Often times, as I cash in my CVS Extra Bucks or Nordstrom Notes, I wonder how much these loyalty programs cost retailers. For some, I imagine they are a valuable loss leader. And done well, a good number should cross over into profitability.

So I ran a quick check of several recent quarterly reports and, well, it turns out a lot of retailers do not provide much detail. Costs related to their loyalty programs are typically included in the selling, general and administrative expenses, and not broken out.

But I did find a few, and the figures are interesting.

Nordstrom

The service-minded retailer is willing to pay a premium for our rewards. In its second-quarter report filed with the Securities and Exchange Commission, Seattle-based Nordstrom said the cost of sales and related expenses, which include the “Nordstrom Notes” redeemed under its Fashion Rewards Program, rose to $18 million in the quarter, from $13 million the year before. For the first six months of the year, such expenses rose to $34 million, from $25 million.

Nordstrom went on to explain that the higher expenses were due to the increased use of Nordstrom credit cards and of program benefits. “We provide these benefits to our customers as participation in the Fashion Rewards program generates enhanced customer loyalty and incremental sales in our stores.”

Sales rose 12.5 percent in the second quarter, to $2.42 billion from almost $2.15 billion the year before. Credit card revenue, which includes finance charges, late fees and third-party interchange fees, rose 12.6 percent, to $98 million from $87 million.

Target

The style-focused value chain delivered lower costs from its loyalty program. In the second quarter, program-related costs declined to $17 million, from $21 million in the year-ago quarter. For the first half of the year, these discounts totaled $34 million, compared with $41 million in the first half of 2009.

Sales in the quarter rose about 4 percent, to $15.13 billion from $14.57 billion. For the first half of the year, they rose almost 5 percent, to $30.28 billion from $28.93 billion.

For those interested: Minneapolis-based Target lumps its rewards redemption costs with its new credit card account expenses. It then moves these expenses from retail SG&A and plants them in the credit card segment, as operations and marketing costs.

Ann Taylor

The specialty women’s apparel chain is scaling down on its loyalty costs, which are accounted for as either the cost of sales or sales discounts.

All together, those two expenses equaled $1.5 million in the second quarter, down from $1.7 million the year before. But in the first six months of 2010, these expenses rose to $3.1 million from $2.9 million in 2009 (most of that increase is weighted in the cost of sales).

Quarterly sales rose almost 3 percent, to $483.47 million from $470.23 million. For the first half of the year, sales rose 7 percent to $ 959.65 million from $ 896.98 million.

So next you get a “gimme” from your favorite retailer, it’s worth keeping in mind that someone is counting it.

About the Author: Lisa Biank Fasig is Director of Public Relations at JZMcBride and Associates.  In her previous life, she was a retail reporter.

My Dad taught me the value of money. Cash is King and all that.

A dollar is a dollar, that can’t be denied. And, those dollars are increasingly hard to come by with the demands of business pressing harder on most over the past two years.

With my mind on cash and flipping through the latest issue of Costco Connection at home the other day, I couldn’t miss the half page announcement that at Costco, February is REWARD TIME. For holders of the  True Earnings Card® from American Express and Costco, shoppers can earn 1% on all Costco purchases and up to 3% back on other purchases including travel, dining out, and gasoline purchased at the Costco store. Business cardholders enjoy a similar offer, topping out at 4% for gas purchases.

Rewards accumulate all year long and, just as folks are thinking of flowers in the spring, the annual disbursement of rewards checks is made each February. The certificates are able to be used for in-store purchases only and expire in about 6 months on August 31.

Costco, in their partnership with American Express, reinforces that a dollar is in fact a dollar. But does it have to be so?

The Costco cash back rewards model has weakness on two levels. First, with consumers interested ever more in redeeming early and often, are they willing to wait one entire year to enjoy their rewards? Actually, the real question is not if they are willing, but if they will consistently alter shopping behavior over this extended period of time. Second, the once a year model is less likely to encourage an extra shopping trip to Costco as it becomes a way to make a regular trip “cheaper” when the coupon is redeemed.

Can Costco do better? You only have to look at far as Target and Tescos to find an answer.

Tescos is the undisputed king of grocery loyalty and may be the undisputed heavyweight champ of leveraging the customer data it collects to drive value for customers and results for the business. Tescos Clubcard is based on cash back rewards, but manages to  turns a dollar (Pound Sterling) into two as it offers Tesco Clubcard holders double the value of their vouchers when applied to purchase of a range of popular items in-stores and online. They even have a nifty rewards calculator to help customers build excitement.

