América Retail | Homepage
Monday, May 29, 2017

La primera comunidad del retail en Latinoamérica

Canada: Canadians just can’t seem to quit loyalty cards

Canada: Canadians just can’t seem to quit loyalty cards

Mayo 19, 2017

Autor/Fuente: Hollie Shaw / Financial Post 👤Periodista: María Alejandra Lopez 🕔19.May 2017

 

A spate of recent data breaches and public relations snafus have made loyalty programs in Canada an increasing target of consumer ire, as any casual glance at their social media pages would suggest.

But even during the best of times, cardholders level a common set of complaints against programs such as Aeroplan and Air Miles: it can be difficult to book flights or secure merchandise, or the offers lack variety and quality.

Air Miles users, in particular, are still annoyed with owner LoyaltyOne Co.’s decision in December to reverse a plan that would have seen points older than five years expire by the new year, because many members had already rushed to redeem the rewards before the announcement was made.

Many other loyalty cardholders have expressed frustration after being asked by multiple providers in recent weeks to reset their passwords because of a series of apparent data breaches and points thefts from popular programs.

Despite the apparent setbacks, it appears Canadian customers aren’t ready to quit loyalty cards just yet. Indeed, the multi-billion dollar business is just as popular as ever with consumers and companies alike and any changes are quickly noticed.

For instance, shares of Aimia Inc., Aeroplan’s owner, plunged 60 per cent last week after Air Canada announced it would cut ties with the loyalty provider in 2020 and launch its own program. Investors and cardholders worry Aimia will not be able to make up for the program’s value.

But consumer engagement generally remains strong across the board. More than nine out of 10 Canadian consumers participate in at least one loyalty program, according to an April report by market researcher Brandspark International, and that number that has been consistent for more than a decade.

“Even with some of the bad press around these issues, most people think that they might as well collect the points and still see value there,” said Philip Scrutton, director of consumer insights at Brandspark.

The company’s research found that 81 per cent of Canadian household shoppers belong to the Air Miles program, the most-held loyalty card in the country with 11 million active users, followed by Shoppers Drug Mart Optimum at 66 per cent, and Loblaw’s PC Plus at 65 per cent. Canadian Tire Corp. Ltd., which was not included in the BrandSpark data, said its loyalty program has 12 million active users.”

The bulk of Canadian loyalty card users belong to three or four programs, and the programs are particularly popular in Canada compared to the rest of the world. Nielsen data show 66 per cent of consumers globally belong to one or more loyalty programs.

“There is no national program in the U.S. with the penetration and coverage of Air Miles, and while individual retailers do have loyalty programs in the U.S., nothing reaches the penetration that Optimum has here,” Scrutton said.

But Canadians’ loyalty is being tested.

Last fall, scores of Air Miles cardholders flooded the loyalty purveyor with redemptions before the anticipated points expiry deadline, causing long phone wait times and extended waits for merchandise.

By the time the controversial expiry policy was reversed at the beginning of December, many consumers said they had already redeemed the points for unwanted merchandise out of fear their points would soon be worthless.

In the meantime, security issues have hit several loyalty programs including Air Miles.

For instance, PC Plus has asked some of its customers to reset their passwords twice after a breach in February resulted in the theft of points from some users.

A handful of members of the Inspire program at Quebec’s provincial liquor chain Société des alcools du Québec also had points stolen.

Read Also: Canadian grocers narrowing gap with big U.S. chains Costco & Walmart

Not long after, Cineplex Inc. emailed its Scene card members to suggest they voluntarily change their passwords even though there was no apparent card breach. Cineplex employees told customers that it was wise to reset their passwords given the amount of recent industry breaches, and reminded customers not to re-use passwords between different accounts.

Then at the end of March, Air Miles suspended in-store redemptions of cash mile rewards after it determined some collectors’ points had been stolen.

Such issues tend to involve consumers using weak passwords rather than actual system hacks, according to security experts.

There are more creative ways to capture the data and there are better ways to drive customer loyalty.

“The bigger problem is that consumers tend not to take these programs very seriously,” said Brian Krebs, an online security expert and author of the popular website Krebs on Security.

“They are often in a hurry to sign up for loyalty accounts and pick really bad passwords, or re-use the same password across all of the sites that they use. Lo and behold, when one of those sites gets hacked, so do their loyalty accounts.”

Krebs reiterates what loyalty program administrators repeatedly tell their members: it is not safe to use the same password for different digital accounts whether it’s for a social media site such as Twitter, online banking or loyalty memberships.

