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Will Saks’ “Democratic” Loyalty Program Cost the Retailer its Upscale Cachet?

Although it’s hard to attribute a company’s corporate health to any single initiative, six months after Saks Fifth Avenue significantly revamped its SaksFirst loyalty program, the luxury department store seems to be on solid footing for two distinct reasons:

SaksFirst: The loyalty program re-launched in January 2013, eliminating the $1,000 purchasing membership threshold. Customers who signed up for the rewards program earned 2% to 6% off initial purchases, including those made at the brand’s outlet stores, Saks Fifth Avenue Off Fifth. Additional early winter and bonus points promotions boosted membership and led to industry praise.

Stock Price:  Merger talks with Neiman-Marcus in May caused the company’s stock price to soar to a five-year high of $15.50. Even after the talks stopped and Saks’ stock underwent an expected correction, its share price is still up 38% for the year.

But is it pure chance that the company’s upswing largely coincides with the overhaul of its loyalty program? I don’t think so. Earlier this year, a Forbes article praised Saks’ revamped loyalty program, comparing it favorably to Macy’s’ efforts as a clear move away from elitism. The article went on to say that Saks’ “initiatives are significant and strategically important to keeping Saks competitive and relevant in a modern retail landscape. Saks, at only 11% of Macy’s size, is implementing some of the same dynamic strategies.”

Be Careful What You Wish For

While such positive coverage is great for Saks, the retailer stills faces some loyalty program challenges.  With its customer engagement scope broadening to such an extent, the brand risks alienating its core customer base, which historically has been the well-heeled.

Adapting with the times is generally a good business decision. And, sometimes, if a brand’s marketing strategy isn’t working, an entire upheaval is warranted. But when tactics such as eliminating $1,000 purchasing thresholds are implemented, the brand could lose its luxury cachet. Saks is not nearing this fate yet, nor will its shoppers resemble Walmart’s demographics any time soon. But if “upscale” and “luxury” are central to a brand’s image and promise – as it has been for Saks – that brand shouldn’t be afraid to promote them.

So, to answer the question posed in the title of this blog, the retailer’s revamped loyalty program could cost Saks its cachet – unless the store is able to maintain a certain level of exclusivity for the highest-spending members. It will be interesting to see how SaksFirst will evolve through the rest of 2013 and into the New Year.

Are you a brand owner looking to remodel your loyalty program, fundamentally changing its membership rules? What is your take on Saks’ new program? What elements do you support or reject? I welcome your comments below.

David Andreadakis

David Andreadakis