It’s easy to fall into the trap of thinking that digital marketing channels hold the keys to driving revenue in brick & mortar retail businesses. Relying on traditional marketing channels may seem archaic when you’re starting to feel like you are a legacy business.
But moving off of the traditional marketing channels that you’re customers have learned to expect from you can make you less relevant, as Nordstrom and J.Jill recently learned.
Nordstrom Moves Their Loyalty Program Off Direct Mail
A loyalty program is about saying “thank you” to customers and rewarding them for frequent purchases. Sending your thank you message in the mail, making a physical connection with your customer, makes the statement that you really do value the relationship.
Once you’ve set this expectation, sending your thank you message in an email rings hollow, as Nordstrom recently learned.
Nordstrom co-president Erik Nordstrom confessed in the Q1 earnings call the company reduced foot traffic at all of their stores when they stopped sending rewards “notes” to its loyal customers by mail. Their rewards program was moved online in an attempt to customers faster. According to Nordstrom: “We eliminated paper notes, but later discovered that a segment of our customer base relies on receiving these notes by mail. As a result, we saw a reduction in traffic.”
Oh yeah. Another thing about loyalty programs is that they drive revenue.
This drop in traffic played a role in Q1 revenue of $3.44 billion, a 3.3% decrease from the previous year. This was short of analyst estimates of $3.58 billion. The first quarter performance has changed full-year projections to be a sales decline of 2% to flat growth for the year, compared to the previous outlook of a 1% to 2% increase.
J.Jill Shifts Budget From Direct Mail
J.Jill shifted budget off of direct mail, causing a decrease in brick and mortar foot traffic, which played a role in decreased quarterly revenue.
According to President and CEO Linda Heasley: “We plan some shift from direct mail to alternative media options primarily digital. In hindsight we moved too much too soon. We made adjustments quickly when we saw the results and we were able to add back some direct mail touch point[s] along some changes in digital to better support our promotional activities. That restored traffic to planned levels albeit belatedly.”
Luckily J.Jill “quickly” realized that decreased direct mail meant decreased revenue, but not soon enough. According to EVP and CFO Mark Webb: “For the quarter, total net sales were $176.5 million, a decline of 2.8% versus last year’s $181.5 million. Total company comparable sales decreased 3.3%, driven by our retail store channel.”
J.Jill traded revenue for long term awareness, which is not a good marketing strategy. Heasley went on to say “The digital ads we ran drove a significant number of impression[s], which should boost brand awareness over the longer term.”
Lessons Learned
- Direct mail drives brick & mortar traffic, which drives revenue.
- Be sure you understand what marketing activities are driving revenue.
- Test before making drastic marketing channel changes.