Even before the latest announcement, customers could spend their Clubcard vouchers at face value in-store and online or increase the value up to four times by selecting rewards offered by Tesco Clubcard partners including restaurants and entertainment venues.

Target announced they are testing new offer combinations with their private label and cobranded credit cards. Instead of the usual “10% off today’s purchase” incentive to take a store charge card, Target is testing everyday rebates between 3-5%  on all store purchases made with the card.  To me this means they are testing incentives to drive repeat purchase and retention rather than simply acquisition.

While it is not different in structure from the Costco program and there is no leverage on specific items purchased like Tescos offers its members, the test does create an incentive to increase visit frequency and the rebate is higher than the industry norm.

Focus group members may have spoken that “cash back is king” for years, but a closer look reveals that the pure model doesn’t breed stickiness to the brand.

Target is experimenting with changes and Tesco has already shared a partial answer key to the test faced by all retailers – how to keep customers coming back for more.

My Dad taught me the value of money. Cash is King and all that.

A dollar is a dollar, that can’t be denied. And, those dollars are increasingly hard to come by with the demands of business pressing harder on most over the past two years.

With my mind on cash and flipping through the latest issue of Costco Connection at home the other day, I couldn’t miss the half page announcement that at Costco, February is REWARD TIME. For holders of the  True Earnings Card® from American Express and Costco, shoppers can earn 1% on all Costco purchases and up to 3% back on other purchases including travel, dining out, and gasoline purchased at the Costco store. Business cardholders enjoy a similar offer, topping out at 4% for gas purchases.

Rewards accumulate all year long and, just as folks are thinking of flowers in the spring, the annual disbursement of rewards checks is made each February. The certificates are able to be used for in-store purchases only and expire in about 6 months on August 31.

Costco, in their partnership with American Express, reinforces that a dollar is in fact a dollar. But does it have to be so?

The Costco cash back rewards model has weakness on two levels. First, with consumers interested ever more in redeeming early and often, are they willing to wait one entire year to enjoy their rewards? Actually, the real question is not if they are willing, but if they will consistently alter shopping behavior over this extended period of time. Second, the once a year model is less likely to encourage an extra shopping trip to Costco as it becomes a way to make a regular trip “cheaper” when the coupon is redeemed.

Can Costco do better? You only have to look at far as Target and Tescos to find an answer.

Tescos is the undisputed king of grocery loyalty and may be the undisputed heavyweight champ of leveraging the customer data it collects to drive value for customers and results for the business. Tescos Clubcard is based on cash back rewards, but manages to  turns a dollar (Pound Sterling) into two as it offers Tesco Clubcard holders double the value of their vouchers when applied to purchase of a range of popular items in-stores and online. They even have a nifty rewards calculator to help customers build excitement.

Even before the latest announcement, customers could spend their Clubcard vouchers at face value in-store and online or increase the value up to four times by selecting rewards offered by Tesco Clubcard partners including restaurants and entertainment venues.

Target announced they are testing new offer combinations with their private label and cobranded credit cards. Instead of the usual “10% off today’s purchase” incentive to take a store charge card, Target is testing everyday rebates between 3-5%  on all store purchases made with the card.  To me this means they are testing incentives to drive repeat purchase and retention rather than simply acquisition.

While it is not different in structure from the Costco program and there is no leverage on specific items purchased like Tescos offers its members, the test does create an incentive to increase visit frequency and the rebate is higher than the industry norm.

Focus group members may have spoken that “cash back is king” for years, but a closer look reveals that the pure model doesn’t breed stickiness to the brand.

Target is experimenting with changes and Tesco has already shared a partial answer key to the test faced by all retailers – how to keep customers coming back for more.

Black Cats, Black Magic, and Black Friday … sounds like a threesome to avoid.

But untold millions will be lining up the day after Thanksgiving in the wee hours of the morning with steely-eyed focus and adrenaline pumping – all with the almighty bargain in mind.

Maybe it’s a gender thing, but while you might find me up at 5am to go fishing, you’ll never find me caffeined-up and ready to shop at that time of day. Maybe Black Friday is defined less by gender and more by the American way. We’re competitive and like to win. And, after a year of economic suffering like we’ve had in this country, you can’t blame consumers for wanting to taste even a small victory.

But as any coach worth his salt will tell you, winning comes at a price. Unfortunately, the price of playing the Black Friday game reached an all time high in 2008 when a Walmart worker was trampled to death by a mob of shoppers at a store in Long Island. The repercussions have been strong and retailers are taking steps to calm the crowds and bring order to stores as the holiday season kicks off this coming Friday.

