Department Stores Target Top Customers
Bloomingdale’s doesn’t want its best cosmetics customers to buy mascara anywhere else again. So it takes their orders by fax and delivers the makeup to their homes without charge.
For other shoppers, Bloomie’s sends reminders to husbands to buy birthday or anniversary presents. Still others get on-the-house services like alterations and gift wrapping.
What did these customers do to deserve such special treatment? They charged a bundle on their new Bloomingdale’s-Visa credit cards, and the retailer believes they can be milked for even more.
The perks are part of what’s known in fashion-retailing circles as ``clienteling.″ Such department stores as Bloomingdale’s, Nordstrom and Saks Fifth Avenue are starting to tap their vast customer databases to identify their most profitable shoppers. Then, the retailers are plying them with personal attention and special services, an approach traditionally used by tiny boutiques that know their customers by name.
Bloomingdale’s, a unit of Federated Department Stores Inc., and Nordstrom Inc. hope to make their databases even more useful by offering co-branded Visa cards to their store charge-card holders and tracking where the customers use the cards. ``We have transaction history,″ says Christine Miller, Bloomingdale’s executive vice president of marketing. ``Other companies have names and addresses but can’t find out anything else.″
While retailers ranging from supermarkets to catalog merchants started using database marketing a few years ago, most big department-store chains just sat on their consumer data. The recent rush to exploit the credit files comes during a period when a glut of department and specialty clothing stores with look-alike merchandise are competing for the same customers.
``Consumers no longer have a natural preference for selecting one retailer over another,″ says Gary Langstaff, president of Retail Resolve, a Steamboat Springs, Colo., consulting firm. ``So the goal now is to reduce how much they shop the competition.″
Most department stores are raising profits largely by cutting costs, so expensive image ad campaigns like those run by Macy’s and Bloomingdale’s in the 1980s are practically out of the question. Database marketing efforts are also less expensive than fishing for new customers with product advertising and promotions, department-store marketers say. ``The hardest thing is to get consumers into the store,″ notes Brian Kendrick, vice chairman of Saks, a unit of Investcorp. ``We’re aiming for 100 percent information capture, so we can spend less time enticing them back in.″
Saks, which issues rewards to frequent users of its charge card, is expanding its database. Handwritten ``client books″ containing the preferences and sizes of frequent customers are being put into storewide databases. Mr. Kendrick says most Saks stores will have an automated client book by fall so that sales associates can call customers with updates on merchandise or make regular shipments of staples like makeup and hosiery.
The rewards for big spenders are extravagant at Neiman Marcus, whose parent, Neiman Marcus Group Inc., is a veteran of database marketing. Customers who join Neiman’s ``InCircle″ club by spending $3,000 can earn a free, 10-day luxury vacation on the French Riviera if they spend an additional $250,000 in one year.
Dayton Hudson Corp., meanwhile, concentrates on offering frequent charge-card shoppers ``softer″ amenities, like free cups of coffee and a seasonal newsletter.
Retailers won’t disclose specific bottom-line results of preferred shopper programs. But according to marketing consultant Richard G. Barlow, president of Cincinnati-based Frequency Marketing Inc., such programs can increase members’ spending between 15 percent and 25 percent.
Not all shoppers take the bait, though. Jan Sneed, a corporate communications executive at ad agency Wells Rich Greene BDDP, is a SaksFirst member. She says she hasn’t charged any purchases at Saks in about a year, despite the newsletters, calendar, T-shirt, catalogs and special charge card the company sent her.
``It hasn’t worked for me because I’m shopping as much as possible off-price,″ she says. ``If you know something about clothes and live in New York City, you should rarely pay retail.″
Retailing experts suggest one of the most powerful marketing weapons may be co-branded cards. Bloomingdale’s is testing a frequent-shopper program, centered on a co-branded Visa card issued by a Federated-owned bank, as a possible replacement for its house charge.
Ms. Miller won’t divulge how many of the 1.8 million credit-card users at Bloomingdale’s are participating in the test. But she does estimate that 20 percent of credit customers account for a stunning 75 percent of sales, visiting the store 22 to 25 times a year.
Some marketers say extending a house charge into a general-purpose card is risky because customers can shop with the card at competitors’ stores. But even if some sales are lost, the issuing retailer gets a benefit: a tantalizing glimpse at what its shoppers buy from rivals.
Rival transactions aren’t reported in as much detail as those made in the retailers’ own stores, says Francine B. Schall, senior vice president of co-branding at Visa. Nonetheless, she says, retailers ``can still learn interesting things.″
Whether retailers’ access to so much personal data will raise concerns about privacy remains to be seen. But Ms. Miller says card holders offer remarkably little objection to being called at home by employees asking questions and pushing merchandise. ``They’ll tell you if you call too much,″ she says.