Fourth-quarter sales at Urban Outfitters fell 7%, prompting company officials to find a way to spark sales growth and increase customer engagement.
Along with the drop in sales, Urban Outfitters temporarily closed stores after the pandemic began. Although sales decreased, the number of digital customers grew by 50%.
Last month Urban Outfitters began testing a membership, or premium, loyalty program.
Company officials plan to run the UP membership loyalty program for six to 12 months. The new program offers free shipping and returns as well as other benefits from its store brands Urban Outfitters, Anthropologie, and Free People.
According to Urban Outfitters CEO Richard Hayne, the test duration depends on how many customers sign up for the program and what insights company officials learn from it.
Hayne said the test program, which has price points of $48 or $98, began in Atlanta and Dallas.
Here’s why the new Urban Outfitters loyalty program is the right move.
Premium Loyalty Members Engage More
Hayne said of the new program: “UP is designed to drive increased frequency, capture a greater share of wallet, improve retention, provide opportunities for greater cross-brand exposure and selling and attract new customers.”
Hayne’s goals for the new program align with current research on premium loyalty programs.
- Ninety-four percent of premium loyalty members shop at that retailer at least once a month
- Eighty-eight percent are likely to choose a retailer whose premium loyalty program they belong to over a competitor that is offering a lower price
- Nearly 90% would recommend a retailer to family or friends if the retailer’s premium loyalty program offers valuable benefits
Meanwhile, according to McKinsey, members of premium loyalty programs are 60% more likely to spend on your brand, while free loyalty programs only increase that likelihood by 30%.
To further illustrate the heightened engagement attached to premium loyalty, consider that premium loyalty members are 4x more valuable than non-premium loyalty members.
These programs drive more frequent purchases, bigger basket size, and greater brand affinity than free loyalty programs do.
The Program Offers the Right Benefits
One of the things a retailer needs to get right with a premium loyalty program is the right mix of benefits.
Time and testing will tell how receptive members are to the benefits, but it appears that Urban Outfitters is on the right track out of the gate.
The benefits include:
- Free shipping and returns
- A 15% discount on purchases
- A $10 coupon every month, which is quite an attractive benefit
- A discounted subscription to clothing rental service nuuly
- Access to promotions and events among its store brands
The top two perks that motivate consumers to join premium loyalty programs are free shipping (66%) and instant discounts that can be used whenever you shop (60%). The UP program has these two perks covered.
Exclusive deals and exclusive in-store experiences are also listed as desired benefits. The monthly coupon is a nice added touch that should encourage members to shop even more.
Traditional and Premium Programs can Co-Exist
Urban Outfitters’ UP program is separate from its free UO Rewards.
Offering a tiered approach to loyalty is a great way for you to gather more insights, tailor your respective programs to your members, and allow them to navigate between programs if so desired.
Sixty-seven percent of consumers are likely to join a premium loyalty program if they already belong to that retailer’s free program.
Casual customers who belong to a free program might not hold elevated benefits as highly, but your best customers will. Once customers are in the free program, it’s easier to convert them into premium loyalty program members.
Having free and premium tiers in your loyalty program not only covers most of your customer base, but it gives members options. This fact alone increases the likelihood of them engaging with one of your programs and, once they’re enrolled, you can entice them over time to the premium offering.
CVS CarePass is a great example.
While CVS ExtraCare has been around quite a while, the retailer rolled out CarePass in 2019. This gave customers who wanted elevated benefits like instant discounts, free shipping, and 24/7 access to a live pharmacist an opportunity to opt-in.
This has resulted in a 15-20% average increase in purchases after a member joins.
Premium Loyalty is a Priority for Retailers in 2021
Ninety percent of retailers say expanding their respective loyalty programs is a priority for 2021.
Urban Outfitters is certainly a prime example of that. Although it’s in the test phase now, Urban Outfitters is trying to do something, and be proactive when it comes to customer loyalty to find competitive differentiation.
Included in the test phase of the program and beyond, which could provide further differentiation down the line, is optimization.
The days of “set it and forget it” loyalty programs are over. Consumers have too many choices today and, if they don’t see any value from your loyalty program, they will simply and quickly look elsewhere.
Test results drive your optimization planning.
Survey your members. Listen for what they like, what they don’t like, and what doesn’t make sense to them.
Optimization can’t occur without acquiring actionable customer data.
Make sure you’re looking at your data and understanding it. Impressions, clicks, opens, joins and any/all types of conversion goals are the most actionable form of data.
Hayne is well prepared for the test run of the UP program.
“The goal here is really to test and learn and to understand the degree to which customers are intrigued by these offerings and then also be able to measure over time how customers respond and if their behavior changes based on becoming a member,” he said. “We just launched it a few weeks ago, very early but encouraged by the early feedback so far and excited about the program.”