Borders has released its plan for reorganization under Chapter 11 protection, and it singles out the company’s loyalty program as a key factor to success. But although we love loyalty, at this point it’s probably smarter for the company to focus on other business operations – the plan submitted by CFO Scott Henry includes store shutdowns of 30% and an infusion of $505 million from GE Capital for the unprofitable company.
On one hand, props to Borders for focusing on their loyal customers, who they need now more than ever. The Borders Rewards Plus program was redesigned and relaunched in the fall of 2010 after extensive customer research, and it incorporated both free and paid enrollment options. Borders hoped that choice would differentiate it from competing bookstore programs. As bankruptcy neared employees reported that they were encouraged to sign up increasing numbers of customers for the program.
On the other, strengthening Borders Rewards Plus didn’t resuscitate the company then, and it isn’t likely to now. There are two marketplace situations in which a loyalty program doesn’t really help – when you offer a superior product or service advantage, or when your company is in a dying industry. As a bookseller, Borders could fall into the second category unless it transitions successfully into the digital age. Once they’ve managed that, loyalty is a sensible next step.
