MIAMI BEACH, Fla.--Merchant-funded loyalty is getting a great deal of buzz in the card-issuing community, but not all retailers are convinced the programs represent the next big trend.
During a panel discussion among merchants here at the Card Forum & Expo, the consensus arose that retailers feel willing to explore new loyalty-marketing tactics but hesitate to dive into new merchant-funded card-rewards programs that do not present an immediate return on investment.
“The notion of [new forms of coupons] and merchant-funded card rewards--we are wrestling with that,” Susan Ehrlich, president, Sears Holdings Corp.’s Sears Financial Services, told conference attendees. If such programs are “funded incremental to what merchants are already doing only adds to our expense burden ,and [in many cases] it doesn’t contribute to a compelling business case for implementation.”
Loyalty is the goal of many merchant-funded rewards, but the concept of loyalty itself varies so widely among marketers that it is difficult to generalize about such programs, said Troy A. Carrothers, senior vice president, retail payment solutions and multi-channel sales and service for department store operator Kohl’s Corp.
“I think a lot of people are defining loyalty differently ... some are focused on (customer) tenure, others on value,” Carrothers said. “We have a very successful private-label credit card product that reinforces our own store and brand loyalty extremely well. Before we even think about (adopting other loyalty) programs, we need to decide what type of loyalty we are talking about, what is the goal, and what we would be trying to get out of (a merchant-funded) loyalty program.”
Best Buy Co. Inc. also remains hesitant to invest in many new merchant-funded loyalty programs unless they demonstrates a clear return on investment, Dan Olstad, director of financial services, told attendees.
“We’re always looking for the next thing that will help us grow our revenue, but ... the mindset (for merchant-funded loyalty programs) must be additive to the merchant’s bottom line ... and I think the economic piece (for that) still has to be sorted out,” he said.
