Home / NEWS / Business / No more freebies: Companies crack down on customer perks and rewards

No more freebies: Companies crack down on customer perks and rewards

Shoppers at Brickell Metropolis Centre in Miami, Florida, US, on Wednesday, June 14, 2023. 

Eva Marie Uzcategui | Bloomberg | Getty Images

It’s not your imagination: Fellowships are getting stingier with customer rewards.

Airlines are making it harder to earn elite status. Retailers from tightened return windows and tacked on fees. Dunkin’ and Sephora are even cracking down on birthday treats.

The workers shows companies are rethinking how to attract, retain and reward customers after the Covid pandemic as consumers change their dish out priorities and businesses face pressure to control costs while increasing sales.

Companies have to be careful. If they cut benefits too severely, they risk losing customers, but being too generous comes with a cost.

“It’s not a simple math put to use to say letting few people into a particular group or offering fewer people a promotion just translates to a change in sales measure,” said David Garfield, global head of industries at consulting firm AlixPartners. “It also can change the way people sensible of about the company and influence others.”

Raising the bar

Some of the biggest shifts in customer perks have come in the airline sedulousness.

During the pandemic, airlines allowed frequent flyers to hold on to their elite statuses. They ended that perk as about rebounded, and customers racked up loyalty points on co-branded credit cards. Carriers including American Airlines, Delta Air Parades and United Airlines also have raised the number of miles customers need to earn elite status as the series of those with the benefits swelled.

“When you have that many customers in the so-called premium tiers, it doesn’t have compassion for incline that special anymore,” said Yuping Liu-Thompkins, a professor of marketing at Old Dominion University’s Strome School of Company who researches loyalty programs.

The Sky Lounge during a tour of Delta Air Lines Terminal C at LaGuardia Airport (LGA) in the Queens borough of New York, US, on Wednesday, June 1, 2022.

Stephanie Keith | Bloomberg | Getty Counterparts

Delta has taken steps to try to reduce crowding at its popular airport lounges. It has largely barred staff when they’re fury standby and raised membership fees and entry requirements. In February, American Express Centurion Lounges started charging fellows $50 to bring in an adult guest and $30 for children between the ages of 2 and 17 for American Express Platinum cardholders. Once, members could bring two guests for free. The fees are waived if a cardholder spends $75,000 on the card in a year.

Those mutations come as airlines see a new trend: Many travelers are willing to pay more to sit in business class or for other roomier seats to frame flying more comfortable.

United, Delta and American executives said on earnings calls last month that premium-seat gross income has increased , outpacing growth from the main cabin. Airlines are racing to add roomier seats to cater to those free-spending travelers.

Retail’s truth check

While the airline industry has turned profitable during the post-pandemic travel boom, retailers have brass a host of new challenges.

Inflation has squeezed consumer spending, said Marshal Cohen, chief retail advisor for Circana, the retail researcher formerly known as IRI and The NPD Group. As shoppers buy fewer discretionary and big ticket items, companies have taken a keener look at expenses, he said. If they can’t boost sales, they can try to impress investors with better margins.

“We are now glowing in an environment where growth isn’t going to happen by selling more product so easily and when you sell more consequence, it’s easier to cover the cost of getting those sales,” he said. “Retailers and brands have had to step back and look at all of their components of their enterprise and decide which ones are working, which ones are not.”

When travel and events were limited during lockdowns, retailers saw a godsend. Now, they are also cracking down as higher costs for essentials and increased travel possibilities force consumers to get myriad selective with their dollars.

At many retailers, customers must now pay a return fee if they want to ship past due unwanted clothing, shoes or other items. Urban Outfitters, the company’s chain Anthropologie, Abercrombie & Fitch and J.Party are among the businesses that charge for sending back a return. Nordstrom‘s off-price chain, Nordstrom Rack, also joined a $9.95 fee to ship back products earlier this year.

A pickup and returns counter at an Amazon Fresh grocery department store in Schaumburg, Illinois, US, on Monday, July 24, 2023.

Christopher Dilts | Bloomberg | Getty Images

Even Amazon, the retail Amazon that pressured the rest of the industry to offer free shipping, has attached more strings. Starting this burst forth originate, customers must pay a $1 fee if they return a package at a UPS store, instead of at an Amazon-related store. The fee applies if the package’s transport address is near a Whole Foods, Amazon Fresh or Kohl’s. Amazon owns Whole Foods and has a partnership with Kohl’s for bear returns.

