THE CLARUS Blog

Restoration Hardware Boldly Killed Off Promotions: Here’s How It’s Working

“WE HAVE LET CUSTOMERS DIE.”

In early 2016, Restoration Hardware CEO Gary Friedman had seen enough. He fired off a tense email containing the above statement to company employees along with the following declaration:

“We need a MASSIVE CHANGE IN OUR CULTURE AND ATTITUDE RIGHT NOW. THE GOAL IS DELIGHT.”

After some internal soul-searching about the company’s widespread use of promotional initiatives, and truly listening to its customers, that “massive change” came in April 2016. Restoration Hardware launched its RH Grey Card premium loyalty program. It now stands as a shining example of loyalty success.

Finding that alignment with its customers’ needs and desires has paved the way for sustainable engagement and brand loyalty at Restoration Hardware.

Our CEO Tom Caporaso says that, by eliminating its antiquated promotional initiatives, Restoration Hardware listened to its customers and gave them what they wanted.

“They went all-in with a premium loyalty program called the RH Grey Card,” Tom says. “For $100 annually, members get 25% off all full-price purchases immediately after signing up. There are other discount-related benefits, but like Prime, it also gives members experiential benefits like free interior design services. No one else is doing that right now, but customers love it.”

So much so that now 95% of Restoration Hardware’s business is driven by its nearly 400,000 members.

We wrote about the early successes of the program here. The RH Grey Card continues to drive engagement.

 

RH is Building a Brand by Being Different

In a recent message to customers, partners, and shareholders on the company website, Friedman talked about the glowing business success that is intimately tied to the RH Grey Card Membership program.

“2017 was the year of execution, architecture, and cash at RH,” Friedman said in his message. “Our efforts were focused on executing our new membership model, architecting a new operating platform, and maximizing cash flow by increasing revenues and earnings, and decreasing inventory and capital spending. With 95% of our core RH business driven by members, we can confidently declare our move from a promotional to membership model a success. Membership has enhanced our brand, streamlined our operations, and vastly improved the customer experience. The road of endless promotions, free shipping, an unnatural shift to online, and a shrinking store base, is resulting in broken and unsustainable retail models. We prefer the road less traveled by, and like Robert Frost, believe it will make all the difference.”

The RH Grey Card Membership program benefits include:

  • 25% savings on RH, RH Modern, RH Baby & Child, RH TEEN, and RH Contemporary Art
  • 10% savings on all sale items
  • Complimentary interior design services
  • Concierge service to manage your orders
  • Early access to clearance events

Friedman realizes that many of his company’s current strategies oppose conventional wisdom within the industry.

Those strategies include opening the largest specialty retail experience in the industry at a time when most are shrinking the size of the retail footprint or closing stores.

The company has moved from a promotional to a membership model. Others are increasing promotions, positioning their brands around price versus product and continuing to mail inspiring Source Books.

“We believe when you step back and consider: One, we are building a brand with no peer,” Friedman added. “Two, we are creating a customer experience that cannot be replicated online; and three, we have total control of our brand from concept to customer, you realize what we are building is extremely rare in today’s retail landscape, and, we would argue, will also prove to be very valuable.”

 

Listening to Customers Paved the Way for Restoration Hardware’s Loyalty Program

Having most of its core business driven by the premium loyalty program bodes well for the company’s sustainable brand advocacy.

Many companies say that they listen to their customers, but they don’t always hear them. Officials at Restoration Hardware have listened to their customers AND heard their message loud and clear.

And as a result of rethinking what it takes to build a loyal customer base, they continue to see success from their RH Grey Card premium loyalty program.

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