Last Year’s Headline: Royal Bank rewards in real time

Synopsis: Royal Bank of Canada (RBC) launches a loyalty card program for selected Visa cardholders – said to be the first program of its kind offered by a North American bank. Royal Rewards program makes its debut as a pilot scheme in Vancouver and the Lower Mainland of B.C. on September 1, 2000.

The program is powered by point-of-sale technology developed by Vancouver-based Ernex Marketing Technologies, which was acquired by RBC in 1999.

Selected holders of Visa Gold Preferred and Platinum Preferred cards are eligible to register. They receive instant loyalty point status updates on their cash register receipts, and can redeem points for instant rewards from the 74 participating merchants. For the first three months, cardholders can accelerate their points-earning capability by making repeat purchases with participating merchants.

The program also incorporates a Swipe ‘n’ Win component that initially offers a grand prize trip to Hawaii and smaller prize vouchers.

Royal Rewards is designed to combat competition from U.S. MasterCard issuers MBNA and Capital One, which came into the Canadian market in recent years with a series of offers of low introductory interest rates. Ernex technology also provides consumer data that can be leveraged by Royal Bank and the participating merchants.

One year later: Following a phenomenal start to the pilot scheme, which attracted more than 100,000 participants, RBC decided to expand the program to include the whole of B.C and southern Ontario. It has also been extended to include Avion Visa and U.S.-dollar Gold cardholders.

‘It was very well received with cardholders and participating merchants alike,’ says Andrew Mitchell, senior manager of loyalty programs at RBC.

‘We saw a large number of cardholders going to the participating retailers because of the points accelerator, so it made sense to expand it to other areas.’ By the end of next year, Mitchell anticipates that the loyalty cards will be available in every RBC branch across Canada.

Card use among participating customers increased substantially following the program launch, with an average transaction price rise of more than 20%.

Since the initial launch, the number of merchants involved in the scheme has risen from 74 to more than 200. Merchant categories include retail, leisure resorts, specialty services and jewelers.

The Swipe ‘n’ Win component of the pilot proved to be particularly successful. ‘This was one of the most fun things about the pilot and one of the key reasons we made the decision to keep the scheme going,’ says Mitchell.

Prizes included dinners and gift vouchers to the merchant stores.

RBC decided to offer the grand-prize trip to the awarding store clerk, as well as to the winning customer. ‘This encourages store clerks to get to know the program and to build up the excitement in the stores.’

In June, a secondary prize trip to Banff was awarded, and a second grand-prize trip to Hawaii is up for grabs this fall.

Although the database-building element was a secondary purpose of this promotion, it did offer RBC the chance to find out a little more about its individual customers. ‘We certainly found out who likes to shop in certain types of stores,’ says Mitchell.

The most important thing the bank learned was that people are willing to change their spending behavior when they are motivated by a points system such as this one.

‘People started visiting restaurants they had never been to before, just to build up their points, so it served as a really big motivating factor to merchants,’ says Mitchell.

Additional credit cards are likely to be included in the scheme next year.