Borders Alters Loyalty Program, Lowers E-Reader Prices
Borders is introducing a new rewards program and lowering prices on its e-book
readers to gain some traction in its competition with Amazon, Barnes & Noble
and others.
Beginning today, Borders’ customers will have a choice of two loyalty programs
with the chain. The first is free with some additional perks over the previous
plan, while the second, Borders Rewards Plus, will cost $20 and include higher
savings on purchases and free shipping on most online orders.
Both programs include members-only discounts in stores and online, personal
shopping days, free coffee and a birthday gift from the chain.
"We saw a great opportunity to differentiate Borders in the marketplace
by offering the choice of a paid program or a free program," Borders CEO
Mike Edwards, said in a press release. "The new Rewards program will provide
members with more relevant content, benefits and discount offers. It’s yet
another example of Borders’ commitment to creating an outstanding customer
experience."
The bookstore chain also announced that it was lowering prices on its Kobo
eReader (to $129.99) and Aluratek "Libre" eBook Pro (to $99.99) beginning
today.
"We’re committed to making it as easy as possible for all Borders customers
to enjoy e-reading," Mr. Edwards said. "We envision this price reduction,
enabling the purchase of these devices as a second e-reader in a household,
as a more affordable option."
Borders’ action is seen as another step towards a price war in the category.
Rival Amazon is offering new, less expensive Kindle e-readers at $189 for the
Kindle 3G and $139 for the Wi-Fi model. Staples has also announced that it
will begin selling the two models along with the more expensive Kindle DX this
fall. Target is also carrying the Kindle in its stores.
Discussion Question: What will have a more positive effect on Borders’
business; its new loyalty program options or lower e-reader prices? Is Borders
taking the types of steps necessary to turn the chain around?
- Borders Launches New Paid ‘Borders Rewards Plus’ Loyalty ProgramFree, Enhanced
Borders Rewards Program Also Launches Today – Borders Group, Inc./PRNewswire - Borders Reduces Price of Kobo and Aluratek eReaders to $129 and $99 – Borders
Group, Inc./PRNewswire - Staples to sell Kindle, Borders cuts reader prices – Reuters
Borders seems to change its loyalty program more often than just about anyone else out there, though this time they seem to have a better approach. Dropping the price of their e-reader isn’t going to hurt but it’s not going to be enough to compete with Amazon’s Kindle, Apple’s iPad or Barnes & Noble’s (much less any of the other ones out there!).
Borders is smart to continue their push towards data-driven customer marketing and, assuming they really use their data, they should be better–at least in terms of loyalty and relationship marketing–than B&N. As we’ve written here before, Amazon is untouchable across many retail categories, and of course books is where their roots are…so, enough said.
It’s refreshing to see something good coming out from Borders and it will be interesting to see what B&N does. They appear to be the most vulnerable here.
Borders is behind the curve on e-readers and needs to develop a program that will get them back in the game.
Combining the two themes could be interesting if loyalty members could earn “points” towards a new eReader or eBooks. The paid version of the loyalty program would have higher value “points” letting you reach your target faster. Staples does an amazing job at this through their loyalty program. Each month I receive a store credit in the mail sometimes reaching over $30. Imagine if a loyal Borders customer could earn a free Kobo eReader in 1 year by purchasing books through Borders.
Loyalty tips:
1) The reward needs to have real value.
2) It needs to be attainable.
3) Progress reports need to be shared.
4) Double “Point” opportunities need to be offered to keep the program exciting and the customer engaged.
“Loyalty” is the objective here. Take care of the best customers, and bring them back often.
Price can play a role in those loyalty programs. And, as long as the pricing mechanism can contribute to profitable revenue, have at it.
