The average consumer participates in about half a dozen different loyalty programs, and is all too familiar with the task of fumbling through their wallet in search of the appropriate card each time the opportunity to collect points presents itself.
But no matter how big a pain it might be, the promise of rewards is far too compelling to force the majority of card-holders to stop, says Steve Ogden, VP of marketing at Points.com, a loyalty points exchange portal that went live earlier this month.
Loyalty programs have become so popular that consumers have a hard time managing all the programs in which they’re registered. The trouble is, they usually have too few points to cash in or too many to use fully.
‘North American consumers participate in anywhere between six and eight loyalty programs on average,’ says Ogden. ‘But the reality is that the points and miles in all these different programs never accumulate to amounts that actually lead to awards. And at any given time, most consumers have only one or two programs that are central to their loyalty program participation.
‘Points.com lets them take all these different points and exchange them into whatever program has the most value to them,’ he contends.
Toronto-based Points.com, a partner company of Internet business generator Exclamation, also of Toronto, enables members of participating airline, credit card, retail and other loyalty programs to consolidate, exchange and redeem points with any other
participating loyalty program.
In effect, the service allows
registered users to treat their points like common currency, says Ogden.
‘We’re really a loyalty asset management system, designed to unlock the value inherent in all the different points and miles and all the different programs. Now, from the consumers’ perspective as well as from the partners’, every point and every program has value,’ he says.
‘This idea of exchanging points between programs is not new – it’s been floating around and lots of people have talked about it – but we’re the first to create a mechanism that meets that need.’
The company, which is currently targeting the North American marketplace, with hopes to eventually expand abroad, currently boasts 10 participating partner programs including Aeroplan – Air Canada’s frequent flyer program – Alaska Airlines, Amer-ican Airlines’ AAdvantage Travel Awards Program, beenz.com, PhoneHog.com and Netcentives’ consumer Internet ClickRewards program. Combined, the partners already represent north of 85 million loyalty program membership accounts, he says.
‘We’ve signed formal contracts with 10 programs, letters of intent with another 10 – to be converted in the coming weeks – and we’re in ongoing discussions with another 50 programs,’ says Ogden.
For partners, he adds, the benefit lies in the portal’s ability to drive loyalty. ‘Research told us that consumers who participate in points exchange would increase their loyalty to their core programs, and that they would also expand their participation in more loyalty programs.’
At the core of Points.com is pointsxchange, the world’s first loyalty program currency exchange. Pointsxchange, in combination with loyalty program management tools like xchange calculator and pointsfolio, allows members to calculate exchange values, exchange points/miles on an automatic basis, track account balances, store account information, find awards and set and monitor progress toward award goals.
While the site is currently free to use, eventually a $14.95 per year fee will apply to users wanting to make unlimited exchanges (members will also be able to pay per transaction). The exchange rates – which are in Points.com’s favour – may vary.
The company – which declined to reveal specific business goals, like the number of registered users it hopes to amass, and potential database marketing or CRM strategy – will market through participating members’ marketing efforts, including direct mail initiatives like partners’ newsletters and points statements, e-mail campaigns and in-flight magazines. Ogden says it’s an excellent opportunity to leverage their partners’ extensive databases. More traditional mass media efforts may be considered at a later date, he adds.
The Internet venture is one of several Web-oriented firms launched by Toronto-based Internet generator Exclamation. Others include ThinOffice.com, which provides technology services to businesses, and Internet-based gaming technology developer Exponential Entertainment, says Christopher Barnard, president of Exclamation.
‘Point.com allows the loyalty programs to really give their customers a much more robust proposition, while allowing consumers to get the most out of the currencies that they spend a lot of time and energy collecting,’ he says, adding it also makes for an impressive prospect for investors.
For Air Canada’s Aeroplan
members, Points.com makes their point plan more flexible by being able to consolidate, or translate other points into Aeroplan points, says Air Canada spokesperson, Laura Cooke.
For the time being though, Aeroplan’s more than five million members can exchange their points or miles from various other loyalty programs for Aeroplan miles, but not vice versa – later in the year, members will be able to exchange their Aeroplan miles for miles and points of other participating loyalty programs. And, Aeroplan does not exchange points with American.
To promote the new program, Points.com is offering Aeroplan members one free pointsxchange transaction and a chance to win one million Aeroplan miles when opening a Points.com account.
‘I think it’s a great new twist on [loyalty program services] and if they get enough people using it, I think it’ll pay off for the partners and the consumers – they get to use their points, which otherwise may have sat in their wallets or virtual accounts forever,’ says Steve Boase, retail consultant with Toronto-based J.C. Williams Group.
However, he adds, there are a few wrinkles to be ironed out. The biggest obstacle is getting a large variety of loyalty programs to agree to participate and swap points, says Boase. And until current restrictions like Air Canada’s deal whereby consumers can only switch points one way, and not with certain loyalty programs (namely, American Airlines), consumers won’t be grappling to get on board.
‘I think consumers might hesitate when they find out their one air mile at Aeroplan isn’t necessarily equivalent to one mile at Alaska Airlines. It could be attractive as long as the exchange rates are attractive, [but] if you’re in a situation where you have to exchange five points to get one, then a
consumer isn’t going to find
value in that. The exchange rates need to be very close or very equal,’ says Boase.
‘Not only that, but eventually consumers will have to pay for the service, and a pay-per-use service may be a bit much to ask from the consumer’s point of view.’
