Gamification of Retail Loyalty Programs

Retailers have used loyalty or membership rewards programs as a customer retention tool. Research by Accenture Labs shows that “42 percent of customers are enrolled in retail loyalty programs, and these customers generate 12 percent to 18 percent more in incremental revenue compared to non-members.” Predictable rewards programs – “buy $x, to earn y points/rewards” are so common that they are no longer a differentiating factor in retailer choice, consumers expect them.


Researchers at the University of Chicago Booth School of Business conducted four experiments in lab and field settings and found that uncertain rewards are more effective in motivating consumers to make repeat purchases than certain rewards, even when the uncertain reward makes customers worse-off than certain rewards.  In their study, “The Fun and Function of Uncertainty: Uncertain Incentives Reinforce Repetition Decisions,” Drs. Shen, Hsee, and Talloen explain that the psychological boost consumers experience when the unpleasantness of uncertainty is resolved motivates consumers to repeat their actions.


Many subscription-based online retailers use uncertain rewards to gain and retain customers. Birchbox, Blue Apron, BarkBox, and Stitch Fix send their subscribers a mystery box each week or month with a different combination of products. Customers look forward to opening the boxes and enjoy discovering products. The uncertainty keeps customers continue their subscription.



Tom Ryan, discussing this research in the RetailWire article, “There May Be Benefits to Adding Uncertainty to Rewards Programs,” and several BrainTrust experts comment that “discovery, chance, mystery, surprise, and delight are all essentially emotion-based concepts, and that’s why they appeal to shoppers/consumers in the loyalty space” (Anne Howe) and that the “uncertainty gamble” only works if the consumer likes the surprise products and services. Consumers provide their product preferences that subscription-based online retailers use to create their surprise assortments for the mystery boxes.


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Clicks to Bricks Strategy – Reaches Tipping Point in 2018

As of a few years ago, pure-play online retail was anointed as the most efficient mode of doing business. Lower costs, greater flexibility, ability to capture information through the customer journey trumped the costs and liabilities associated with physical stores – major store-based retailers like Macy’s, JCPenney announce store closing on most quarterly earnings calls and prioritize e-commerce.


As online retail has become crowded and hyper-competitive, more pure-play online retailers are setting up physical stores to complement their online operations. Established online retailers, like Warby Parker, Zappos, and Bonobos have long used their physical stores as an important customer touchpoint to reduce consumer purchase uncertainty, help customers identify their preferences and select products online, and process customer returns.


2018 has been a blockbuster year for clicks-to-bricks strategy. Amazon, the biggest online retailer owns Whole Foods and sells its products through its 460 stores. According to Warren Shoulberg reporting in Forbes, Wayfair, the online home furnishings retailer is shelving its “no store” mantra to open its first physical store and distribution center in Cincinnati, OH in 2019, and two pop-up shops in NJ and MA for the 2018 holiday season


Reid Greenberg, e-commerce lead researcher at Kantar retail in a report by Ilyse Liffreing on DigiDay observes, “Roughly 85-90 percent of retail takes place in brick-and-mortar locations.” Mall-type department stores are challenged “because they aren’t connecting with shoppers in the way they want to be connected with. Consumers already know what to expect when walking into one of these stores.” 


E-commerce brands are redefining the in-store experience by interconnecting digital touchpoints and mobile apps with their physical experience. Instead of traditional mall-based focusing on stocking products, display and checking out, the focus on providing the customer with a branded experience, visualize and experience products (as Boll and Branch does for their premium bedding) or helping the customer interact with technology to help in product discovery and use. 


Boll and Branch store at Short Hills mall, New Jersey. Photo courtesy: Digiday


Online commerce is approaching maturity in its life cycle. Incremental growth in e-commerce revenues will be driven by older, risk-averse customers cautiously making purchases from online retailers. Having a positive shopping experience at a store of an online retailer will go a long way in reducing the uncertainty associated with the process. Having a retail location provides other benefits – conversion rates are higher in stores and Google SERPs (Search Engine Results Page) ranks merchants with physical locations higher than online-only merchants, another win for retailers selling online. 


Posted in Part 4: Store Location Planning, Part 7: Communicating with the Customer, Web, Nonstore-Based, and Other Forms of Nontraditional Retailing | Tagged , , , , | Leave a comment

Amazon’s $15 Minimum Hourly Wage – Reactionary or a Smart Business Move?

On October 2, Amazon unilaterally announced that all its US-based employees – 250,000 full-time and part-time, 100,000 seasonal and temporary agency staff will earn a minimum wage of $15 an hour effective November. This will also apply to workers at its many subsidiaries, including Whole foods, and As reported by David Meyer in his Fortune article, in 2017 Amazon’s median pay was approximately $14 an hour, while Walmart’s minimum wage is $11 an hour and Target’s aim of $15 an hour by 2020.


Further, as the second-largest private employer in the US, Amazon is “encouraging” large companies to follow suit and is lobbying the federal government to increase the federally-mandated minimum wage of $7.25 an hour set nine years ago.  



Many, including David Meyer at Fortune, have observed this may be in response to political pressure Amazon CEO,  Jeff Bezos was facing as the world’s richest man while dealing with “The Stop Bad Employers by Zeroing Out Subsidies – Stop BEZOS —Act” introduced by Senator Bernie Sanders. The proposed legislation would require companies that don’t pay a living wage reimburse the tax authorities for federal benefits paid out to their low-wage workers. Several other retailers including Walmart and McDonald’s have faced similar calls but have yet to respond.


Others, including Neil Saunders in his Chain Store Age commentary, suggests Amazon’s unilateral move was an economic and strategic imperative as Amazon’s growth engine is reliant on a robust workforce in a tight labor market, especially during the holiday season. Amazon will better able to tolerate the impact on its profitability, through cost-savings.  


This view is supported by Prof. Zeynep Ton at MIT and author of “The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits.” In his Fortune Leadership Forum article, he argues that even in low-cost retail, the logical trade-off between low prices and good pay is false. Studies of four retail chains Costco, Trader Joe’s, QuikTrip, and Spain’s Mercadona, offer better pay and benefits to their employees compared to their competitors. They are able to keep prices low and deliver excellent financial returns to their investors through higher labor productivity, great customer service, innovative practices, and healthy growth. They consider workforce, including front-line employees to be a strategic asset in a complex environment, as an imperative for long-term competitive advantage.

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