Macy’s restructures its loyalty program to keep its most important customers

BI Intelligence

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Macy’s is revamping its Star Rewards loyalty program to prevent its best customers from shifting their spending elsewhere, Fortune reports.

This is new CEO Jeff Gennette’s first major attempt at ending Macy’s consecutive quarters of declines in comparable store sales. The department store needs its highest-spending customers — 50% of its revenue comes from the top 10% of its shoppers, who spend at least $1,200 annually at the retailer.

The revitalized Star Rewards program will offer different reward tiers based on shoppers' spending. Shoppers who spend $1,200 or more annually will receive 5% back in store credit, free shipping, 25% off with the store’s “Star Pass” coupons with no restrictions, and even more features starting in 2018. Some of those perks may include early access to new products and personalized experiences. Those who spend between $500 and $1,200 annually will receive free shipping and the same nonrestricted coupons, and those who spend less than $500 will get 25% coupons with some restrictions.

The update looks to simplify Star Rewards and reform Macy's tarnished image.

• This tiered system makes the rewards easy for consumers to grasp, reversing the current "deals on top of deals" offering, which can cause confusion. Additionally, the exclusive store credit could make Macy’s highest-spending customers feel appreciated, and keep them coming back.
• The straightforward perks and streamlined discounts may help Macy’s rebuild its reputation as an upscale department store. Offering tons of sales can hurt that position and drive high-spending customers away.

Macy’s might need to expand the reach of its loyalty program if it wants to find success going forward. Star Rewards is currently only available to those who have a Macy’s store card, and though the retailer plans to remove the requirement in the future, it stifles the program for now. This requirement shrinks Macy’s potential consumer base, hindering its ability to use customer data from the program for personalization. Programs that feature deals and perks can be a persuasive tool for retailers, as Ulta’s success with its loyalty program and Amazon’s exclusive Prime membership deals have proven, so Macy’s should work to quickly open its program up to more consumers, otherwise it risks gaining only incremental benefits. 

Ayoub Aouad, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed credit card rewards explainer that:

• Identifies the costs associated with offering rewards for issuers and how they have increased over time.
• Details why credit card issuers continue offering high-valued rewards.
• Analyzes how the industry has evolved since 2011
• Explores how credit card issuers will advance in order to continue reaping the benefits of offering rewards without assuming increased costs. 

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