Promoting Express Can Be Rewarding
Eric is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Express' (NYSE: EXPR) recent loyalty program announcement shows that it understands the young adult shoppers who make up its customer base. Allowing shoppers to gain loyalty points with any credit card, instead of only Express' branded credit card, is helpful but not too unusual. Department stores often market their own branded credit cards, but restaurants and other businesses commonly award loyalty points regardless of the payment method that a customer uses. Express' use of social networks to award loyalty points is more unusual for a loyalty program.
On its loyalty website, Express explains that a shopper can earn points by helping this clothing retailer make sales to other customers. A shopper who wants to buy Express clothing can help the company by reviewing clothing on Express' website, or promoting Express on Twitter. Chantal Tode, for Mobile Commerce Daily, reports that a shopper earns five points in the loyalty program by retweeting a message from Express, and ten points for a product review. Product reviews and tweets are both excellent ways to reach young adult shoppers, and internet marketers frequently earn income from retailers by using product reviews and tweets to send web traffic to retailers' websites. Express can cut out third party internet marketers by using its audience to promote its products directly, which might reduce its advertising costs.
Young adults who use Twitter may use it to communicate with friends that shop at Express, so Express has selected an effective marketing channel. Product reviews allow Express to attract targeted traffic from Google (NASDAQ: GOOG) and other search engines. Express' marketing strategy may not be good for Google, because Express may not need to place as many ads on Google if it can use product reviews and social networks to draw in shoppers. Google does know that social networks can serve as alternatives to search engines for shoppers, and it has responded by investing in its own Google+ network.
Express' loyalty program could also provide better motivation to its shoppers than a traditional department store loyalty program. A clothing retailer can pick up some sales if shoppers see other people wearing its distinctive clothing, but offering direct rewards for helping a company with marketing is more unusual. Express knows its customer base well. Some young adults can't afford Express clothing because of the poor economy, but these potential customers still want to wear Express clothing. A shopper can now use Express loyalty points to buy clothing instead of running up the balance on her credit card.
Guess' (NYSE: GES) loyalty program currently provides rewards for more traditional shopping activities, as a shopper earns loyalty points when she purchases clothing from Guess. Guess could introduce its own rewards for product reviews and social network engagement, as Guess also markets its clothing to young adult shoppers. Like Express, Guess has an extensive web and social network presence and could benefit by rewarding its shoppers for promoting Guess products online.
Guess looks cheap right now. With $496 million in cash and $13 million in debt, Guess could afford to launch a new marketing campaign, and its P/E ratio of 10.3 is lower than many competitors, including Express at 15. Guess also has a better profit margin, at 9.9 percent, than Express, with a profit margin of 6.8 percent. Express did report better growth figures than Guess last quarter, as Guess reported a 7.2 percent drop in earnings while Express reported 24.7 percent growth, and Express' 8.3 percent revenue growth beat Guess' 2.5 percent figure.
Express' loyalty program decision shows that this fashion retailer is a good long term investment because it understands its shoppers. Guess also has a strong social network presence and markets its clothing to young adult shoppers, so Guess also has the potential to attract more shoppers with its internet marketing efforts in the future.
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