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Chico’s is Profiting from Customer Loyalty

Why is the Passport Loyalty Program Working?

The psychological concept known as “Endowed Progress Effect” is so deeply ingrained in the mind of consumers that loyalty programs are essentially hardwired for success. This principle simply means that people love seeing they’re making progress towards a goal. When they do, their commitment increases and they continue on with their behavior.

Chico’s tiered program structure, for example, shows consumers tangible proof that they are getting somewhere. Everyone can participate in the Passport program, but only those customers spending $500 or more earn the 5% reward. This strategy enables Chico’s to allocate its marketing dollars to only those customers that are loyal and growable. This strategy can be very successful. In a recent loyalty study, 50% of respondents said they increased their spending or changed other purchasing behavior in order to achieve a higher tier status in a rewards program. At Chico’s, 90% of sales come from customers in the loyalty program though Robert Atkinson, vice president of investor relations says its objective isn’t to make them spend more than they intend. [MarketWatch]

Customer engagement and brand loyalty are the cornerstones of Chico’s strategic goals. During the company’s November 25, 2014 third-quarter financial results conference call, CEO Dave Dyer discussed Chico’s strategic initiatives. “On omni-channel, we remain focused on creating a truly customer-centric experience,” Dyer said, according to a Seeking Alpha transcript.

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