Virgin Plays Loyalty Tune

Cancel the funeral for the retail music business. Virgin Megastores has created a rewards program that it hopes will stem music downloads and drive audiophiles into its North American shops. And it seems to be working.

Shortly after launching the V.I.P. customer loyalty program last December, the chain sent an e-mail blast to welcome members. To date, 92% of recipients have made a retail purchase, and the club has attracted 40,000 members.

“Our year-one target is 150,000, but it looks like we'll smash that,” says Dee McLaughlin, senior director of marketing at Virgin Entertainment Group, North America.

The program is now available in seven of the chain's 13 U.S. stores. In many of those, V.I.P. customers make more than 15% of all purchases. In addition, the club can be directly linked to increases in consumer satisfaction levels, according to McLaughlin.

There's no fee for joining. “Why would we want to charge our customers for shopping with us?” she asks. “We want to reward them.”

That said, the initial application must be accompanied by a purchase of $20 or more. But members begin racking up points immediately, with every purchase above $10 earning a point per dollar spent. One hundred points earns a $5 voucher good for all Virgin Megastore merchandise.

Pre-rollout research showed that consumers valued cash back and points, but Virgin wanted to offer more. Two elements separate V.I.P. from other programs of its type.

The first is the club card issued to each member. It features thermographic rewritable technology, meaning that images and writing on the back of the card change after every transaction.

V.I.P. members have an immediate record of the points they've earned after a purchase. Virgin is able to transmit product and sweepstakes announcements to customers at the point of sale without having to deal with the hassles of e-mail or snail mail.

“[The technology] allows the back of the card to be rewritten every time it's presented, turning it into a self-contained database that eliminates extensive, costly systems integration while encouraging repeated use,” McLaughlin says.

The program also awards participants instant prizes at the cash register, and the card informs them when they're automatically entered into sweepstakes drawings.

“The wow factor is in the privileges part of the package,” McLaughlin adds.

But that's not all. Customers can win rewards from the chain's parent firm and its subsidiaries — travel on Virgin Atlantic Airways, home theater packages, backstage concert passes, apparel, hotel vouchers and Virgin Mobile phones. In this way the chain's most valuable customers are exposed to Virgin's other brands.

Members can also meet luminaries like Paul McCartney, Pamela Anderson, Snoop Dogg and Jay-Z.

All these front-end offerings are supported by back-end analysis. Virgin tracks transactions, purchase behaviors, retail traffic and demographics. This data enables the firm to offer tailored rewards.

“A film noir buff won't get tickets to the premiere of a science fiction flick if there weren't any science fiction movies in their shopping basket previously,” McLaughlin says.

Maintained by service provider Visible Results, the technology also allows Virgin to identify consumers who are close to an award threshold and to send them offers that will put them over the top.

Despite Virgin's Anglo roots, the program is all American. Virgin did not test a U.K. version first, nor does it have a different program in place for U.K. consumers. It prefers to test the larger U.S. market with the initial rollout.

What's next? McLaughlin won't disclose all of Virgin's immediate expansion plans. But she points out that the firm will increase its V.I.P.-only events like live shows, movie screenings and partner-based private events.

“V.I.P. will become a cornerstone of our customer service program in the next year,” she says.

W

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