Is a trend developing in the retail sector toward the return of loyalty program alliances?
“For a while most new loyalty programs went in-house but we may be seeing a new trend. Canadian customers are hurting financially and retailers need to offer even more value that is easy to convert into savings,” said Bruce Winder, Author of RETAIL Before, During & After COVID-19 and President, Bruce Winder Retail.
Recently, it was announced that Canadians can now earn Scene+ points at Home Hardware Stores Limited’s close to 1,100 locations across Canada and at homehardware.ca using their Scene+ Loyalty Card and the Scotiabank® Scene+ Visa* Card.
Also, AIR MILES announced the first of several program enhancements including a new partnership with leading Canadian value retailer, Dollarama.
“This piqued my interest. If you go back to the loyalty space about 20 years ago, even 15 years ago, a lot of programs were sort of tied with a coalition, like a network. AIR MILES and things like that,” said Winder. “Then there was a trend where companies started to kind of create their own programs so that they could harvest the data directly and control the relationship with the customer.
“But I’ve seen recently two data points where maybe we’re starting to see a bit of a rebirth and a re-linkage of coalitions.
“I read somewhere that Canadians on average like 16 loyalty programs they’re involved in. And I also read somewhere where they’re sitting on $15 or $16 billion worth of points that they’re not using.”
Because of the tough economic times and the fact that consumers may be holding back on spending, retailers are wondering how they can add value for a consumer who is really stretched.
“I’m wondering if companies are starting to see the benefit again of partnering with larger programs that offer multiple retailers so that they can earn easier and quicker and then burn off the points easier and quicker to kind of keep them in that loyalty cycle,” said Winder.
Winder said 60 per cent of consumers will change where they shop to try to maximize points.
“It actually works. It changes consumer behaviour,” he said. “Especially now because I think consumers are tuned in to look at savings right now. I’m sure there’s a lot of consumers out there who probably won’t buy much unless it’s on sale right now. Or there’s some sort of deal.
“Loyalty works. It’s better to use loyalty than just drop your prices. So instead of saying okay let’s drive some traffic, let’s drop our prices 10 per cent this week, that’s a very expensive way to draw traffic and to draw a conversion. It’s cheaper and has more stickiness to use a loyalty program instead.
“It’s less expensive and it’s actually more engaging and it has more of a long-term impact. In other words, the customer will keep coming up. What if you drop your prices 10 per cent this week and then your competitor drops 10 per cent next week, well the consumer has no problem jumping back and forth to retailers. But if you offer value in a loyalty program the way that they get the value is by continuing to shop at your store. So you kind of keep them captive within at least the network. It’s a smarter approach in an economic downturn instead of just relying on price. Relying on loyalty is cheaper and smarter to drive people in your stores and keep them in your stores.”
Winder said one of the reasons behind all the unused loyalty points is that consumers have signed up to a lot of independent one store programs. The points just sit there.
“If you have consumers that are sitting on a pile of points and not using them, that means your loyalty program is broken,” he said. “Because what you want to do is you want to have consumers every week or every month earning points and burning points, earning points and burning points.
“And if you stop the burning side, in other words the usage, then you’re going to stop earning. It might also be an indication too that the rewards you’re offering aren’t very appetizing. They’re hard to claim or you need an enormous amount of points to claim them or they’re rewards that people just don’t want. So it’s a bit of a telltale that your rewards program is broken when you’re sitting on too many points.”