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For fashion brands, selling styles at a discount isn’t a good look.
Direct-to-consumer brands are no exception. In fact, they’re often built on a pricing model that doesn’t leave room for promotions: Their pieces are sold at the lowest price possible, as shown in their voluntary breakdown of production expenses.
But sales attract shoppers. As a workaround, young direct-to-consumer brands, including Mack Weldon, Mizzen+Main, and MVMT, have launched loyalty programs. The programs allow them to lure customers with perks and price cuts, without resorting to brand-damaging sales events.
So far, the programs have proven successful.
Mack Weldon’s Weldon Blue loyalty program
Men’s underwear and basics brand Mack Weldon launched Weldon Blue in late November, when founder Brian Berger saw an opportunity to build on existing customer behavior. Though he vowed to never host a sale when the brand launched in 2012, he had since established a volume-based pricing model to reward customers: They received 10, 15 or 20 percent off, based on how much product was in their cart.
“It drove up average order values,” he said. “And, most importantly, it allowed us to keep the focus of our marketing messaging on things customers really care about, rather than just sale, sale, sale.”
However, he soon realized customers were waiting around to make a purchase until they could maximize their cart size. He decided to trade the setup for a loyalty program that would drive purchase frequency and lifetime spend, rather than transaction value.
“The more frequently a customer purchases, the more engaged they are in the brand, and the more likely they are to stick around,” he said. “Customers like the value proposition, but this drives the business in the long-term, as well.”
The program has two tiers: Level One, a membership given to every customer who places an order and grants free shipping for all future orders. To get to Level Two, customers must spend $200 per year. They’ll then receive free shipping, a 20 percent discount on all orders, surprise gifts (like products that are in development as a gift with purchase) and the chance to buy newly launched products a week early.
In the three-month testing period leading up to the launch, the brand saw a 66 percent lift in repeat sales among customers offered a sneak peek of the program. It also saw a 29 percent hike in sales among high-spend participants automatically grandfathered into Level Two.
Once the plan is more established, Berger plans to use it to drive other marketing initiatives — for instance, upgrading loyalty members who contribute to the brand’s recycling program.
Mizzen+Main’s Officer’s Club loyalty program
Such loyalty programs make sense for emerging direct-to-consumer brands like Mack Weldon, said Richard Kestenbaum, partner at Triangle Capital, a private investment firm focused on fashion and retail.
“Points and transactional relationships work if they are enhancing a good product with a good brand that has a good message,” he said. “You can get people interested in a brand they don’t know yet by giving them a deal to reduce their risk; everyone loves a deal.”
Direct-to-consumer watch brand MVMT also launched a loyalty program last year, with Swell Rewards. It allows customers to accumulate credit by referring friends. The brand accredits nearly half a million dollars to the program in the past six months, with almost 2,000 orders coming from referred customers. The program’s growth so far has been largely organic, and according to co-founder and CEO Jake Kassan, the brand plans to dedicate more resources to promoting it in the future.
DTC performance menswear brand Mizzen+Main has had luck with its “Officer’s Club,” a loyalty club broken into three tiers based on customers’ lifetime spend, starting at $2,500. Members receive early access to product launches, opportunities for exclusive trunk shows handwritten notes, surprise gifts (like whiskey or monogrammed duffle bags) and access to a VIP style concierge, who is available by email, phone and text. CEO Kevin Lavelle reported higher engagement and revenue lifts from existing customers and customers aiming to join the Club.
Among fashion startups, the programs are popular — and they technically get the brands around offering sales. But brands should proceed with caution, warns Kestenbaum.
“Loyalty programs are a misnomer; in some ways, they’re disloyalty programs,” he said. “They’re not asking a customer to buy because the product is great, they’re asking them to buy because the price is great. It becomes a race to compete for the lowest price, and as a brand, that’s not a race you want to be in.”
Image via Mack Weldon