However, having “two new programs” coming at once, offers the potential for confusion, both for associates and for consumers. And, Borders may be asking the consumer to think too hard about their decisions. Borders, and retailers who are instituting “loyalty” programs like this should keep in mind some principles of effective incentive programs. They should:
1. Be consistent with the company’s overall objectives.
2. Be easy to understand (applies to associates and customers).
3. Be easy to administer (where do you want to release the power to interact with the consumer)
4. Put “blood in their mouth”–make the consumer hungry to come back for more.
5. Be timely.
Marketers have to ask themselves what type of loyalty programs meet these criteria, and then mimic them. We all have a great deal of decisions to make about our own lives. We don’t always want to think through a program that the marketer wants to send our way. That might mean fewer choices, but that can work for all parties.
Check out the loyalty programs of:
Southwest Airlines – get on a plane and fly, and you have a segment;
Kroger – show your key fob and you have instant discounts at the register;
A dry cleaner who has your telephone number during drop off and pick up, and then provides an automatic reward over time when certain expenditures are reached.
Barnes & Noble provides an automatic discount at the register when you buy a book, if you’re a member of their rewards program.
There are a good number of strong ones in the works. Not certain that Borders has the easy path for consumers. However, loyalty, in a world of increasing uncertainty, lack of trust, and confusion, works.
I am not familiar with the details of the Borders Loyalty programs. Like all consumers, I could order my books from them online but there are two of their competitor’s locations close to where I live so, when I shop for a physical book, it is not at a Borders location.
My view on the e-readers is based on the Gillette theory – give them the razor and sell them the blades. If all the comments on the growth of the e-books are correct then the lowering of the e-reader prices should have the greatest long term impact. However, both the Kindle and Nook (with a few iPads now showing up) have far greater market penetration based on my airplane seat surveys.
Borders sowed the seeds for its demise ten years ago when they foolishly outsourced their e-commerce operations to Amazon. This was a tragic mistake and they have never recovered from it (despite the fact that they ultimately moved away from the Amazon relationship). Having a weak online presence makes it impossible for them to run a proper e-book business, and also limits the scope/effectiveness of their loyalty program.
It may be kind of obvious in hindsight, but there’s an important lesson to be learned here: the failure to properly run and integrate a full-scale multichannel relationship will lead to a number of bad outcomes (such as those mentioned above), and ultimately the failure of the company as a whole.
I have little confidence in the impact of reducing the price of Borders’ e-reader. It is apparent that e-readers will go the route of most electronic innovations, namely, lower prices, more features, and eventually commodity priced.
On the other hand, as noted by others, a sound continuity of purchase program (please do not call it a loyalty program) can be a tool to differentiate Borders’ offerings, assuming the offer is of value, is relevant, is valued by the consumer, and is clear in its positioning and communication. To this end Borders needs to insure that these points are clearly addressed. If not, the adage “a confused mind always says NO” is operative.
Consumers’ decision criteria have yet to be discussed. This article talks about two options for a loyalty program and several options for an eReader. But there isn’t any in depth discussion about how consumers prioritize the characteristics for buying.
I agree with Steven’s Gillette reference. So it’s not about the availability of books to read. Right?
I understand the 3G and Wi-Fi options. So it’s not about any other aspect of the eReader. Otherwise they’re all the same. Right? Not exactly as far as I know. The iPad is backlit for one.
We’ve already talked about the weak position of Barnes & Noble because of how eBooks are eating away at their legacy stronghold.
So I’m thinking there’s a lot of “let’s throw it against the wall and see if it sticks” going on.
This program is not completely new to the Borders company. In fact Waldenbooks, one of their subsidiaries, had an almost similar program for a long time that they called “Preferred Reader.” Through the PR program the customer would pay $10 a year to subscribe, receive $5 for every $100 spent, and receive 10% off every purchase with additional benefits.
I recall that when the PR card was retired with Waldenbooks in favor of the Borders Rewards card there was a lot of feedback from the customers at the time that they did not want the free mediocre program in place of what they had considered a great program. It’s a shame that it’s taken Borders nearly 6 years to discover that what Waldenbooks had run was the preferred program.
This also puts them in direct line to compete with the Barns & Nobles card. However, unlike the Waldenbooks PR card, there is no price point advantage in purchasing Borders over B&N in this case. I do have to say that their option of the free card versus the paid card will at least be a selling point to continue driving sign ups.
