CM4P

Customer
Management
4
Profit

Making
Loyalty
Work

Harrods' By Invitation

(This article was first published in Colloquy retention marketing magazine in the USA in 2002.)

Harrods' By Invitation: Loyalty as Art

A black card. A personal invitation from the Chairman. A high class, members-only brochure that features all the benefits of membership of the Harrods By Invitation customer rewards program. What's going on in London? Harrods, the world's most famous department store, recently launched an invitation-only loyalty program for its higher-spending customers. Peter Wray immediately hopped into a taxi for a trip to the famous store front in Knightsbridge, where he interviewed Harrods' American born Customer Relationship Marketing Controller, Lauri Vela.

When one of the world's most famous luxury brands decides to launch a loyalty program, benchmarking the best in class has an obvious advantage. While By Invitation owes a large debt to the Neiman Marcus InCircle program, it's also clear that Harrods has designed a program unique enough to appeal to the loyal - and high-spending - Harrods shopper.

Our first questions for Ms. Vela were obvious ones. Why a loyalty program? Why now?

"We wanted to surprise and delight our most loyal customers," said Vela. "Our initiative was a CRM one, launched 12 months ago. We wanted to engage and understand our customer base better. Within the luxury market, Harrods is all things to all people ."

Harrods currently maintains 18 separate customer database references. They wanted to build a CRM system to bring them all together, and to include a loyalty initiative that was focused on experience-driven customer recognition. Harrods' Chairman, Mohamed Al Fayed, has a vision to create a shopping experience that delights the customer - what Vela called the "wow" factor.

How will the new loyalty program relate to the well-established Harrods Account card?

"It's a good product," Vela said of the Account card, "but we discovered that not many of our core customers are carrying the card. We have people using many forms of tender."

Besides its multi-tender focus, what separates the By Invitation program from most other department store programs is its integration with Harrods' CRM initiatives.

"We wanted to understand what customers wanted from us as a brand," said Vela. "We don't want to shy away from the fact that we are a luxury brand - our customers enjoy a point of difference. We identified core customers from recency, frequency, value, needs and preference."

Working with outside consultants on data cleansing and strategy, Harrods identified an initial group of 700,000 customers based on a single customer view developed from disparate, pre-existing data sources. Vela managed a cross-functional team that she described as "outside in and inside out."

"We asked ourselves some crucial internal questions," she said. "We set up an employee advisory board right out of the gate, [which served as] a feedback loop to the cross functional team. Understanding the intricacies and nuances around this customer group, luxury shoppers who prefer to shop anonymously, was a key success factor. We focus on the customer journey, [which begins with] a very selective process to join a unique customer loyalty program via a teaser brochure."

In June of 2002, Harrods targeted some 47,000 customers from the initial group, profiled by demographics and behavior, to receive the black By Invitation mailer with a personal invitation to join from the Harrods Chairman. The up-market feel and look of this invitation is representative of Harrods' philosophy. Touch, feel, quality, and photography create a feeling of the unusual around that first contact.

"Science and technology are what enables, but art is what separates," said Vela.

Customers must opt in to the program, and may nominate up to three forms of tender, exclusive of cash, to identify them as members. This element led to one of the first operational challenges of the program: members don't need to produce the By Invitation plastic at the point of sale in order to participate.

Harrods overcame this challenge with a combination of staff training and technology. The solution included educating over 4000 Harrods staff to use the EPOS to flag members based on their preferred tender options. This method allows Harrods staff to service customers in the traditional Harrods style.

"We've worked with our staff to recognize these customers and spot triggers suggesting extra service dimensions that can improve the overall shopping experience," said Vela. "[By] trusting in the staff to deliver great service as a building block, we can then seek to lift it to a higher customer-centric and managed level."

The rewards package involves a classic blend of hard and soft benefits. Members earn one point per pound, with double points on birthdays up to one week prior. Customers redeeming enough points can take a chauffeur-driven trip to the studios of jeweler Boodle & Dunthorne and create their own jewelry with top designer Rebecca Hawkins; take a day trip to Florence with Harrods' bed linen buyer; enjoy classic motor racing experiences; or spend the day on Al Fayed's 65,000-acre Balnagown estate or at Fulham FC, the club Al Fayed owns and bankrolls.

Spending tier levels starting from $4000 USD go up to $88,000, at which point members can enter the Chairman's Circle. Redemption of points will happen initially only through a personal call center contact who will seek further feedback on member views, opinions and experiences to date. Members will also have access to a unique members-only Web site.

Since the initial June launch, Harrods has seen a 34 percent response rate, with 16,500 active participants, and more who have opted in but not activated. Predictive modeling will be built into the loyalty engine supporting the program to create a feeling of personalization unique to each member. Although the pilot will operate initially in the UK, Harrods vision is global

"We're happy with the execution so far and still learning every day," said Vela. "We started with what the customer wanted and then worked backwards. That's what we mean by art. We're passionate about service in Harrods. We want our customers to return with smiles on their faces."

Its focus on core brand values and its niche appeal suggests that By Invitation will succeed in the crowded UK loyalty market. With Nectar looming over the horizon and other big players squaring up to defend their loyal customer bases, the market is likely to polarize into the truly massive and the very niche. Anyone sitting in the middle ground may be heading down the road to oblivion.


Peter G Wray

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