J&R tests online loyalty program

Aug 01, 2006 9:30 PM  By

J&R Electronics, the 35-year-old New York-based consumer electronics merchant, has kept customers coming back time and again to its Manhattan store with low prices, a wide selection, and exceptional service. But maintaining customer loyalty online is a different matter. Because of the commodity nature of its products, J&R has found it difficult to get its Web customers to return directly to the site to purchase additional electronics, DVDs, and CDs. Rather, customers bargain-shop for the best price via comparison engines.

“We recognized that with online consumer electronics, a lot of people are becoming more trained to come to us through aggregator sites,” says vice president of e-commerce Jason Friedman. “We wanted to train and reward customers for coming to J&R directly.”

To do that, J&R is testing a loyalty program developed with San Francisco-based services provider Loyalty Lab. Through the program, J&R rewards customers who come directly to the merchant’s site by typing in the URL or by clicking on an organic J&R listing in a search engine with 2% back on purchases in the form of a gift card.

The company began testing the program in June. For the time being it applies only to online purchases, but Friedman says J&R plans to expand the program into its retail and catalog channels within six months.

To redeem their points, customers log on to a J&R-branded Loyalty Lab site 30 days after purchase and request a gift card to be mailed to them. J&R allows returns within 30 days of purchase, hence the 30-day window, to cut down on fraud.

The program also reduces the amount of money J&R pays affiliate and search sites — what Loyalty Lab CEO Mark Goldstein calls “the Google tax.” For merchants in low-margin sectors such as consumer electronics, having to fork over an estimated 20%-30% of their already small margins to these sites is “wacky,” says Goldstein.

The program is being rolled out to a few thousand customers each week via e-mail. As of mid-July, 10,000 were enrolled. Friedman says he will begin to see how buyer behavior is changing after the program has been running for three months, the average time it takes for a customer to make a repeat purchase.