Linking Customer Retention With Earnings: Strategies From Chipotle, Netflix, Nordstrom
August 15, 2016
One fact comes through loud and clear in the recent earnings reports: Loyalty programs and customer retention can make a big difference when a brand stumbles. We’ll look at how three household names are using customer loyalty and customer retention in a pinch, and (quietly) wonder why they waited for a crisis to invest in programs that should be priorities for every marketer.
How Chiptopia is Bringing Back Fans and Earnings
After eschewing loyalty programs for 20 years, Chipotle has finally seen the light. (Yes, it took a terrible E. coli outbreak to convince them.) On July 1st, the company rolled out its Chiptopia program, and since then, nearly 30 percent of its transactions have been from program members, reports Loyalty 360.
Loyalty members will receive free entrees, branded swag and even catering for up to 20 people, depending on how many burritos they purchase between now and September.
“Our entire company is focused on restoring customer trust and re-establishing customer frequency, and rewarding our most loyal customers for visiting more often through Chiptopia is one way to do just that,” said Chipotle CEO Steve Els during a call with analysts.
And it’s working. The second quarter ended with a slide in revenue for Chipotle, but just a few weeks into the launch of Chiptopia, Els says Chipotle’s finances are already turning around.
Netflix Rolls Out Flixtape To Retain Existing Subscribers and Recruit New Ones
Lower subscription growth has pounded the stock price for Netflix, pushing it down by 16%. The company had projected it would sign up 2.5 million new subscribers by June, but gathered only 1.7 million, according to Reuters.
Not only was subscriber growth slow, but many current customers cancelled their service in anticipation of an upcoming price increase. That suggests subscriber loyalty is thin — not a good sign for the long-term profitability of the company.
Netflix CEO Reed Hastings isn’t one to be caught flat-footed. Along with its earnings report, Netflix released Flixtape, a new feature that allows subscribers to create a “mix tape” of their favorite shows. Based on Netflix’ queue feature, Flixtape lets subscribers create themed lists that can be shared via social media.
Flixtape gives subscribers a way to put some emotion into their relationship with Netflix, and the fact that Flixtapes are easily shareable could draw in new customers. Flixtape also shows that Netflix is thinking about how it can add value to its service as it increases prices.
Finally, Nordstrom Smiles Upon Your Credit Card
After reporting poor earnings and slowing sales growth in the first quarter of this year, Nordstrom has finally dropped the not-invented-here strategy that has characterized its loyalty program from the start. Since its launch in the late 1990s, Nordstrom’s loyalty program has been tied to its branded Visa card. Even as Nordstrom added new ways to earn points, they remained tied to Nordstrom-branded cards. Now, customers will earn points on purchases no matter how they pay.
The new flexibility is clearly something customer value: In just one month, Nordstrom’s has signed up nearly 1 million new members — and, for the first time, the retailer is about to be able to collect valuable data on all of them.
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