Rather than a password, Krebs suggests using a multi-letter “pass-phrase,” such as a song lyric.

“Part of the problem with these loyalty accounts and the reason people have been so successful at exploiting members is that (members) don’t view them as having a financial value until it is too late,” he said.

In the case of PC Plus, some points were stolen to buy third-party gift cards from grocery stores, a points usage option that has since been scrapped by the retailer. Air Miles also no longer allows cash reward redemptions for gift cards after recent thefts.

Nevertheless, loyalty cards remain popular with consumers as well as large retailers, who have embraced them for the rich insight they provide about customers’ shopping habits and preferences.

Loyalty card members generate 12-to-18-per-cent more revenue on transactions for retailers than non-members, according to Accenture.

In addition, retailers use the data to target consumers with personalized deals aimed at motivating them to return and spend more money.

But how well loyalty programs work to increase sales is up for debate, and likely depends on the nature of the business involved.

Most people think that they might as well collect the points and still see value there

For example, David’sTea Inc. introduced a loyalty program in 2013 when it already had a “loyal, passionate customer following, and the program cost millions in discounts and it did not increase sales,” said company co-founder and entrepreneur David Segal, who left the retailer a year ago to work on new business ventures. He has since become a vocal critic of loyalty programs.

“You erode your margin and you train your customers to expect discounts,” Segal said. “There are more creative ways to capture the data and there are better ways to drive customer loyalty. It shows a lack of creativity when companies give you points in exchange for free stuff.”

David MacDonald, vice-president of financial services at Environics Research, has analyzed loyalty programs in the past and he agrees with Segal that some program formats might be stale.

Read Also: Visa Canada updates website and adds page for Android Pay

“Where I think the loyalty industry has run into problems of late is the resetting of loyalty metrics,” he said.

Many popular rewards programs have slowly shaved the “earn rates” of members over time, MacDonald said, diluting the value of rewards points. That’s probably in part, he said, because Canadian consumers retain a high level of engagement in loyalty programs.

“There is nothing that the consumer can do about it, other than deciding that he or she has done enough of the program,” he said.

But quitting doesn’t seem to be a likely option for most consumers.

The bigger problem is that consumers tend not to take these programs very seriously

After PC Plus’s password reset, the number of members who loaded their personalized offers slightly declined. But just a few weeks later, “use of the program is now the highest it has ever been,” said Loblaw spokeswoman Catherine Thomas. “We continue to see new members joining and longstanding members are engaging with the program weekly.”

Even Air Miles, which has seemed to attract more consumer vitriol than other loyalty providers in the past year due to its flip-flop on the points expiry issue, appears to be bouncing back.

“The activity level is beginning to return on our collector side,” Ed Heffernan, chief executive of Alliance Data Systems, owner of Air Miles’ operator LoyaltyOne, told investors on the company’s first-quarter conference call with investors in April.

Source: Finacial Post

Articulos relacionados

Canada: Retail Opportunities Abound in Ambitious Clairmont Heights Development

Canada: Retail Opportunities Abound in Ambitious Clairmont Heights Development

Mayo 26, 2017

  A groundbreaking multi-billion-dollar development project in the County of Grande Prairie, Alberta, will see the

Canada: CBC Stands By Its ‘Fair And Thorough’ Subway Chicken Investigation

Canada: CBC Stands By Its ‘Fair And Thorough’ Subway Chicken Investigation

Mayo 26, 2017

  The CBC says it gave Subway plenty of opportunity to refute the findings of an

Canada: At Tim Hortons it’s not business as usual

Canada: At Tim Hortons it’s not business as usual

Mayo 26, 2017

  During a recent visit to the Tim Hortons headquarters, Daniel Schwartz happily pokes fun at

Canada: Indigenous activists want Dollarama to stop selling dreamcatchers

Canada: Indigenous activists want Dollarama to stop selling dreamcatchers

Mayo 26, 2017

  Canadian discount retailer Dollarama is coming under fire by indigenous rights activists who are accusing

Canada: Walmart pleads not guilty to health charges following 2016 Fort McMurray wildfire

Canada: Walmart pleads not guilty to health charges following 2016 Fort McMurray wildfire

Mayo 26, 2017

  The plea was made during a brief Wednesday morning court appearance in Fort McMuray. A

Últimas Noticias

Newsletter

SECTIONS

América Retail