Customers, marketers love loyalty programs

It's virtually impossible to know exactly how many loyalty marketing programs currently exist in Canada, how many members they have collectively, or how much revenue they generate every year. The problem stems in part from the fact that there's little, if...

It’s virtually impossible to know exactly how many loyalty marketing programs currently exist in Canada, how many members they have collectively, or how much revenue they generate every year. The problem stems in part from the fact that there’s little, if any, consensus on what actually constitutes a loyalty program.

The range of activities that fall under the definition of ‘loyalty program’ includes everything from coffee shop buy-10-get-one-free punch-card promotions to airline frequent flyer programs to store discount voucher schemes (think Canadian Tire money) to standalone single-banner programs – Zellers’ Club Z or Shoppers Drug Mart’s Optimum – and multi-partner syndicated retail loyalty programs like Air Miles. Throw in the growing number of Internet-based loyalty programs, and the picture becomes even more blurry.

The one thing all such programs have in common, however, is that they embody an attempt by the companies that run them to hook customers into returning to make additional purchases by holding out the promise of a reward to the repeat customer. In other words, loyalty programs are viewed by many marketers as being a superb retention marketing tool.

Judging by the pervasiveness of loyalty programs in Canada, it would seem that there’s a common belief among marketers that consumers in this country are open to the possibility of being bribed to do business with one company over another. And there are new or expanded loyalty programs popping up all the time.

Last fall, for instance, Shoppers Drug Mart, Canada’s largest drugstore chain, put a massive marketing push behind the launch of its Shoppers Optimum Program, a customer loyalty initiative that had been in the making for the past three years. At the time, Neil Everett, Shoppers’ senior vice-president of marketing and communications, ventured that the Optimum program would grow to become the largest customer loyalty program of any kind in Canada before the end of its first year.

A testament to the popularity of its proposition that customers would be able to earn reward points on every purchase they make at Shoppers, including prescription drugs, the Optimum Program enlisted four million members – its target for the entire first year – within the first six weeks of its existence.

Another major new loyalty program that got its start last fall is Equity Retirement Rewards, which, instead of providing reward points that can be redeemed for merchandise, gives members the opportunity to earn cash contributions to an RRSP account simply by making purchases from participating sponsors, or by using the program’s affinity Mastercard anywhere they shop.

Although there is no word on how many Canadians have joined the Equity program thus far, a national TV ad campaign to promote the program continues to air, and a company spokesperson indicates that a number of new program sponsors will be announced very shortly.

Meanwhile, other loyalty programs, such as the Loyalty Group’s ubiquitous Air Miles and Air Canada’s Aeroplan programs continue to expand both their reach and the level of rewards they offer to both consumer and business customers. At least two of the big banks, specifically CIBC and Royal Bank, are developing plans to increase their involvement with retail-based customer loyalty programs. Club Z appears to be on the verge of being amalgamated into an omnibus loyalty program that would include its corporate sister, The Bay. And, there are countless other programs, both small and large, that will be stepping up their efforts to grab and hold the attention of consumers in the increasingly crowded Canadian loyalty program market.

All this, of course, begs the question: Will consumers grow tired of fumbling through their wallets to find the appropriate loyalty card every time they make a purchase?

Steve Boase, a retail consultant at Toronto-based J.C. Williams Group, says that although some consumers are already starting to abandon their participation in loyalty programs, he believes there may still be room for growth in the market, particularly among coalition-type programs in which several businesses band together to offer consumers a broad choice of reward-earning opportunities within a single program.

‘It’s just a question of getting the right mix of retailers for the consumers you’re trying to hit,’ he says. ‘If the program is effective in that regard, it will certainly increase traffic.’

Also in this report:

- Retail CRM: From profiling to profits p.D13