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Loyalty trends and best practices

Loyalty Makeover: JCPenney

by Zach Woith
March 03, 2014
Loyalty Makeover: JCPenney

 jcpenney_logo

In this installment, we look at the loyalty program at JCPenney, the $12 billion department store chain with 1,100 stores and $1 billion in online sales. 500friends Loyalty Makeovers offer suggestions to retail brands for making the most of their loyalty initiatives.

What JCP Rewards looks like today

JCP Rewards members accrue one point for every dollar they spend. For every 100 points they earn in a calendar month, they receive a $10 coupon towards future purchases (up to a maximum of ten $10 coupons per month). At the end of every month, point balances reset to zero.

First impressions

With a 2013 operating loss of over $1.2 billion, investing in customer retention and loyalty may seem like a luxury for JCPenney. However, to really get back on track, the embattled department store chain will have to prop up its gross margins, which fell to 29.4% in 2013 (typical department stores gross margins hover in the mid- to upper-30s). That means finding an alternative to discounting, which means boosting loyalty is critical. Compared to other department store loyalty programs, JCP Rewards is remarkably simple, but by eschewing a more robust loyalty program structure, JCPenney is missing out on important loyalty benefits.

Makeover ideas:

  1. Personalized loyalty rewards: Currently, JCPenney invests in loyalty at the same rate for first-time shoppers and the chain's established, high-value customers. JCPenney has the opportunity to increase spend among its best customers by introducing one or more premium program tiers. This would allow JCPenney to show appreciation to its best customers while offering benefits (a higher rate of point accrual, for example) that encourage mid-tier customers to spend more. In addition, the company could send automated, personalized loyalty offers to customers who haven't shopped for a while ("Double points if you buy this weekend," for example), which can be highly effective at reducing churn.

  2. Extend point expiration: With the current reward structure, a customer loses all of her loyalty status every month. A more liberal point expiration policy would help JCPenney better drive incremental sales and long-term engagement by giving customers the incentive to make an extra purchase down the road. The right expiration period depends on an analysis of the purchasing frequency of the chain's mid-tier customers, and should be set so that expiration reminders effectively shorten average time between purchases.

  3. Leverage loyalty to boost omni-channel engagement: Given that JCPenney's online property, jcp.com, is a crucial piece of the company's turnaround effort, JCPenney could do more to incent customers to engage through multiple channels. For example, JCPenney could offer double-points bonuses to in-store shoppers who make their first purchase online, and vice versa for online-only buyers who start transacting in stores. Making point balances and tier status available at point-of-sale would empower in-store personnel to upsell ("You're just $10 away from your next reward," for instance).

Questions? Or is there a loyalty program you'd like to see featured in Loyalty Makeover? Send me a note at  zach@500friends.com.


Zach Woith is Director of Loyalty Strategy at 500friends, which helps retail brands maximize the profitability of their customer relationships. 


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