RedEnvelope tests loyalty program

The number of online retailers with loyalty programs is set to hit 67% by the end of this year, according to New York-based Jupiter Research. Working ahead of the curve is San Francisco-based RedEnvelope. Working with another San Francisco firm, services provider Loyalty Lab, the gifts merchant started a loyalty program last fall.

RedEnvelope in early September began testing Red Box Rewards with a select group of customers. For every $200 they spent with RedEnvelope, customers receive a $20 certificate good toward merchandise or services. Customers can also accumulate the certificates and give them to friends and family as gift certificates. RedEnvelope expanded the test to include all customers in early December.

The $96.5 million RedEnvelope wanted a program that was easy for customers to understand and to use, says chief marketing officer Gary Korotzer: “The customer doesn’t [have to] do anything other than shopping.” The program is also easy for RedEnvelope, since Loyalty Lab administers it off its own servers.

Loyalty Lab uses JavaScript tags on the client’s site to promote the program, display points earned, and supply special offers. The service provider also tracks each transaction — whether placed online, through a catalog, or via the phone — sends and tracks questionnaires, and works with third-party CRM services such as Coremetrics and Axion Solutions to better track customers’ Web behavior and provide a more positive shopping experience. The goal, says Loyalty Lab CEO Mark Goldstein, is to “put the right offer in front of the right customer at the right time.”

RedEnvelope decided to test a loyalty program after early research in focus groups showed that its customers have a strong affinity for the company. Executives felt a rewards program would be an appropriate way to recognize customers for their business, develop a stronger high-value and midvalue customer base, gain more customers, and capture a larger share of customers’ gift wallet, Goldstein says.

Customers participating in RedEnvelope’s loyalty program test were invited by e-mail to sign up for the program. Korotzer would not disclose how many people participated in the initial test but says it consisted of some of RedEnvelope’s best customers as well as those it was trying to reactivate.

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