Will more customer rewards lift J.C. Penney’s sales?

Discussion
Photo: JCPenney
Jul 13, 2017
George Anderson

J.C. Penney is counting on a new rewards program to entice customers to shop more frequently and spend more on each trip to its stores and website.

Penney’s rewards are more generous than before, allowing customers to earn a $10 reward for every 200 points they earn with the chain. Rewards can be rolled over into a new month and are a valid for a minimum of 45 days and up to 60 days. Penney credit cardholders are automatically enrolled in the program and earn one point for every dollar they spend. Others using other forms of payment earn one point for every $2.

Members receive special offers including lower pricing on selected merchandise, limited samples from Sephora and a coupon to use on their birthday. Penney credit card holders receive even more benefits, such as exclusive coupons and invitations to private shopping events.

“We know our JCPenney Rewards members shop and spend more than twice as much as non-Rewards customers,” said Sherina Smith, vice president of loyalty and customer relationship management for the chain, in a statement. “As we focus on growing revenue per customers, our customer loyalty program will be integral to enticing customers to shop more often and spend more on every trip.”

The department store chain’s focus on its best customers is well placed, according to Melissa Freund, a partner at LoyaltyOne.

“Brands can’t be complacent. They have to look at their top-tier customers and make sure they’re taking care of them. People want to be recognized for their loyalty,” she told The Dallas Morning News.

Ms. Smith said Penney analyzed programs in hospitality and travel as well as retail in developing its own. The last year was used to test and tweak the program before its launch. Regular customers will reap more rewards, something she believes that will help Penney create lasting relationships with its most important shoppers.

Penney has incorporated rewards into its mobile app enabling customers to bring up a barcode for discounts to be scanned at the checkout. Rewards are automatically stored in the app’s mobile wallet, which can also hold electronic coupons and gift cards.

DISCUSSION QUESTIONS: What role do rewards programs play in a retailer’s relationship with its customers? Will a more generous and flexible rewards program help Penney increase shopping visits and expenditures by its best customers?

Braintrust
"Retailers and brands need to look to ways to engender repeat buying and loyalty without unnecessarily complicating the consumer experience."
"...their ability to “win” with a sustainably program will rest with their ability to use the shopper data to be more efficient and relevant..."
"...is the lower pricing on selected merchandise fixed across all customers or is it customisable? At this point it really should be the latter."

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18 Comments on "Will more customer rewards lift J.C. Penney’s sales?"

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Phil Rubin
BrainTrust
8 days 1 hour ago

Rewards programs — and loyalty propositions in general — serve to make customers addressable and trackable for retailers. They are essential when customer anonymity is a challenge and certainly retail (unless it’s pure e-commerce) falls squarely into that requirement.

The challenge with making programs more generous and flexible — which for J.C. Penney was largely focused on competing with Kohl’s — is that they become dilutive for the best customers and dilutive when coupled (stacked) with discounts and promos.

The new J.C. Penney program reflects some smart moves but is still almost fully transactional, with a limited set of soft benefits. Retail is increasingly divided into those focused on competing on price versus those more focused on customers and a better customer experience. Those in the former category will be challenged. Those focusing on improving the CX will win.

Stefan Weitz
BrainTrust

Is it just me or are even the rules of this program tiring to read? What retailers need now is fewer games and less friction in their shopping process. There’s a reason grocery chains began to pull away from loyalty programs a few years ago — customers want transparency and ease in their shopping experiences and these programs and cards provide the opposite. Even the graphic at the top of the page is byzantine. At a time when Amazon can separate you from your money in 15 seconds, other retailers and brands need to look to ways to engender repeat buying and loyalty without unnecessarily complicating the consumer experience.

Max Goldberg
BrainTrust

Rewards programs can play a vital role in relationships with customers. They can help retailers gather data and build loyalty. The goal of any rewards program should be an increase customer visits and spend. J.C. Penney is moving the needle with its program. Too many retail loyalty programs are meaningless to customers; they simply gather data, which retailers rarely put to effective use.

Art Suriano
BrainTrust

Rewards programs can still be a good method for keeping the customer loyal. However for them to be successful, they have to be worth the customer’s time and provide valuable benefits. That is what J. C. Penney is doing here. I commend J. C. Penney for trying different ideas to help turn their business around. Their expanded rewards program is another one of those ideas. Some rewards programs are weak and not worth the effort, but here J. C. Penney has nicely increased the customer’s opportunity to receive benefits. If J. C. Penney can continue to improve their product mix and attract new customers; that, combined with a rewards program that is better than their competitors’, can make the company successful.

Chris Petersen, PhD.
BrainTrust

Ask Prime members what role rewards and perks play in their relationship with Amazon … and they even pay Amazon for that “privilege” annually.

A rewards program for a retailer’s best customers make sense if it generates loyalty in terms of tangible outcomes like more visits and more spend.

One key is making sure that “rewards” become something more than just discounts or cash back. Another key in the era of mobile omnichannel shoppers is to make sure that everything is simple, accessible and integrates with smartphones.

The bottom line for retailers is that this is all very measurable. But the measurement must be granular at the individual customer/household level.

Anne Howe
BrainTrust

Rewards that translate to price reduction should do well for J.C. Penney’s, since almost 80 percent of regular J.C. Penney shoppers choose price as their primary reason to go there. (Prosper Insights & Analytics, April 2017). But since 25 percent of its shoppers have been loyal for 25+ years, it’s clear they have an aging base.

I like to see what reasons other department store shoppers select as their primary reasons for visiting a store, just to get a sense of what J.C. Penney might think about as it tries to bring in new shoppers. The Prosper data reveals that where Macy’s gets the edge from shoppers is in quality, newest styles, fashion ideas and brands. Common sense says J.C. Penney might add some style to the overall mix.

