Source: Target
Will mobile perks put Target’s Cartwheel app on a roll?
Target continues tinkering with its Cartwheel mobile app. In the spring, the company announced it would test letting customers clip and redeem digital coupons using the app. Now comes reports the retailer is testing a rewards program known as “Cartwheel Perks” that gives customers who use the app the opportunity to earn credit toward purchases or free items such as athletic apparel and laundry detergent.
Target is testing the concept at 126 stores in four markets — Denver, Houston, San Diego and St. Louis — with plans to expand the program should it prove successful. The chain begins the test following a quarter in which comparable store sales declined 2.2 percent on reduced customer traffic.
Cartwheel has certainly resonated with Target customers since the retailer first launched the app in 2013 via its own Facebook page. Since then, the St. Louis Post-Dispatch reports, 27 million users have signed up saved a collective $600 million on purchases.
Eddie Baeb, a spokesperson for Target, told The San Diego Union-Tribune that Cartwheel indexes particularly well with Millennials. Adding rewards may make Cartwheel even more attractive to this increasingly important demographic for the chain.
Mr. Baeb told the Post-Dispatch that Target began testing another rewards program called REDperks in the Raleigh-Durham, N.C. market last year and customers participating in that will be transitioned into Cartwheel Perks as it expands.
Discussion Questions
DISCUSSION QUESTIONS: Will the addition of rewards on top of percentage off discounts and digital coupons result in more downloads of the Cartwheel app? Do you see the move having more of an effect increasing customer counts or building market basket size?
Poll
BrainTrust
Lyle Bunn (Ph.D. Hon)
Strategy Architect – Digital Place-based Media
Shawn Harris
Board Advisor, Light Line Delivery
The addition of rewards should increase downloads and usage of the app, provided that the rewards program is easy to use and offers rewards without making consumers jump through hoops. If the program is skillfully created, it could increase market basket size and customer frequency. To be successful the Cartwheel loyalty program can’t simply be a me-too. It has to be dynamically different from grocery programs, which have become justifications for high-low pricing. Consumers have to find real value in the rewards.
The debate over the bottom-line effectiveness of rewards programs has been going on for a few years. Many agree that just giving merchandise away at a discount does not a loyalty program make. So Target is walking a fine line here. Running a pilot hopefully provides an indication of whether customer use will have increased or market basket size will have increased, but the $600 million that those 27 million customers saved who downloaded Cartwheel is $600 million that Target didn’t deposit in the bank. Let’s wait and see.
Apps fuel a relationship, so full-speed ahead, Target. But apps are also valuable in gathering data toward better audience-of-one marketing. As retailers augment their segmentation marketing and can better profile shopper groups toward that specific patron, data based on browse history, purchase history and path-to-purchase engagement fuels shopper communications and “Target-ing.” Coupons are a worthy outlay toward establishing a stronger foundation for future opt-channel traffic, conversion and margin achievement.
Twenty years ago we had the same discussion with every type of new frequent shopper card or loyalty program that came out. Now it’s every new phone app that is suppose to save the day. We used to carry 15 frequent shopper cards on our key chains, which the numbers eventually wore off, and now they let use our phone number. Now we have the same amount of retail apps on our phones. This is just another “me-too” move. Who wins in the end? Retailers that offer the most value. Good products, good service and good people without making the customer do all the work with their phones. Having an app on a phone that a customer is forced that only gives them free products you really don’t want is not going to improve sales much. If a retailer really wants to make a difference, forget the phone app, use facial recognition technology and just hand the customer their free products when they walk into the store.
Cartwheel Perks’ user experience and messaging will be key to its success. It has to be simple to understand and use for both customers and associates. Target should be mindful to sprinkle in a lot of “wow” factor. That is, be sure to surprise and delight the customer with personalized perks at the right time. That will drive advocacy for the Cartwheel app.
Target appears to be experimenting with a variety of loyalty and rewards programs and the myriad of options is confusing to shoppers. Should shoppers participate in the REDCard program or the Cartwheel program? Why should shoppers have to do work to determine which program is right for them?
A dedicated rewards program for Millennials is too confusing when added to Target’s existing loyalty programs. All the research on loyalty concludes that the programs must be easy to use with benefits that are valuable to shoppers. Target should simplify its programs into one overall structure that meets these requirements.
My Millennial daughter is a big fan of the Cartwheel app and Target in general — and not in that order. She is a fan of shopping at Target first and foremost. The Cartwheel app allows her an opportunity to save on her purchases. Will a rewards program that presumably gives away more margin dollars help Target’s business? Discounts, coupons and rewards all seem to be a race to the bottom. If the margin dollars exists and the vendors continue to support these programs then they’ll continue to be used. It seems there should be innovative methods and processes that are valued by shoppers to increase business without giving money away. Any thoughts from the panel?
Adding special features like Cartwheel Perks is key to keeping Target’s Cartwheel app top-of-mind for users. The challenge with all apps is making them compelling enough for consumers to download to their precious screen space and, more importantly, keeping them fresh so that they are used. If they don’t get used frequently, they are at risk of being deleted from consumers’ smartphones. While the Cartwheel Perks may inspire more people to download the app, the biggest benefit is the increased usage and retention of the app.
I think Target has confused their mobile experience. Cartwheel is a co-branded program created with Facebook. RedPerks is the Target continuity purchase program. REDCard is Target’s proprietary credit card. Why should a shopper have to flip between programs? Why conflicting brands? Tiered loyalty? I suspect that is why they have multiple tests in market.
The lack of retail outlet loyalty is pretty well shot. This time of austerity has trained shoppers to hunt for the best deal. All the research says: she wants all the deals, then she’ll sort and act.
That understood, Target still has to create some meaningful differentiated relevance that increases trial, frequency, basket size and profit. Especially with Michael Francis down in Fayetteville helping Walmart get its act together. Uber does look easier!
Why we say, “retail ain’t for sissies!” Have a great weekend!
Target is a sissy. Another boring app. Snore. Since their failure in Canada it’s very hard to take Target seriously. They are not Kmart but have a history of Kmart-like blunders.
Having an app like this is simply a table stake, meaning the large-box retailers must have them to remain viable. So, yes, it’s a good thing for Target to expand. However, other retailers such as Walmart have similar capabilities. This is all nice for Target to have, but don’t confuse with it with the reasons why consumers might choose Target. It’s not a differentiator.