Kohl’s Rolls Out Tender-Neutral Loyalty Program

Navigator Edition: January 2015
By: Jeff Kalski and Aaron Mercurio

After a series of regional tests that began in the fall of 2012, Kohl’s launched its tender-neutral loyalty program, Yes2You Rewards. The launch of this program is noteworthy given Kohl’s highly successful private label credit card program, My Kohl’s Charge, currently issued in partnership with Capital One.  The private label credit program boasts industry-leading credit penetration, approaching almost 60% of sales, driven in large part by the integration of credit into the company’s retail strategy best exhibited by the use of credit event days and introductory credit offers (e.g., 15%-off first purchase). An overview of Yes2You Rewards is included in the nearby table.

Figure 1: Kohl’s Yes2You Rewards: Program Overview

Fig-1_-Kohl’s-Yes2You-Rewards_-Program-Overview_v31 As of December 2014 (formerly 20%-off first purchase as of October 2014).
2 Per WSJ article dated December 4, 2014.
3 On Q3 2014 earnings call.
4 On Q2 2014 earnings call.
Source: Company announcements and earning calls.

Kohl’s joins other major retailers offering tender-neutral programs in addition to a credit card program, including  the TJX Companies, JCPenney, and Sears. While each program has its unique positioning, benefits, and customer appeal, we have identified a few common themes for successful programs:

  1. Incremental Value – The most successful tender-neutral programs are designed to be incremental to the credit card value proposition. Specifically, successful tender-neutral programs provide a differentiated value proposition which can be additive to the credit card program, but do not exceed or limit the credit card value proposition in any way. Differing strategies exist regarding whether tender-neutral programs offer points vs. access vs. savings events, but most programs avoid being “either / or” with respect to the credit card and mesh well when the customer participates in both the credit card program and the tender-neutral program.
  2. Bank Partner – Successful retailers work closely with their bank partners to maximize credit card program benefits (and shared economics) and carefully mitigate risks associated with the tender-neutral loyalty program such as cannibalization of the credit program.  Kohl’s, as an example, recently called Capital One its “partner on loyalty.”1
  3. Data Collection / Pre-Screen – Tender-neutral programs center around the powerful data they provide retailers. Many retailers use their programs as a pre-screening tool for credit as well as an important way to interact and communicate with loyal customers who either don’t want or do not qualify for credit.
  4. Testing – Kohl’s carefully tested its way into the Yes2You Rewards program, introducing the pilot program to select markets across the country before the national roll-out. These type of test phases provide retailers with learnings that include impact on credit, spend lift, and customer behaviors in reaction to varying offer types or values.
  5. Mobile – As customers become increasingly digital, convenience and ease-of-use are important for both consumer adoption and on-going engagement. Kohl’s has integrated its loyalty program into its mobile application, allowing members to access points2 and rewards balances within the wallet section of the app, and scan their rewards card via a barcode at the POS for instant redemption. While mobile PLCC functionality is currently limited to balance information, transaction history and payment, there may be potential for future POS capability.

1 On Q4 2013 earnings call.
2 Points accumulated appear in account within 48-hours of purchase online or in-store.

For more information, please contact Jeff Kalski, Senior Analyst,; or Aaron Mercurio, Senior Consultant, Both specialize in Credit Card Issuing.

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