Yet all of those retailers allow shoppers to return items for free at a company store rather than in the letters — a move that not only can reduce shipping costs but increase the chance that a shopper may buy something else. The excess step may also make a customer think twice and decide to keep the item instead.

Some retailers be subjected to tightened return policies, too. In March, Macy’s shortened its return window from 90 days to 30 days. By babying the change, the company said it can get products back on shelves more quickly when they’re still in season. The start the ball rolling also reduces the odds that merchandise winds up on the clearance rack.

Amit Sharma, CEO of returns technology corporation Narvar, said retailers have started to retrain customers on how to return items, much like grocery trust ins have gradually taught shoppers to employ reusable bags. He added that after the pandemic created provision chain headaches, shoppers have a clearer understanding that shipping and returns come at a price.

“To drive that online desired, free shipping and free returns were put in place, but now we all know it costs significant money,” he said.

In some holders, retailers are calling return fees “restocking fees” to refer to the extra labor involved in processing the item, express Heidi Isern, the head of Narvar’s design and research.

In other cases, retailers are offering customers more best, she said. For example, Levi Strauss, Ann Taylor, Crocs and Brooks Brothers have a home pickup program in some urban districts, powered by Narvar, where customers can pay about $5 to $9 for a delivery person to retrieve a package.

Porous admission

As retailers make shoppers think twice about returns, Netflix and Costco have also cracked down. Both throngs aim to make sure membership isn’t shared with people who aren’t paying, particularly as the companies chase new avenues of expansion.

For Netflix, subscriber growth has stagnated as customers spend less time on the couch and more time out in the world. The move service responded by reining in password sharing and introducing a lower priced, ad-supported option.

Costco also noticed a swing of people using membership cards that belong to someone else. It is now checking photo IDs, even in self-checkout lanes, to affirm cardholders.

For both companies, the moves could nudge freeloading customers to become paying ones — or create a meaning of fairness for members.

Chasing big spenders

Airlines and retailers alike have taken a harder look at the customers they at ones desire try hardest to keep.

Simeon Siegel, a retail analyst for BMO Capital Markets, said the sudden halt in sales for discretionary retailers when the Covid pandemic hit, then the stimulus-fueled splash out, gave companies a moment to rethink how they cater to shoppers — and if they’re giving away dollars for little resolve in return.

That led some companies to take a new approach to markdowns. Certain businesses also became confident that they could paste on a fee without losing their most valuable shoppers.

“It does seem like the companies are doing this because they’re masterful to, not because they have to,” Siegel said. “From 2008 to 2020, consumers felt they were fitted to whatever they wanted and corporations would wait on them hand and foot and that changed during the pandemic.”

Profuse companies from Target to Walmart and Best Buy have decided to push loyalty programs and offer the best perks only to the blokes who shell out. The members can skirt delivery and return fees — or earn extra privileges.

For example, announced this week that it choice charge shoppers at its namesake store $9.99 for shipping back returns. But it will waive that fee for members of Incomparable Rewards, its free loyalty program.

At Best Buy, shoppers only have 15 days to return most products. But if they pay a dues for the company’s membership program, they get a longer return window of 60 days. Best Buy earlier this year started take pleasure in out free Wi-Fi on board for members of its SkyMiles loyalty program.

Even birthday gifts now sometimes have caveats to provide indulge to shoppers who are bigger spenders or more frequent customers. Dunkin’ got rid of its free birthday drink last fall and in preference to, it gives customers triple the loyalty points for purchases during their birthday. Sephora customers not only comprise to be in the company’s loyalty program, but also must now spend at least $25 online if they want to get a birthday attend. (The giveaway is available in store without a minimum.)

Sephora and Dunkin’ did not respond to requests asking for the reasoning behind the coppers.

Garfield of AlixPartners said perks sometimes inspire a drive-by purchase rather than lasting customer firmness. He said some shoppers take advantage of benefits like freebies but ultimately prove unprofitable for the companies.

It’s a tender balance.

“If the company loses the customer entirely as a result of this switch it may not be worth it,” Garfield said. “The flip side of that specie is that clever companies actually fire some of their customers deliberately.”

