Rack Room Shoes may be fashionably late to the loyalty party, but with its stylishly modern points program it’s a welcome guest among shoe lovers.
Opportunity
Rewind to 2009. Rack Room Shoes stood at an interesting place in the footwear retail market. Like its competitors, the retailer was using multiple channels to reach customers and enhance their shopping experience. The usual suspects were all accounted for: email, social, the Web. The company also leveraged coupons, in-store associates, and physical collateral such as signage. Even mobile, which was barely out of its nascent stages, played a key role. The one thing Rack Room Shoes lacked was an effective loyalty program. “We were very aware of what was going on in the market, but we were fairly late to the rewards party,” says Jan Mauldin, director of corporate marketing at Rack Room. “We knew we had a loyal customer base, so we started looking at who we could partner with to create a loyalty program.”
Rack Room spent the next few years shopping for a loyalty development partner, eventually closing on Customer Communications Group (CCG), a relationship marketing agency.
Strategy
As with any successful undertaking, the first order of business was data. Rack Room Shoes “had a long history of conducting ongoing customer research through surveys, emails, etc. That’s not something retailers usually do,” says Sandra Gudat, CEO at CCG. “[The retailer] had a somewhat disembodied customer view because of this. They knew what customers said they did, but couldn’t see the actual behavior.”
Using Rack Room Shoes’ existing data as a foundation, CCG worked with Mauldin and her team to better understand the retailer’s business and customers. “[We] looked at our customers’ frequency, average spend, sales data, traffic data, geography,” Mauldin says. “We built a consumer profile and found that [most customers] were moms. That’s our core shopper.”
The next step was learning what motivates those core customers to spend. “All of this research was important because it helped us understand what incentives drive these moms to shop more frequently,” CCG’s Gudat says. “These consumers are busy. They’re mothers.”
Rack Room had built a solid email list before the loyalty initiative began in earnest by sending promotions. Through their research CCG and Rack Room found that a large segment of customers were interacting with these emails on mobile. “We found that they do everything on the go, so mobile and digital were baked into the [loyalty] program from the beginning,” Gudat says.
Execution
CCG also found through the research that Rack Room’s customers wanted shopping rewards to accumulate quickly and wanted access to them easily. As such, traditional rewards systems were out of the question. “These customers don’t have time to wait 30 days for a postcard in the mail telling them about points,” Mauldin says. Consequently, the retailer opted for a digital launch of the loyalty program.
“When we were conceiving the program we saw that these moms were heavy smartphone users,” Gudat explains. “We designed the program so that [Rack Room’s customers] could do everything from their phone.”
CCG developed the program so that physical membership cards were unnecessary. The only requirements from customers are their name and email address. “Essentially [their] name and email is their member number,” Mauldin says. “That allows us to give customers an immediate response.”
Knowing Rack Room Shoes’ customer, CCG recommended a basic rewards process. Rack Room Rewards shoppers receive $15 for every $200 they spend. They receive the rewards instantly, and even get notifications if they are within a few dollars of the $200 threshold, in addition to regular points tracking. “Periodically, they receive promotions that help them toward that $200,” Mauldin says. “They’ll typically get promotions on days like their birthday and other parts of the year.”
Customers can select their preferred channel of communication; the prevailing method is email. “Other than telling people they have points, the whole point of communication in this program is to create engagement with an individual,” Mauldin notes. “Mobile text is limiting, so our customers tend to prefer email. Specifically, they prefer to open emails on their mobile device.”
Even so, Rack Room Shoes uses both to interact with its customers, sending offers and promotions through SMS or responsive emails based on customer preference, as well as the optimal channel for a specific message type.
Results
Rack Room Shoes launched its loyalty rewards program at the end of April 2013. As of May 2014, 2.1 million customers have enrolled. Through the program, Rack Room Shoes was able to capture 20% more of its customers’ overall shoe budget and the number of customers spending more than $400 a year has also increased. “We feel very good about the program,” Mauldin says.
Mauldin expects the program’s performance to continue to increase with back-to-school season just about a month away. “I think we’ll have strong enrollment during back-to-school time,” she says. “You tend to get new customers then and we’ve opened a few new stores, so I would love for us to be at 2.5 million by August or September.”
