points for spending and weekly bonuses for interacting with the brand and offers benefits for shoppers who cross certain point thresholds.

"To make it fair we crafted a program that rewarded engagement, i.e. site visitation and social interaction, in addition to purchasing, so that members could advance up tiers as they earned points," Elizabeth Francis, Gilt's CMO, told CNBC.

It's a system that appeals mostly to wealthy shoppers, who like to use the loyalty programs as a sort of scorecard that shows them where they stand and how far they can still advance. Of course, for many of these programs, wealthy shoppers are the only ones who can even consider participating. Premier Silver status at Best Buy (NYSE:BBY), for example, only goes to those who spend at least $2,500 annually, while the top level of Nordstrom's (NYSE:JWN) elite benefits program has a golden threshold of $10,000 in annual spending.

"A lot of the loyalty programs these days are less about points and more about special access," said Milton Pedraza, chief executive of the research firm Luxury Institute. "It's about special treatment."

Whether that treatment is enough to justify the buy-in is another question altogether. Many retailers can only offer early access to sales and invitations to VIP events, not quite as tempting as the free upgrades and other perks associated with the airline miles model they're emulating.

For more:

- See this CNBC story

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