Zellers loyalty program cultivates young consumers, rewards parents

Discount Store News, Oct 26, 1998 by Mike Duff

TORONTO -- Zellers has created a new loyalty program aimed at young children that will reward both them and their parents with goods and services based on dollars spent in the store.

Generation Z, directed at 6- to 14-year-old consumers, is a demographically specific application derived from expertise the company has developed over the past 12 years with its Club Z loyalty program.

Generation Z represents a niche application program for Zellers and could be a new way of doing business.

In fact, Zellers has gained so much experience over the years with Club Z, it now acts as a consultant to other companies around the world on loyalty program development. Its client list includes such U.S. concerns as American Express and Citibank.

Hudson's Bay, Zellers parent, is taking steps to turn its loyalty-program experience into a new venture. In the United States, Hudson's Bay has launched Hudson's. Bay Loyalty Management Debuted on Oct. 13 at the Motivation Show in Chicago, the initiative will include the opening of offices in various U.S. cities over the next two years.

"With only one-fourth of all companies currently using incentive programs, we believe the enormous potential of the $23 billion incentive market is still unrealized, particularly in the U.S.," said Bill Fields, Hudson's Bay's president and ceo.

Of course, incentive programs aren't new, but Generation Z demonstrates that Hudson's Bay, through Zellers, can take such initiatives to a new level, where programs can be developed that specifically target defined groups, appealing to their particular preferences, gaining insights about them and developing them as customers.

Zellers has parlayed its knowledge and experience with loyalty programs to subsidize the development of the Generation Z program.

Of course, Generation Z is built on Club Z, which now encompasses 10 million members. The retailer contends eight of 10 Zellers shoppers and one-third of all Canadian's are Club Z cardholders.

The Generation Z initiative arises from three motivations: teaching children about making purchasing choices; encouraging kids to become loyal Zellers customers; and providing more value to the company's core customer.

"Zellers is a mum's store and we want to find ways, through merchandising, service, assortment and value, to better serve her," said Doug Ajram, Club Z general manager. "Most Club Z members, 70%, are mums. We thought, what do we need to do in a program to further reward them?"

The retailer found that most mothers use their Club Z points on their husbands and children. Therefore, Zellers decided to launch a program that provides loyalty points to Club Z members as their children earn Generation Z points.

Under the program, for every dollar the Club Z member spends, not only does she get 100 points, but so does a participating child. The points are deposited into a Generation Z account which can be spent by the child on Generation Z rewards--with the permission from a parent or guardian--or combined within a family's reward.

The Generation Z program gives every indication that it is on its way to success. In its first two days, 100,000 kids signed up for the program. By 1999, said Ajram, Zellers foresees having 1.5 million Generation Z members out of a total Canadian population of about 30 million.

But Generation Z isn't just a simple points/reward program. Its Web site, www.genz.com, not only includes a kid-oriented rewards catalog but has the capacity for continual expansion based on feedback from program members. The program itself is designed to grow. Vendor participation is expected and this can occur in several ways. In some cases, Generation Z members may get extra points for trying a new product, get special discounts or be invited to participate in exclusive vendor-sponsored events.

Eventually, Zellers plans links with companies outside its business in fields like video rental and travel whose participation will further boost the program's value.

Additionally, Zellers will develop new programs out of its Club Z efforts. Another demographically based initiative with even more sophisticated elements will be launched in 1999, said Ajram.