Borders is in a fight for its business life and has been for some time. I live in an area where we had a Borders in a difficult-to-get-to location. They closed last year; and it is now a thriving CVS store. Why could one make it and the other not? Is it because Borders gave up and hoped previous loyal customers would continue to spend more money there than at either B&N or Amazon.com?
We have a Barnes & Noble that has customers streaming in from open to close. I can’t begin to tell you where the closest Borders is located.
I think Borders forgot who they were and who their customers were several years ago. They have not found the way to attract them back. Will this new approach do it? I doubt it. But it is the best effort they have put forth so let’s hope they make it work successfully.
I have been a Borders Rewards member for years and have enjoyed the $5 Borders Bucks which are frequently sent by email. My local Borders always has helpful staff in the store and on the telephone. I frequently call and ask them to hold a book up front for me to save time. Yesterday I received the Borders email describing the two programs which seemed pretty clear to me. As to whether the Rewards Plus program will be successful depends on what’s offered to consumers and the breadth of appeal.
As for me, I’m sticking with the free program where I was informed I now have “gold status” and have a personal shopping day discount.
I like the idea of a two-level loyalty program and both programs seem to provide tangible benefits. I imagine, however, that a large majority of consumers will default to the free program, so hopefully that is factored in to the model.
With e-readers, it seems to me that the iPad and the Kindle are twin 800 pound gorillas at this point, with the Nook being a runner up and anything else an also ran. When picking an e-reader, consumers will almost certainly default to one of the above, for fear that if they pick something else it will eventually be discontinued and left unsupported. Kind of like beta vs. VHS players if anyone can remember back that far.
Long-term, physical book stores have got to morph into real experiential places with lots of book signings, readings, lectures, mini-concerts, art shows, community meetings, etc. If there isn’t an event going on, lots of people aren’t going to make a trip to the store for something they can get more easily and cheaper online. I’d carve out a meeting space in every store and allow it to be reserved for free, just to attract more traffic and goodwill.
Too often, companies–particularly ones that deal with marketing–use band aids when they should be using tourniquets. Borders’ needs a tourniquet and that most likely will not be enough. Border’s has evolved into the retailer with no reason for being. Loyalty programs enhance business, they never turn business around. This is a tactic, when Borders should be thinking strategically. Unfortunately, the strategic options for Borders are close to non-existent.
I really don’t think there is any such thing as loyalty in book retailing these days and price deceleration-to-the-point-of-commoditization driven by nimble online and terrestrial players is a big reason why. Which strategy will move the needle? How about neither?
Remember the song “What the World Needs Now (Is Love)”? it contains the lyric “we don’t need another mountain”: I think the same could be said about “Loyalty Programs” (and yet Borders sees fit to have not one but two!) My idea of a loyalty program is simple: give me a reason (good merchandise and good prices) and I’ll shop at your store…I don’t drink coffee (and if I did, a book store seems like a lousy place to be drinking it in).
It is clear that in the tumultuous book market that Borders is throwing everything but the kitchen sink at the customers in order to increase retention, and gain some sort of foothold in the fast changing e-book market. It is unclear whether either of their approaches will succeed.
The free shipping benefit is one that will help to drive retention. Amazon has seen that the Amazon Prime customers more than payout their additional shipping expense through incremental purchases. Since this benefit is similar at a lower cost, Borders could see some sort of lift off the program.
In terms of e-readers (sigh), I am not sure what Borders can do to drive penetration of their devices given the strong push by Apple, Amazon and B&N. I like the suggestion of one other commentator — give the book readers away to their most prolific customers in order to establish a strong base. Then sell the “razor blades” to make back the money. One other approach might be to couple the digital with the physical. As described in the New York Times this week, couples often want a book in multiple formats. Perhaps offer the e-book for a dollar when the physical book is purchased.
Either way, Borders will have to introduce some sort of “game changer” to succeed.
They need better customer service and community involvement. Loyalty programs work better with a personal touch.