Target’s ‘Cartwheel Perks’ Test Offers Insights into Emerging Loyalty Efforts
When Target launched its Cartwheel app in 2013, its value proposition for customers was simple: Save on in-store purchases via digital coupons. As compelling as that offer has been, the competition for shoppers keeps intensifying, and Target knows that it can’t afford to stand still, particularly in mobile commerce, a.k.a. m-commerce. The retailer therefore recently began testing a “Cartwheel Perks” feature, which adds a new element to the app’s value proposition: Claim a reward for saving on multiple in-store purchases.
Offering rewards for repeat business is a common loyalty-building tactic across virtually every B2C sector, from banks and credit card companies to airlines, hotels, gas stations, and even delis that give patrons a free sandwich after they buy ten of them. Target’s Perks program uses a similar model, but with a contemporary twist: It’s available only to Cartwheel users. That’s an important distinction, not just for Target and its customers but for other retailers.
According to the 2016 Bond Loyalty Report, 57% of consumers want to access loyalty programs via mobile devices, but 49% don’t know whether their program has an app. However, the report also showed that loyalty programs are incredibly effective in engaging customers and altering their shopping habits:
- 81% of consumers say a loyalty program makes them more likely to keep doing business with a brand;
- 70% modify when and where they shop to increase their loyalty points; and
- 66% change how much they spend to maximize their points.
Target’s Cartwheel app has already proven successful in engaging and influencing shoppers; more than 27 million people have downloaded it, and they’ve saved over $620 million, combined, thanks to its in-store discounts on up to 700 items. The Perks test offers users 10 points for every dollar they spend in stores. Once they reach 5,000 points (i.e., $500 worth of purchases), they can choose a reward from among 25 items, including sunglasses, laundry soap, and athletic apparel; the items range in value from $10 to $20.
Perks clearly adds value to and can therefore enhance users’ experiences with Cartwheel. Instead of launching the feature nationwide, though, Target is testing it in St. Louis, Denver, Houston, and San Diego to see whether — and to what degree — it will drive customers to:
- Sign up for and/or increase their usage of Cartwheel;
- Visit Target stores more frequently; and
- Make repeated in-store purchases.
The Perks test should also help Target figure out how best to incorporate mobile-centric tactics into its larger mission to strengthen customer loyalty. Given the swift and accelerating growth of m-commerce, this is a critical step. Nearly 200 million people in the U.S. now own a smartphone; in a Google survey asking people how their smartphones factored into a recent purchase decision:
- 43% of respondents said they used it to look for ideas and inspiration;
- 36% said they compared choices;
- 35% said they sought opinions, reviews, or advice; and
- 32% said they prepared for an offline purchase (e.g., by searching for store locations).
Consumers are obviously getting more comfortable with shopping via mobile devices; indeed, a recent Demandware study found that mobile traffic on retail sites now surpasses traffic from desktops and laptops. If Target and other retailers want to retain and expand their audiences, they’ll need to cater to these emerging behaviors. Retailers that successfully do so will be able to collect increasing amounts of data about mobile shoppers and then personalize offers and other messages to reinforce their brand affinities.
In the meantime, Target will keep a close eye on how customers respond to Perks. As noted earlier, the maximum reward is worth $20, or 4% of the $500 purchase threshold. In Raleigh-Durham, NC, in March 2015, Target tested a similar loyalty program, Red Perks, which offered shoppers 5% off an entire purchase once they reached 5,000 points. Red Perks users also earned points for online purchases, which they can’t do through Cartwheel Perks — not yet, anyway; Target says it’s considering that change. For now, though, Target is transitioning Red Perks shoppers to the Cartwheel Perks program.
Of course, one of the benefits of testing a rewards program in select markets is that it allows Target — or any retailer — to analyze the results and adjust the offers as needed before expanding into new markets. By simultaneously testing an upgrade to the Cartwheel app and expanding its loyalty efforts, Target will also gain valuable information about its audience’s mobile interests and offer an important lesson for other retailers: Succeeding in today’s retail environment still means giving customers what they want — and recognizing and responding to their changing desires.
An expert in customer loyalty and retention, Clarus partners with brands to develop, implement and manage premium loyalty programs that are fully customizable based on their unique consumer’s needs. Tom’s expertise spans the e-commerce, grocery, retail and publishing industries and focuses on customer loyalty and consumer behavior. He has been featured in Nasdaq, CNBC, The Wall Street Journal, Fortune, The Next Web, The Washington Post and much more.