Walmart settled the lawsuits that followed with a nearly $2 Million payout to victims of the incident. Concern is so high that even the National Retail Federation (NRF) has released crowd management guidelines for its members hoping to prevent future disasters.

Consumers seeking ways to get ahead of the game have options. They can check out Top 10 Black Friday websites to find bargains in advance, or they can just sit at home after turkey dinner on Thursday and watch “what not to do” videos on YouTube ranging from Stampedes at Walmart to Scuffles at Target.

Outside of the fun that some people associate with the crazed energy of Black Friday, I have to wonder if retailers knew what they doing when they originally promoted the concept. Competing on price only leads to a “death spiral” of diminishing profit margins. And since there is usually only one acknowledged price leader in a discounting category (ahem, Walmart) the rest of the retailing pack might be much better off taking a higher road to open consumer wallets in their favor.

There have been some really good articles written about the violence of last year’s Black Friday, and academics such as  University of Delaware professor Sharron Lennon are now studying the human behaviors that lead to such incidents. There is also a groundswell of voices encouraging consumers to “Spend time together, not money”.

All of this makes me smile when people ask if Loyalty Marketing programs work. Yep, there are some lame versions of the concept out there, and even the good ones could make use of their data to be more relevant to their customers. But as a business owner, it should be attractive to preserve margins, improve the shopping experience, and justify repeat business at your store without having to fake a “going out of business sale” once a month.  Data-driven Customer Strategies do just that.

I’ll bet there are some forward thinking people at the NRF and among larger retailers that could change the paradigm. Maybe the time has come to return a bit of elegance and class into daily shopping experiences, not to mention air travel. And, retailers had better consider the impact of promoting mass shopping frenzy on Millennial (Generation Y) consumers shopping online at home from their PC’s.

Could it be time for Black Friday to “Go Dark”?

Black Cats, Black Magic, and Black Friday … sounds like a threesome to avoid.

But untold millions will be lining up the day after Thanksgiving in the wee hours of the morning with steely-eyed focus and adrenaline pumping – all with the almighty bargain in mind.

Maybe it’s a gender thing, but while you might find me up at 5am to go fishing, you’ll never find me caffeined-up and ready to shop at that time of day. Maybe Black Friday is defined less by gender and more by the American way. We’re competitive and like to win. And, after a year of economic suffering like we’ve had in this country, you can’t blame consumers for wanting to taste even a small victory.

But as any coach worth his salt will tell you, winning comes at a price. Unfortunately, the price of playing the Black Friday game reached an all time high in 2008 when a Walmart worker was trampled to death by a mob of shoppers at a store in Long Island. The repercussions have been strong and retailers are taking steps to calm the crowds and bring order to stores as the holiday season kicks off this coming Friday.

Walmart settled the lawsuits that followed with a nearly $2 Million payout to victims of the incident. Concern is so high that even the National Retail Federation (NRF) has released crowd management guidelines for its members hoping to prevent future disasters.

Consumers seeking ways to get ahead of the game have options. They can check out Top 10 Black Friday websites to find bargains in advance, or they can just sit at home after turkey dinner on Thursday and watch “what not to do” videos on YouTube ranging from Stampedes at Walmart to Scuffles at Target.

Outside of the fun that some people associate with the crazed energy of Black Friday, I have to wonder if retailers knew what they doing when they originally promoted the concept. Competing on price only leads to a “death spiral” of diminishing profit margins. And since there is usually only one acknowledged price leader in a discounting category (ahem, Walmart) the rest of the retailing pack might be much better off taking a higher road to open consumer wallets in their favor.

There have been some really good articles written about the violence of last year’s Black Friday, and academics such as  University of Delaware professor Sharron Lennon are now studying the human behaviors that lead to such incidents. There is also a groundswell of voices encouraging consumers to “Spend time together, not money”.

All of this makes me smile when people ask if Loyalty Marketing programs work. Yep, there are some lame versions of the concept out there, and even the good ones could make use of their data to be more relevant to their customers. But as a business owner, it should be attractive to preserve margins, improve the shopping experience, and justify repeat business at your store without having to fake a “going out of business sale” once a month.  Data-driven Customer Strategies do just that.

I’ll bet there are some forward thinking people at the NRF and among larger retailers that could change the paradigm. Maybe the time has come to return a bit of elegance and class into daily shopping experiences, not to mention air travel. And, retailers had better consider the impact of promoting mass shopping frenzy on Millennial (Generation Y) consumers shopping online at home from their PC’s.

Could it be time for Black Friday to “Go Dark”?