Card rewards maximizing loyalty

The following column, which appears each issue, looks at new and emerging trends in direct marketing. Alternating columnists are Barbara Canning Brown, a leading figure in the Canadian direct marketing industry, and David Foley, a specialist in database marketing programs.Strategy also...

The following column, which appears each issue, looks at new and emerging trends in direct marketing. Alternating columnists are Barbara Canning Brown, a leading figure in the Canadian direct marketing industry, and David Foley, a specialist in database marketing programs.

Strategy also invites other news items or column submissions for this section. Enquiries should be directed to Mark Smyka, editor, (416) 408-2300.

It is payback time for Eaton cardholders.

Out West, Canadian Tire gives its cardholders Options. And, The Bay keeps on sending out its Bay Card Dollars to qualifying shoppers.

Retailer-specific customer ‘loyalty’ programs are on a roll.


Last October, Canadian Tire began testing its Options program in Calgary.

Options lets the Canadian Tire cardholder choose either a flat dollar discount or a percentage discount (with a cap) on a future purchase, once the required number of points have been collected.

The test has been expanded into Saskatchewan, and plans are under way for an Ontario-based test, in Kingston, starting this month.

According to Scott Doan, manager, Loyalty Marketing, at Canadian Tire Acceptance, the Calgary test was ‘very successful,’ with both higher card sales and overall store sales.

In essence, the program has three target groups: dormant Canadian Tire credit cardholders, non-cardholders, and those who already use the Canadian Tire card.

Doing well

For the first group, Doan say the Options program is doing ‘extremely well,’ and new card acquisition is ‘over plan by at least 15%.’

Doan says the fundamental purpose of the program is to ‘drive incremental sales [to Canadian Tire] and not just get current customers to ‘switch’ their payment method, and he acknowledges that more analysis is needed to determine how well it is doing on that in that regard.

Importantly, in Western Canada, Canadian Tire customers do not get Canadian Tire ‘money’ when they pay in cash; therefore, the Options program is the first to provide any type of loyalty incentive to Canadian Tire shoppers.

The Kingston test will be an important evaluation of the relative appeal of two loyalty approaches in one store: the long-established ’5% for cash’ program, versus the Options credit card program.

Mathematically, those who pay cash at Canadian Tire still win: a $300 purchase will generate $15 in Canadian Tire ‘money’ (5%), or, using the current Options reward schedule, $5 in dollar awards (1.7%), or up to $10 (3.3%) in discount awards.

Less than 5%

While the Options reward schedule is progressive, its highest level (120,000 points) pays out less than the 5% cash discount: 2.1% as a dollar award or 4.2% as a discount award.

Meanwhile, Eaton’s introduced its Pay Back program in August.

This offers its cardholders $100 in ‘partner reward certificates’ that provide discounts on purchases from a variety of third-party firms such as Petro Canada, Swiss Chalet and Canada 3000 Airlines when $100 or more is charged to an Eaton’s account within one calendar month.

At $200 in one-month spending, the customer gets $200 in ‘pay back’ certificates.

The program is slated to run from Aug. 1 through Dec. 31, although Sigi Brough, Eaton’s public relations manager, believes it could be extended.

‘Almost anything [in retailer loyalty] could be considered as a test,’ Brough says.

Bay Card Dollars

The on-going Bay Card Dollars program, launched in August 1991 by the Hudson’s Bay Company, gives The Bay customers who, in any one month, charge $100 or more to their Bay Card statement, $5 in Bay Card Dollars that they can use on future Bay Card purchases.

The objective, according to Richard Schenker, national credit marketing manager, is to switch customers from other credit cards to the Bay Card.

‘Our biggest competitor is the bank cards,’ Schenker says.

He declined to comment on the interest rate differential between retailer-issued credit cards (at 28.8% apr) and bank-issued credit cards (at 9.75% to 16% apr.)

In pre-launch focus group research, The Bay learned that consumers believed that ‘thousands of points’ were needed before they could claim a reward, hence the reason for The Bay’s ‘low’ threshold for the basic $5 reward.

While The Bay has no plans ‘at the moment’ to modify its basic reward offering in the face of increasing competition, it does have the option of augmenting its unadvertised Gold Bay Card Dollars program, which recognizes ‘about the top 10%’ of Bay Card holders who qualify for Bay Card Dollars.

These top spenders get a personalized letter from Bob Peter, president of The Bay, along with Gold Bay Card Dollars or some other reward (a weekend at a luxury inn and tickets to a movie screening are two examples of past non-merchandise related rewards) which, at least the first time, arrives as a surprise to the customer.

Since it is not advertised, the Gold Bay Card Dollars program can be adjusted to meet competitive or market conditions.

Remember: only 85 shopping days until Christmas.

- Arthur Hughes, the experienced database marketing practitioner from acs near Washington, d.c. and author of The Complete Database Marketer, was in Toronto recently to speak at the 4th Annual Database Marketing Conference.

If you missed his presentation, Hughes will be back in Toronto on Nov. 25-26 as the featured instructor at York University’s new intensive two-day seminar on database marketing. Yours truly is also on the program.

To find out more about this seminar, call (416) 736-5079 and ask for a brochure.

- Sign of the times? Posted on my community mailbox, as a reminder to the neighbors who protest Ad-Mail by lodging it between two of the mailboxes’ sections: ‘Please throw your junk mail out at home.’

David Foley Associates specializes in design implementation and evaluation of database marketing programs. Please direct comments and questions to David Foley, David Foley Associates, 48 Woodman’s Chart, Unionville, Ont. L3R 6K7, or call or fax (416) 940-8784.