CASE A Nordstrom Rewards Its Customers

From consultants ready to solve fashion crises to personal concierge services and spa treatments
at Le Couvent des Minimes Spa by L’Occitane in Provence, France, Nordstrom is using its varied loyalty
programs to retain and increase its share of wallet among key customers. The retailer’s research indicates
that customers who have relationships with Nordstrom through either the rewards program or a salesperson
spend more at Nordstrom than those who do not.
Nordstrom shoppers automatically become members of Nordstrom’s Fashion Rewards program
when they sign up for the store’s credit card. They earn points, or Nordstrom Notes, whenever they use the
card—including on purchases made from other vendors—although Nordstrom purchases result in twice the
points. Each time a customer accumulates 2,000 points, he or she receives a $20 Nordstrom Note, a gift
certificate redeemable for Nordstrom merchandise or services. The program’s different levels are based on
annual net purchases; the higher the customer’s annual spending, the more rewards earned. Nordstrom
Notes encourage shoppers to move up to the higher levels by shopping at Nordstrom and by using the store’s
credit card no matter where they shop. Benefits available at different levels include free standard shipping,
free trial-size beauty products, invitations to private shopping events, Nordstrom On Call (a 24-hour fashion
emergency hotline), early access to Nordstrom’s Anniversary Sale (the biggest sale of the year), and
complimentary tickets to Nordstrom designer runway shows and a private shopping party hosted by
Nordstrom.
Nordstrom is not alone in its efforts. Its competitors have also ramped up their loyalty programs. Saks
Fifth Avenue’s SakFirst program allows shoppers to accrue points from in-store purchases made using a
Saks credit card or another form of payment and from credit card purchases made outside the store with the
Saks’ “little black card.” Points earned vary depending on tier and whether the purchase was made at Saks
or at an outside vendor. Diamond Plus customers, who spend at least $25,000 a year at the store, receive
free local delivery, complimentary valet parking, storage of one fur item at no cost, advance notice of sales,
invitations to special events, and complimentary shipping on online and catalog orders. Saks also partners
with exclusive vendors such as Mercedes, The Palm restaurant, and The Yachts of Seabourn on exclusive
offerings, and it rewards its top shoppers with elite travel services.
Of the various programs, though, Neiman Marcus’s In- Circle, launched nearly 30 years ago, remains
the granddaddy of them all. Customers at different spending levels earn points by using their Neiman Marcus
credit card. Customers usually get 1 point for each dollar they spend, although at the highest tiers the point-
earning formulas become more generous and members may choose one day each year on which to receive
double points. Points are redeemable for gift certificates, in-store dining, alterations, fur storage, store
delivery, or airline miles. The program’s five tiers include the President’s Circle, achieved by spending
between $75,000 and $599,999 annually. Neiman’s President’s Circle members receive custom-designed
travel, entertainment, or gifts. For example, members might take in a Broadway preview and dine with the
cast, savor a private cooking class in a Tuscan villa with an Italian chef and sommelier, or enjoy the Kentucky
Derby from Millionaire’s Row seating and relax at the Barnstable Brown party.

QUESTIONS
1. What are the design characteristics of an effective loyalty program?
2. How effective is Nordstrom’s program in terms of developing customer loyalty?
3. Whom should Nordstrom target for its loyalty program?
4. Is the Nordstrom program worth what it spends to reward customers? Why or why not? Explain.
5. Are luxury consumers more drawn to reward/ loyalty programs than are those in other economic groups?
Are they drawn to different types of programs?