Indigo Books & Music Inc. is introducing a new rewards program, borrowing a page from the playbook of Canada's largest drugstore retailer.
Just as Shoppers Drug Mart Corp. has made gains with its familiar Optimum loyalty program, this week Indigo launched a similar scheme, dubbed "plum rewards," in a bid to bolster sales. It allows customers to sign on for free and collect rewards for purchases in the store - not just books - towards future discounts and perks.
The move is a further attempt by Indigo to lure customers to snap up not only books but also its growing array of non-book products. Just as Shoppers honed in on its strategy of diversifying beyond drugs to cosmetics and food, so Indigo is betting on everything from picture frames to yoga mats. The move is aimed at helping Indigo offset its declining business in traditional books amid a burgeoning business of digital books, which generate slim profit margins.
Indigo is running its new loyalty program along with its existing iRewards scheme, but with some crucial changes. It has expanded iRewards to non-book as well as book purchases - and increased its annual membership fee to $35 from $25 - again in trying to increase non-book sales.
Under the new program, Indigo wants to rev up business by catering to customers' personal interests, sending e-mails to them with purchase recommendations that complement past purchases.
Indigo is set to cast a wider net among its customers with the new scheme, said Bob Gibson, head of research at Octagon Capital. "It's tailoring rewards to personal tastes."
It's a tactic that has paid off at Shoppers: Optimum cardholders spend 60 per cent more during every shopping trip than non-cardholders, its executives say. Last year, the number of Shoppers' active cardholders grew to a record 10.5 million from 9.6 million.
Indigo, which has more than one million iRewards members, uses the program more as a marketing expense than anything else, Mr. Gibson said. "To get the consumer to spend that much [more]money is huge … If something is free, you'll get more people signing up."
He said iRewards only works for customers if, under the new rules, they spend more than $350 on books or $700 on non-books a year. Under the program, Indigo offers a 10 per cent discount on books and a 5 per cent discount on most non-book products. The plum rewards scheme gives members 10 points for virtually every dollar spent in stores, including books, toys, magazines and e-readers, and up to 5 per cent off books purchased at its website.
Indigo isn't alone to focus on improving its loyalty plan: retailers ranging from Loblaw Cos. Ltd. to Hudson's Bay Co. are racing to introduce new rewards features to pump up customer spending.