Best Buy Executive Shares Top Tips For Optimizing Loyalty Initiatives

Today’s retailers are focusing more on shrinking budgets and retaining customers than acquiring new ones. As a result, many are revamping and monetizing their loyalty programs to ensure their brands are integral parts of consumers’ lives. Best Buy, for example, has turned its Rewards Zone loyalty program into a source for shoppers to receive access to special events, coupons and offerings, in hopes of incenting them to increase basket size.

During the Loyalty 360 webinar, titled “Monetizing Loyalty Marketing Assets: A Conversation with Best Buy,” Barb Olson, Senior Director of Marketing for Best Buy and Mike McDonnell, VP, Product Management and Client Solutions for Affinion Loyalty Group, discussed the retailer’s key tactics for its Rewards Zone program, as well as its customer retention strategy.

“The loyalty industry is at a point where, over the next few years, we will see major evolutions in program design and customer experience due to changing customer needs and technology,” McDonald said.

Currently, 80% of purchases completed within the consumer electronics market still take place through the brick-and-mortar store, according to research from NPD Group. To cash in on this tendency and boost purchase rates at store locations, Best Buy implemented new rules and tools of engagement, such as mobile and online rewards, and tiered loyalty programs.

 The Best Buy Rewards Zone program, initially rolled out in 2003, currently has more than 30 million members. By signing up for a free membership, shoppers are rewarded one point per dollar they spend at any Best Buy location or at BestBuy.com. Members also receive exclusive access to events and offers. In an effort to boost subscription rates, Best Buy rolled out Premier Silver and Premier Black levels, which include unique offerings and incentives based on shopper activity and loyalty. To become a Premier Silver member, shoppers must spend $2,500 in a calendar year at Best Buy, or spend that same amount anywhere with their Reward Zone MasterCard. Benefits include 25%-point bonuses, bank points, free shipping, an extended return/exchange policy, and a dedicated helpline. This “elite” status converges with tiered loyalty initiatives to help drive participation, according to Olson.

“During the 2011 holiday season, we provided our Rewards Zone Silver members with early access to the Black Friday holiday sales online, and they absolutely loved it,” said Olson. “They were just pummeling the site: We had more than 50,000 hits within a second of its opening. We’ve learned that early access is a big deal for our customers, so you’ll definitely see that occurring more often.”

As the Rewards Zone ecosystem continues to evolve, Best Buy is utilizing its loyalty strategy as a separate marketing platform across channels — from mobile to in-store — to solidify relationships with shoppers. The retailer also is making its tiered reward programs more appealing by tapping into gaming theories and mechanics.

“The key to the [rewards program’s] success is that the retail stores have really embraced it,” Olson explained. “It grew dramatically to millions of members. Today, it’s a very valuable marketing asset for us; we use it as a marketing platform. Some of the changes we’ve made along the journey include adding the Silver and Black tiers, which have more personalized benefits. We also moved from direct mail to digital, and are doing more targeted offers based upon data analysis. In addition, we’re doing more with mobile and incorporating more ways to earn points outside of stores.”

Through in-depth research and analysis of its consumer base, Best Buy is working towards making the brand a more valuable asset to consumers’ every day lives. For example, the retailer is developing partnerships with companies such as Netflix. If consumers sign up for a Netflix membership, they receive 500 points, as well as 100 additional points a month within a six-month period.

“It was surprising to us, but consumers really wanted to earn points on everyday items such as gas, groceries, movies and books,” Olson reported. “We started the new project with our current partner network, but there are some gaps.”
 
While it is important for retailers to provide optimal incentives to encourage purchases, it also is vital that merchants focus on correcting negative engagements and interaction to increase trust among their consumer base. This year, Best Buy struggled to deliver some purchases in time for the holiday season. Although the retailer suffered from negative customer feedback, the retailer provided each shopper with gift cards equivalent to each item’s value.

“We definitely took care of the customer,” Olson said. “We didn’t make a big PR event out of it, but we did make sure those issues were resolved. Now, we’re working diligently to make sure that they never happen again.”

Despite these obstacles, Best Buy experienced positive growth in sales during the holiday season, acquiring $8.4 billion in revenue across 1,100 stores. Online business, as well as purchases on mobile phones and appliances experienced double-digit growth, while sales on tablets and e-Readers increased three-fold.