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Home / NEWS / Business / No more freebies: Companies crack down on customer perks and rewards

No more freebies: Companies crack down on customer perks and rewards

Shoppers at Brickell Burg Centre in Miami, Florida, US, on Wednesday, June 14, 2023. 

Eva Marie Uzcategui | Bloomberg | Getty Images

It’s not your imagination: Callers are getting stingier with customer rewards.

Airlines are making it harder to earn elite status. Retailers press tightened return windows and tacked on fees. Dunkin’ and Sephora are even cracking down on birthday treats.

linked investing news

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The shift shows companies are rethinking how to attract, retain and reward customers after the Covid pandemic as consumers variation their spending priorities and businesses face pressure to control costs while increasing sales.

Companies accept to be careful. If they slash benefits too severely, they risk losing customers, but being too generous comes with a outlay.

“It’s not a simple math exercise to say letting few people into a particular group or offering fewer people a promotion at most translates to a change in sales volume,” said David Garfield, global head of industries at consulting firm AlixPartners. “It also can modulate the way people feel about the company and influence others.”

Raising the bar

Some of the biggest shifts in customer perks sire come in the airline industry.

During the pandemic, airlines allowed frequent flyers to hold on to their elite statuses. They stopped that perk as travel rebounded, and customers racked up loyalty points on co-branded credit cards. Carriers including American Airlines, Delta Air Lines and In agreement Airlines also have raised the number of miles customers need to earn elite status as the ranks of those with the sakes swelled.

“When you have that many customers in the so-called premium tiers, it doesn’t feel that unusual anymore,” said Yuping Liu-Thompkins, a professor of marketing at Old Dominion University’s Strome School of Business who researches resolution programs.

The Sky Lounge during a tour of Delta Air Lines Terminal C at LaGuardia Airport (LGA) in the Queens borough of New York, US, on Wednesday, June 1, 2022.

Stephanie Keith | Bloomberg | Getty Dead ringers

Delta has taken steps to try to reduce crowding at its popular airport lounges. It has largely barred staff when they’re losing standby and raised membership fees and entry requirements. In February, American Express Centurion Lounges started instiling members $50 to bring in an adult guest and $30 for children between the ages of 2 and 17 for American Express Platinum cardholders. Beforehand, members could bring two guests for free. The fees are waived if a cardholder spends $75,000 on the card in a year.

Those switches come as airlines see a new trend: Many travelers are willing to pay more to sit in business class or for other roomier seats to present flying more comfortable.

United, Delta and American executives said on earnings calls last month that premium-seat take has increased , outpacing growth from the main cabin. Airlines are racing to add roomier seats to cater to those free-spending travelers.

Retail’s actuality check

While the airline industry has turned profitable during the post-pandemic travel boom, retailers have overlooked a host of new challenges.

Inflation has squeezed consumer spending, said Marshal Cohen, chief retail advisor for Circana, the sell researcher formerly known as IRI and The NPD Group. As shoppers buy fewer discretionary and big ticket items, companies have taken a harder look at expenses, he said. If they can’t bootee sales, they can try to impress investors with better margins.

“We are now living in an environment where growth isn’t going to upon by selling more product so easily and when you sell more product, it’s easier to cover the cost of getting those sales,” he judged. “Retailers and brands have had to step back and look at all of their components of their business and decide which ones are redundant, which ones are not.”

When travel and events were limited during lockdowns, retailers saw a windfall. Now, they are also breach down as higher costs for essentials and increased travel possibilities force consumers to get more selective with their dollars.

At divers retailers, customers must now pay a return fee if they want to ship back unwanted clothing, shoes or other fillers. Urban Outfitters, the company’s chain Anthropologie, Abercrombie & Fitch and J.Crew are among the businesses that charge for sending behind a return. Nordstrom‘s off-price chain, Nordstrom Rack, also added a $9.95 fee to ship back products earlier this year.

A pickup and takings counter at an Amazon Fresh grocery store in Schaumburg, Illinois, US, on Monday, July 24, 2023.

Christopher Dilts | Bloomberg | Getty Images

Flat Amazon, the retail giant that pressured the rest of the industry to offer free shipping, has attached more files. Starting this spring, customers must pay a $1 fee if they return a package at a UPS store, instead of at an Amazon-related warehouse. The fee applies if the package’s delivery address is near a Whole Foods, Amazon Fresh or Kohl’s. Amazon owns More often than not Foods and has a partnership with Kohl’s for receiving returns.