Cathy Hotka
BrainTrust

I loved the Ron Johnson-era J.C. Penney with its shiny stores, ultra-low prices and no price-it-up and discount-it-down pricing. Apparently I was the only one. I’ll predict success here.

Gene Detroyer
BrainTrust

I liked it too. I thought it was the only chance they had.

Lee Kent
BrainTrust

I loved it too, Cathy!

Alex Senn
BrainTrust

I certainly think this is a good move, however I think the execution of it could be a little better. For instance, why not use a subscription rewards program like the Prime example with Amazon? Offer up free installation and maintenance for a monthly $15 along with free shipping or a unique blend of a few advantages they could offer in one bundled “upgraded” J.C. Penney account. They would get the points, the rewards, the shipping, the this-and-that and it all factors into their J.C. Penney account.

At this point, marginal improvements to J.C. Penney are not going to make a difference. They’ve got to get scrappy and figure out what they still can do to win back customers. I agree with Phil that this strategy in the short term works, but in the long term it makes it so that the loyal customers are always waiting for their reward, whereas if they are paying for it they will want to come back to take advantage of it.

Lee Kent
BrainTrust

I just have one question. Is J.C. Penney planning on turning their merchandise more often too? It is great to focus on your best and top customers however, if you have nothing new to offer them, more discounts are not necessarily going to bring them in. You have to think beyond the dollar.

But that’s just my 2 cents.

Camille P. Schuster, PhD.
BrainTrust

Does J.C. Penney know its frequent and/or loyal consumers? If so, a less generic rewards program would be more successful. If not, and if the intention is to create a database of loyal customers, this may be a first step. However, loyalty is being bought with this program and only exists as long as the rewards are great. How will J.C. Penney move beyond that to create truly loyal customers?

Brian Kelly
Guest
7 days 23 hours ago

Rewards programs allow the retailer to track customer behavior by having a file against which to append data. In the shift to increasing personalization, that file needs to be robust to more fully understand the customer.

A more relevant rewards program should incent customers to use the program. Key is the question of how J.C. Penney will interpret the data it captures and then activate the relationship. Will it inform the selling model to ensure J.C. Penney is relevant to the customer or limit its use to off-price promotion? Therein lies the rub.

As we like to remind folks, “retail ain’t for sissies!”

gordon arnold
Guest

The recent departure of the company’s CFO, Mr. Edward Record, is not a sign that all is well with J.C. Penney’s corporate direction. Mr. Ellison has more than a little bit of explaining to do for this and slow sales. Putting faith in any attempt to repair the company’s viability with current leadership is a long leap of faith at this time.

Cate Trotter
BrainTrust

If a customer regularly shops with a certain retailer, then a loyalty programme can help them feel rewarded for making that choice. Of course if the product and experience are good enough, and distinct enough, they’d be shopping there anyway. Rewards programmes are a fine part of the relationship ecosystem, and it’s great J.C. Penney is looking at ways to improve that, but the payback to customers has to be worth it. I’m not sure if this is as far a step forward it could be — for example, is the lower pricing on selected merchandise fixed across all customers or is it customisable? At this point it really should be the latter.

Mark Heckman
BrainTrust
From personal experience and observation, Kohl’s shoppers seem to be gaga over the myriad of special discounts, coupons, private label credit cards, and promotions that shoppers can stack up to drive the bill lower. This could be especially annoying to a pure cash customer like me, as I waiting impatiently in-line as the seeming endless transaction ahead of me at the checkout processes all of these savings tools. As annoying and numerous as they maybe, I get the sense that Kohl’s success and shopper loyalty is almost entirely predicated upon the use of these promotions. Given JCP is directly competing for the Kohl’s customer, I would surmise that they are going to have to be not just generous, but rather innovative to lure the Koh’s devotees away from their coupon party. What seems to be missing with these programs is any real effort to use the residual shopper data to better target their shoppers via specific items, categories, and even the depth of promotions. I can only assume that Kohl’s is giving away a good bit of margin that need not be, by offer the same healthy discounts to almost everyone who walks in. My sense is that JCP is… Read more »
Ken Morris
BrainTrust

Rewards programs can be extremely powerful tools to increase customer loyalty, if done right. Many loyalty programs don’t provide enough incentives to get consumers to join or recognize the value. Those programs often struggle to get enough members and to keep them.

Penney recognizes that its main competitor, Kohl’s, has done a great job of cultivating loyal customers with its lucrative loyalty program that is also very mobile friendly. The new J.C. Penney rewards program is enticing for consumer and it even allows them to double-dip when they purchase Sephora merchandise if they are also a Sephora loyalty member.

For a retailer to reap the benefit of a rewards program they must offer something meaningful to the member and Penney’s is doing just that.

Thomas Patchin
Guest

Loyalty programs are not about discounts! The fundamentals of loyalty are knowing your customer, demonstrating you know your customer and providing something of value for the program. That value does not have to be only discounts; it can be preferred access and personalized experiences. Is the brand able to cut back or limit the mass-market offers because of this increased reinvestment with known customers?

This could be very valuable to brands and to consumers who want to be known and are willing to shift their spending if they receive more than just discounts. Loyalty is strategy supported by a complete 360 degree view of the customer.

wpDiscuz
Braintrust
"Retailers and brands need to look to ways to engender repeat buying and loyalty without unnecessarily complicating the consumer experience."
"...their ability to “win” with a sustainably program will rest with their ability to use the shopper data to be more efficient and relevant..."
"...is the lower pricing on selected merchandise fixed across all customers or is it customisable? At this point it really should be the latter."

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