The Exchange - Loyalty, Customers & Rewards
If you are anything like me, your wallet is filled with cards for loyalty programs. Some programs have migrated to my phone (an evolution I appreciate) but the sheer volume of available loyalty programs is overwhelming. I have everything from paper cards from my local sushi joint, children’s bookstore and independent café – “buy 10 and the next one is free” – to AmEx travel rewards, Aeroplan and Air Miles. I carry electronic or physical cards for grocery stores, pharmacies, department stores, movie theatres, car rental outlets, and, yes, even casinos. There is a loyalty card option for nearly every business. Loyalty programs are based on a simple concept, but few businesses execute these programs really well. Similarly, few customers maximize the advantages offered through these programs.
As a customer, your best chance of accumulating significant rewards is to limit your active participation to a few programs. By strategically aggregating your spending with a few retailers, you are able to realize more benefits from their loyalty programs. The loyalty programs I have committed to are chosen because they work for me. We have discussed in other blog entries how important it is for businesses to know and understand their customers. It is also important for customers to know and understand the business we choose to support. I make my loyalty program choices based on which retailers and programs best serve my needs.
My loyalty program commitments influence my behaviour as a consumer. For example, recently I switched my grocery shopping from Superstore (Loblaws) to Sobeys because Sobeys takes American Express and AmEx offers double travel rewards on grocery purchases (gas, pharmacy and travel too incidentally). This decision was made even though I prefer Superstore, and the Superstore is more conveniently located. I tried the Superstore “PC Plus” loyalty program but I found it too product-oriented for me. The PC Plus program awards points based on specific products and brands, not on your total spend. Through the program Loblaws worked to influence my brand loyalty. In the end, saving $20 on my grocery order occasionally was less attractive to me than earning 2 travel rewards for every dollar spent on one of our most significant household purchases. I did suggest to Superstore that they consider taking American Express but was told in an email that the company prefers to promote and support its own financial services products.
We all make choices. Good for Loblaws for being clear on its priorities. Businesses need to make decisions and understand that they cannot make everyone happy. When you try to please everyone, no one is satisfied. On the other side of the equation: mission accomplished for AmEx and its partners: Superstore has lost a customer and Sobeys has gained one.
Another program I am invested in is the Shoppers Drug Mart Optimum program. Shoppers carries Dr. Hauschka Skincare products, as well as Estée Lauder, Benefit and Stila makeup. Let’s be clear: if I did not like what Shoppers sold I would not shop there. So many people end up buying things they neither want or need because they have a coupon or there is a special on an item. Repeat after me: “it is not a bargain if I don’t want it.” Perhaps the reason Optimum works for me is because it is not oriented to bargains; it rewards me for buying the things I want. In fact, I am rewarded for choosing premium products since points are awarded (for the most part) on the entire purchase. Shoppers frequently offers point bonuses when you meet price thresholds, the most common being 20x the points if you spend $75 or more. The higher price point of my preferred products combines with the 20x the points offers, allowing me to accumulate significant benefits more quickly.
When I am in the moment, I am very happy to think about the $370 in “free” stuff I have available to me at Shoppers. I am currently saving up for a “spend your points event” which will increase the value of my rewards. Of course the reality is that $370 is not free money. Think about how much I had to spend to earn enough points to receive this benefit (even at 20x the points!).
Shoppers Drug Mart influences when I shop by placing time limits on the promotions, but it does not influence what I buy. Though I should qualify that statement by noting that I will buy products I might normally buy at the grocery store if I am in Shoppers buying my skincare and makeup during a points event. I pay at bit more at Shoppers, but that’s okay for me because I am getting points. (I will provide a detailed description of the Optimum program in the future, per a request from a faithful reader).
The more insidious, less considered aspect of these highly sophisticated programs is what consumers are sacrificing in order to participate. Shoppers Drug Mart for example, has insight into my demographic information. This includes my age, how many people live in my household, where I live (as well as where I used to live). It also has insight into my “pyschographic” or behavioral profile. For example, they know I am brand loyal and not super price sensitive about the products I love (offering me “customized” coupons to try a product I don’t typically buy will not change my behaviour). My behavioural profile is opposite to the “coupon” culture. Shoppers is aware that I only make large purchases during point promotions but that is not a problem for them. I have been a loyal customer for years, because I like their loyalty program. Shoppers knows a lot about me. This is the real value of these programs to marketers: data. The intelligence is the gold.
I see how Shoppers is trying to activate this data intelligence to win a larger piece of my wallet-share. They have not quite mastered this yet, however I see the types of customized offers are getting closer to engaging me further. There is one coupon in my Optimum App that will generate an incremental visit to the store later today. The next step in the journey for retailers and loyalty program operators is to get better at activating this high-value intelligence. It is a powerful opportunity.
Points programs provide an exchange: customers give up their personal information and offer their business and/or loyalty, and retailers reward customers for choosing their business and sharing their data. They are designed to influence our behaviour, specifically our spending choices and visitation patterns. As we hand over our Air Miles or PC Plus card at the grocery store, or Optimum card at Shoppers Drug Mart, most of us don’t stop to consider what we are doing. We are giving away our privacy every time our card is scanned or swiped. I have decided that the value I get in return makes this a good business decision for me. The merchants know the programs work, otherwise they would not be so popular.
Top Photo Credit: Gala Holm