Keeping Customers in a Crummy Economy

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"There's more stickiness in the membership base already because of the family component in the membership," says Laura Richardson, an analyst at BB&T Capital Markets (BBT). "The best way to retain a customer is to get them more fully involved in the club, using it as frequently and broadly as possible." (BB&T Capital Markets expects to receive or intends to seek compensation for investment banking services from Life Time in the next three months.)

Life Time is beefing up its customer connectivity program by bolstering its online advantage club, through which members get discount offers on everything from groceries to cellular service to vacation resorts from a network of nearly 100 partners who want access to Life Time's affluent customer base, says Scott Lutz, Life Time's chief marketing officer.

"In a tough economy, people start justifying every spend they make," says Lutz. "We make it easier for you to justify [that expense] because you can only get this discount if you're a member of Life Time. We allow it to fit your budget."

Veering Off the Yellow Brick Road

Department stores are also getting more desperate to keep customers engaged. In addition to buying customer lists from credit-card companies, some upscale retailers are offering gift cards for $150 or more after a $1,000 purchase, and turning their stores into entertainment venues to boost store traffic, says Patricia Pao, chief executive of Pao Principle, a retail consulting firm in New York.

For a Wizard of Oz theme party during New York's annual Fashion Week in September, Saks (SKS) brought in top shoe designers to create their renderings of the MGM film version's iconic ruby slippers, an event that probably cost Saks an additional couple of hundred thousand dollars, Pao estimates. She doubts such attention-grabbing tactics are working since sales at stores open at least one year continue to be extremely weak. With comparable sales already faltering for a year before the Lehman Brothers collapse and other recent events, "it's going to be very hard for [retailers] to retain their customers, or just to get them in the door," she says.

Aggressive markdowns on prices are also occurring much earlier than in the past, she notes, with fall merchandise already being advertised at 60% off at the start of October. "[Stores] are going to start doing markdowns [on Christmas items] by the middle of November" rather than waiting until the traditional day after Thanksgiving.

Says Pao: "I guarantee you're not going to see Black Friday anymore."

Bogoslaw is a reporter for BusinessWeek's Investing channel.