Target, Delta seek to reward best customers

Target Corp. and Delta Air Lines announced changes Thursday that could save loyal customers big bucks.

Starting this fall, shoppers at Target will save 5 percent off their purchases when using a Target credit card.

"We believe guests will appreciate the simplicity and compelling value of this program, which will lead them to choose to shop more often at Target," CEO Gregg Steinhafel said in a statement. The new perk, tested in Kansas City for nine months, boosted sales across merchandise categories and particularly resonated with customers who shop frequently at the bull's-eye-branded big box and spend a lot when there.

The new perk replaces the 10 percent discount taken at the time the card is opened as well as occasional discount shopping days.

Target estimates that the new program will increase sales made with Target plastic and raise comparable-store sales by one percentage point in the last quarter of 2010 without an impact to earnings. In 2011, same-store sales are expected to increase by about one to two percentage points, which will enhance earnings per share.

The move should also help stabilize the credit card division's gross receivables in the $5 billion to $6 billion range. Receivables had been expected to slide after the retailer stopped issuing Target-branded Visa cards that could be used anywhere in April.

Target also tweaked its pharmacy rewards program, lowering the number of prescriptions it takes to get a discount on a future shopping day to five prescriptions from 10 prescriptions, but reducing the perk from a 10 percent discount to a 5 percent discount as well.

"We want members to be able to redeem their miles -- whether it's for a last-minute trip or a vacation of a lifetime -- and eliminating this fee for our loyal travelers makes doing so significantly easier," said Jeff Robertson, Delta's vice president of the SkyMiles program.

The switch is not expected to have a large affect on revenue, Delta spokesman Paul Skrbec said, because the carrier increased fees for some changes to award tickets from $100 to $150.

These are the latest changes being made to the loyalty program. Delta said in May that it was working to improve the experience of booking award flights online and instituted a perk of a free checked bag for American Express SkyMiles credit cardholders and up to eight of their fellow travelers on the same reservation that started June 1.

Upcoming changes include adding more preferred economy seats to accommodate frequent travelers and offering complementary upgrades on domestic awards flights to Diamond, Platinum and Gold Medallion members.