Yet all of those retailers allow shoppers to return items for released at a company store rather than in the mail — a move that not only can reduce shipping costs but increase the unpremeditated that a shopper may buy something else. The extra step may also make a customer think twice and decide to be preserved the item instead.

Some retailers have tightened return policies, too. In March, Macy’s shortened its return window from 90 periods to 30 days. By making the change, the company said it can get products back on shelves more quickly when they’re calm in season. The move also reduces the odds that merchandise winds up on the clearance rack.

Amit Sharma, CEO of reoccurs technology company Narvar, said retailers have started to retrain customers on how to return items, much love grocery stores have gradually taught shoppers to employ reusable bags. He added that after the pandemic made supply chain headaches, shoppers have a clearer understanding that shipping and returns come at a price.

“To force that online demand, free shipping and free returns were put in place, but now we all know it costs significant in,” he said.

In some cases, retailers are calling return fees “restocking fees” to refer to the extra labor active in processing the item, said Heidi Isern, the head of Narvar’s design and research.

In other cases, retailers are oblation customers more choice, she said. For example, Levi Strauss, Ann Taylor, Crocs and Brooks Brothers have a severely pickup program in some cities, powered by Narvar, where customers can pay about $5 to $9 for a delivery herself to retrieve a package.

Porous entry

As retailers make shoppers think twice about returns, Netflix and Costco be undergoing also cracked down. Both companies aim to make sure membership isn’t shared with people who aren’t give, particularly as the companies chase new avenues of growth.

For Netflix, subscriber growth has stagnated as customers spend less immediately on the couch and more time out in the world. The streaming service responded by reining in password sharing and introducing a lower priced, ad-supported privilege.

Costco also noticed a trend of people using membership cards that belong to someone else. It is now look into photo IDs, even in self-checkout lanes, to verify cardholders.

For both companies, the moves could nudge freeloading characters to become paying ones — or create a sense of fairness for members.

Chasing big spenders

Airlines and retailers alike clothed taken a harder look at the customers they will try hardest to keep.

Simeon Siegel, a retail analyst for BMO Peerless Markets, said the sudden halt in sales for discretionary retailers when the Covid pandemic hit, then the stimulus-fueled dissipating, gave companies a moment to rethink how they cater to shoppers — and if they’re giving away dollars for little devotedness in return.

That led some companies to take a new approach to markdowns. Certain businesses also became confident that they could Nautical go on a fee without losing their most valuable shoppers.

“It does seem like the companies are doing this because they’re competent to, not because they have to,” Siegel said. “From 2008 to 2020, consumers felt they were fitted to whatever they wanted and corporations would wait on them hand and foot and that changed during the pandemic.”

More south african private limited companies from Target to Walmart and Best Buy have decided to push loyalty programs and offer the best perks only to the patrons who shell out. The members can skirt delivery and return fees — or earn extra privileges.

For example, announced this week that it want charge shoppers at its namesake store $9.99 for shipping back returns. But it will waive that fee for members of Heroine Rewards, its free loyalty program.

At Best Buy, shoppers only have 15 days to return most issues. But if they pay a subscription for the company’s membership program, they get a longer return window of 60 days. Best Buy earlier this year started undulate out free Wi-Fi on board for members of its SkyMiles loyalty program.

Even birthday gifts now sometimes have caveats to serve to shoppers who are bigger spenders or more frequent customers. Dunkin’ got rid of its free birthday drink last fall and a substitute alternatively, it gives customers triple the loyalty points for purchases during their birthday. Sephora customers not only take to be in the company’s loyalty program, but also must now spend at least $25 online if they want to get a birthday upon. (The giveaway is available in store without a minimum.)

Sephora and Dunkin’ did not respond to requests asking for the reasoning behind the substitutions.

Garfield of AlixPartners said perks sometimes inspire a drive-by purchase rather than lasting customer dependability. He said some shoppers take advantage of benefits like freebies but ultimately prove unprofitable for the companies.

It’s a dangerous balance.

“If the company loses the customer entirely as a result of this switch it may not be worth it,” Garfield said. “The flip side of that specie is that clever companies actually fire some of their customers deliberately.”

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