Crabtree & Evelyn’s Rocky Road to Customer Loyalty

Crabtree & Evelyn has learned a lot about operating loyalty programs. It has had one version or another for about 10 years. The first program was free and drew hundreds of thousands of members. Then it was paid and membership dove into a death spiral. The name of the program has been changed three times. There was no customer or transaction data collected and no database, thus no way to manage, mine or converse with its customers.

That was up until about 18 months ago, when a focus was put on building and maintaining customer loyalty. A system was put in place to collect basic customer information, like names and email addresses, identifying purchase behavior and then enhancing all that data with overlays from Acxiom. Mining the information unearthed frequent shoppers and provided a means to incent others to shop and spend more. (2012 Trends in Customer Loyalty and Rewards).

“The focus is now on customer loyalty,” said Tom Woodside, vice president of marketing and e-commerce North America, at Crabtree & Evelyn.

The newest version, Platinum Rewards, launched in December and is free. It has two tiers: customers who, within in a three-month period, spend up to $45 earn $5 back and those who spend more than $45 are rewarded with $10 back.

To determine the fee structure, Crabtree & Evelyn dipped in to its new wealth of data and tested numerous offers. . It conducted data mining on what Platinum (the former loyalty program) members had spent on average over three months. It discovered that giving someone $5 or $10 would motivate that person to go to one of its stores.

“We combined learnings from direct mail thresholds to meet what the current marketplace and competitive set is driving,” said Rupa Rajopadhye, vice president and partner at 89 Degrees, which executed and handles the new loyalty program.

Also as part of the new program, customers will receive unannounced custom gifts or emails with discounts on gifts and gift-with-purchase offers.

“That is another “exciting” piece of the program on top of the reward period,” he said.

Woodside’s hope is that the data capture, new loyalty benefit structure and customized follow-up communications will keep the program humming. And in a signal that the company is serious about regaining market share, it plans to hire a PR firm to build stronger press events, event marketing and partnership programs. CRM and digital marketing are also being ramped up as a way to pull in a younger demographic between ages 30 and 45.

“Part of the marketing opportunity in this company is the need to attract a young audience that we will build out with new products,” Woodside said.

While the new program is humming along, it’s earned a 40% sign up rate since the launch, many of the lesson learned came from hard knocks. (These three steps will Help Toughen Up Your Loyalty Program).

Some 10 years ago, the Crabtree & Evelyn’s first loyalty program, Preferred, operated similar to other retail programs, spend “x” amount of dollars, in this case $250, and receive rewards like coupon, samples and discounts once a month. It was free and drew membership that reached 600,000 out of its 1.2 million U.S. customers at the time. Things were looking good so a second tier, Prestige, was added offering larger discounts for bigger basket rings.

“The old program was discounting trips people were making, but it didn’t encourage frequency,” Rajopadhye said. “So it was diluting some of the dollars that we were getting on our margins, but not giving enough of an incentive to drive repeat trips.

But it wasn’t long before an idea came to fruition to model the program after the one run by the GMC Vitamin store chain. The idea was to give customers a 20% discount on the their total purchases during the first week of each month. They had to pay $10 to join.

Crabtree & Evelyn invited its Preferred and Prestige members to enroll but only 115,000 paid to join out of its then 800,000 U.S. customers.

“We saw a big spike in volume during that first week, but there was no incentive to come back the rest of the month,” he said. “When we looked at it the program wasn’t driving incremental volume, the customers weren’t shopping more often. We were essentially giving them a discount to buy what that already would have purchased anyway.”

The new program, Prestige Rewards, is being marketed in stores and online, as well as through the company’s email database.

“People are more price conscious and are products are more expensive than products in mass marketer so we wanted to give people and incentive and let them know what it takes to get there,” Woodside said. “Loyalty programs can manipulate consumer behavior. If we deliver a really great product and a discount by the end of the year we hope to have a happy customer who will recommend us to others.”