Retailers Reward Loyalty -- and Reap the Rewards

Nancy De Lire shops at a Target store in Chicago. Target offers credit cards through its own bank and also with Visa. (John Gress -- Reuters)

Debra Mims of Burtonsville loyally shopped at Hecht's for 11 years. She diligently clipped out an endless array of 10-percent-off coupons and timed her purchases to coincide with the local chain's many sales.

"That would make it affordable," she said. "I'm just one of those people who refuses to pay full price."

But now that Hecht's has become Macy's, the coupon free-for-all is expected to subside. Macy's wants to save its regular discounts for customers who carry its credit card.

Many retailers have adopted similar strategies, known as loyalty programs, tied to their credit cards. They often ramp up promotions during the holiday season, offering extra incentives for customers to sign up for a store credit card. Companies say such programs allow them to reward those who shop the most -- though some shoppers say they're actually turned off by the sales pitch and don't want to carry another card.

But there are plenty of benefits for retailers: The cards encourage shoppers to spend more, allow the stores to avoid fees from other credit card companies and offer the retailers insight into their customers' buying habits.

"At the end of the day, loyalty programs are really targeted advertising or marketing programs aimed at getting more customers in the store," said Shea Long, a vice president at Maritz Loyalty Marketing, which builds partnerships between retailers and credit card companies.

For shoppers, the perks can range from free shipping on online purchases to invitation-only sales and concierge travel services. The more charged on the credit card, the greater the rewards.

Of course, coupons have not disappeared. Macy's ran several ads yesterday in The Washington Post with coupons for $15, $25 and $50 off and for a 20 percent discount. But shoppers who open an account get an additional 20 percent savings, the ad said.

"It is an important part of the marketing mix for the holiday season," Macy's spokeswoman Elina Kazan said of the coupons. But she added that "there is a shift away from it."

Customers who sign up for the Macy's Star Rewards credit card get bonuses beyond discounts: They can return merchandise bought with the card without a receipt for up to six months, and they get notice of special monthly sales. If they spend more than $2,500 on the card, they can receive free gift wrap and alterations and a priority customer-service phone number.

"If you chose to spend your dollars at Macy's, we want to reward that customer and keep that customer," Kazan said.

The payoff for the retailer can be lucrative. Kazan wouldn't comment on how much Macy's credit card holders spend, but Maritz said cards with retail loyalty programs are used 25 percent more often than ordinary credit cards.