Loyalty Marketing in Action What you can learn from Neiman Marcus' loyalty program

The key to successfully launching a loyalty program is to build something unique and superior, not "equivalent to" or "on par with" what is currently in the marketplace. Look for ideas from loyalty-leading companies that have already spent the time and resources performing the necessary trial and error. This will make the process more cost-effective.

Neiman Marcus and its sister company, Bergdorf Goodman, are two of the most respected names in retail. In 1984, the Neiman Marcus Group introduced InCircle Rewards, which became an industry-leading rewards program aimed at catering to Neiman Marcus' most valued and loyal customers.

InCircle Rewards is tied directly to purchases made with the Neiman Marcus or Bergdorf Goodman proprietary credit card. Members earn two points for virtually every dollar spent. The more members spend, the more benefits they earn.

Recently, I had the chance to speak with Michael Crotty, the senior vice president of marketing programs and customer insight for Neiman Marcus Group Services. He credits the success of the InCircle program to the company's dedicated team of employees and to the many relationships the company has built with vendor-partners, who provide top-notch rewards on items such as travel and merchandise.

Does InCircle have complete company support at all levels within the organization?
Crotty: Yes, and I think this is one of the reasons why the program has been so successful. The InCircle program is a universal program across all of our brands and channels, and it's well understood and supported by everyone from assistant buyers to sales associates to the executive team.

How much training do program associates undergo?
Crotty: Regardless of position, all new hires receive InCircle training. Furthermore, we have dedicated "InCircle Ambassadors" in our stores who provide ongoing training. It's important to keep the program on top of the associates' minds and to reinforce how to use it to build stronger relationships with our customers.

How important is communication with your customers for the overall success of the program?
Crotty: Consistent communication about the program to our customers is of vital importance. We have a separate marketing plan just for the InCircle program, and we run campaigns throughout the year to highlight the many benefits and rewards that come with the program.

Do you have any words of advice for companies contemplating starting a loyalty program?
Crotty: I think you should carefully consider why you think you need to do it. Look closely at your competitors and evaluate what they are doing in terms of loyalty programs. Creating a "me too" program could end up being an extra expense without any extra sales. But I firmly believe if you can create a program that clearly gives you a meaningful competitive advantage then it can become a significant and powerful new marketing tool.

Crotty was mum when I broached the topic of statistical evidence of the program's success (things like retention rate and InCircle spending vs. the bottom line), declining to comment. So I spoke with Kelly Hlavinka, managing partner of COLLOQUY, a leading provider of loyalty publishing, research and education.

"Neiman Marcus' InCircle has been a best-in-class program for the past 25 years," explains Hlavinka. "To hold this ranking, you have to have rewards, recognition and relevance, as InCircle does."

Here are five lessons you should take away from InCircle Rewards:

1. Loyalty programs need complete company buy-in. All levels and departments within the Neiman Marcus organization support InCircle and understand the benefits of the program itself.
2. You need a serious commitment to employee training. InCircle training is extensive and taken very seriously at Neiman Marcus. Each store has its own "InCircle Ambassador," who is the go-to person for any questions related to the program.
3. Offer multiple earning opportunities. InCircle members can earn points on virtually every purchase made within a Neiman Marcus Group brand. This allows members to accumulate points quickly.
4. Offer attractive redemption options. InCircle Rewards are attractive and diverse. If you accumulate enough points, you can name your reward.
5. Added benefits (tiered rewards) maintain interest. Although the base InCircle membership has enough value to stand on its own, the program goes one step further by offering additional benefits to members reaching higher spending levels.

When you enter the loyalty arena, you're entering the new age of marketing. Furthermore, marketing your loyalty program is far different than the traditional marketing methods you may be used to. Traditional marketing talks to the masses, while loyalty marketing talks to the individual. Loyalty marketing is intimate and has a profound effect on how customers respond to targeted promotions. Ultimately, the pay-off is being able to motivate customer behavior so they become more profitable.

Whether you're in the restaurant business or retail, antiques or auto sales, look to flourishing loyalty leaders such as Neiman Marcus, and build a loyalty strategy that outshines your competition.